Rights in real property - Restrictive covenants

Learning Outcomes

This article examines restrictive covenants affecting land, including real covenants and equitable servitudes. It details the requirements for creating enforceable covenants, the conditions under which the benefit and burden of such covenants run with the land to bind subsequent owners, and the various methods by which these restrictions can be terminated. After reading this article, you will be able to analyse fact patterns involving restrictive covenants, identify the relevant legal principles, and determine the enforceability and effect of such covenants in MBE-style questions.

MBE Syllabus

For the MBE, you are required to understand how promises relating to land use are created and enforced against successors in interest. This includes distinguishing between real covenants and equitable servitudes and knowing the requirements for each. You should be prepared to:

  • Identify the requirements for the creation of a real covenant (writing, intent, touch and concern, privity).
  • Distinguish between horizontal and vertical privity.
  • Analyze the requirements for the burden of a real covenant to run with the land.
  • Analyze the requirements for the benefit of a real covenant to run with the land.
  • Identify the requirements for the creation of an equitable servitude (writing or common scheme, intent, touch and concern, notice).
  • Explain how equitable servitudes are enforced (injunction).
  • Recognize methods for terminating covenants and servitudes (e.g., merger, release, abandonment, changed conditions).

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. For the burden of a real covenant to run with the land and bind a successor owner, which type of privity is typically required between the original covenanting parties?
    1. Relaxed vertical privity
    2. Strict vertical privity
    3. Horizontal privity
    4. Mutual privity
  2. Developer subdivides a large tract into 50 lots. The first 40 deeds contain an express covenant restricting use to single-family residential purposes and stating the restriction is for the benefit of all lots in the subdivision. The remaining 10 deeds, including Lot 45 sold to Buyer, contain no express restriction. Buyer, aware of the uniform residential nature of the neighborhood, plans to build a small convenience store on Lot 45. Neighbor, owner of Lot 5, seeks to enjoin Buyer. Which doctrine is most likely to allow Neighbor to enforce the restriction against Buyer?
    1. Real covenant
    2. Easement by implication
    3. Equitable servitude based on a common scheme
    4. Estoppel
  3. A promises B, a neighboring landowner, in a recorded writing, that A will not build any structure exceeding two stories on A's property. A later sells the property to C, who has actual knowledge of the promise. B sells his property to D. If C begins construction of a three-story building, can D enforce the promise against C as a real covenant?
    1. Yes, because C had actual notice.
    2. Yes, if the benefit and burden touch and concern the respective lands and vertical privity exists.
    3. No, because horizontal privity was lacking between A and B.
    4. No, because D was not an original party to the covenant.
  4. Which of the following is generally required for the enforcement of an equitable servitude against a subsequent purchaser but NOT necessarily for the burden of a real covenant to run at law?
    1. Intent for the restriction to run
    2. The restriction must touch and concern the land
    3. Notice of the restriction
    4. Horizontal privity between the original parties

Introduction

Restrictive covenants are promises made between landowners that restrict the use of land. These promises can be enforced by successors in interest if certain requirements are met, allowing the restrictions to "run with the land." There are two primary types of restrictive covenants recognized in property law: real covenants and equitable servitudes. While similar in purpose—controlling land use—they differ in their requirements for creation and enforcement, and most significantly, in the remedy available for breach. Real covenants are typically enforced by an award of money damages, whereas equitable servitudes are enforced by injunction.

Understanding the distinction and the specific requirements for the benefit and burden of each type of covenant to run to subsequent landowners is critical for the MBE.

Key Term: Restrictive Covenant A promise relating to the use of land that binds successors in interest if certain conditions are met.

Real Covenants

A real covenant is a written promise concerning the use of land that runs with the land at law. This means that subsequent owners may enforce it or be burdened by it. For a real covenant to be enforceable by or against successors, both the benefit and the burden of the covenant must be analyzed separately to determine if they meet the requirements for running.

Requirements for the Burden to Run

For the burden of a real covenant to run with the land and bind a successor owner of the burdened property, the following elements are generally required:

  1. Writing: The original covenant must be in writing, satisfying the Statute of Frauds.
  2. Intent: The original covenanting parties must have intended the burden to run with the land and bind successors. This intent is often found in the language of the deed (e.g., "heirs and assigns").
  3. Touch and Concern: The substance of the covenant must "touch and concern" the land. This means the covenant must affect the parties as landowners, relating to the use or enjoyment of the land itself.
    • Negative covenants (restrictions on use) generally meet this requirement easily.
    • Affirmative covenants (promises to do something, like pay fees) also generally touch and concern the land if the performance relates to the land (e.g., maintaining common areas).
  4. Horizontal Privity: This refers to the relationship between the original covenanting parties. For the burden to run, they must have shared some interest in the land independent of the covenant itself at the time the covenant was created (e.g., grantor-grantee, landlord-tenant, mortgagor-mortgagee).
  5. Vertical Privity: This refers to the relationship between the original covenantor and their successor in interest. For the burden to run, the successor must have acquired the entire durational estate held by the original covenantor (strict vertical privity).
  6. Notice: The successor owner of the burdened land must have had notice (actual, record, or inquiry) of the covenant when they acquired the land. This requirement stems primarily from recording statutes, rather than the common law of covenants itself, but is practically essential for enforcement against subsequent purchasers.

Key Term: Horizontal Privity The relationship between the original parties who created the covenant, requiring they share some interest in the land apart from the covenant itself (e.g., grantor-grantee). Required for the burden of a real covenant to run.

Key Term: Vertical Privity The relationship between an original party to the covenant and their successor in interest. Strict vertical privity (successor takes the entire estate) is needed for the burden to run; relaxed vertical privity (successor takes an interest carved out of the original estate) is sufficient for the benefit to run.

Requirements for the Benefit to Run

For the benefit of a real covenant to run with the land and be enforceable by a successor owner of the benefited property, the requirements are generally less stringent:

  1. Writing: The original covenant must be in writing.
  2. Intent: The original parties must have intended the benefit to run with the land.
  3. Touch and Concern: The benefit of the covenant must touch and concern the land owned by the covenantee (i.e., improve its value or enjoyment).
  4. Vertical Privity: The successor must have acquired some possessory interest in the benefited land previously owned by the original covenantee (relaxed vertical privity). Horizontal privity is not required for the benefit to run.

Worked Example 1.1

Alex owns Lot 1 and Betty owns adjacent Lot 2. They enter into a written agreement, recorded properly, where Alex promises Betty, "for herself, her heirs and assigns," that Alex will maintain a fence between their properties. Alex sells Lot 1 to Charles. Betty sells Lot 2 to David. Charles refuses to maintain the fence. Can David enforce the covenant against Charles at law?

Answer: Yes, likely. We need to determine if both the burden and the benefit run. Burden (Alex to Charles): (1) Writing: Yes. (2) Intent: Yes ("heirs and assigns"). (3) Touch & Concern: Yes (maintaining a boundary fence relates to land use). (4) Horizontal Privity: No, Alex and Betty were just neighbors; they didn't share an independent land interest when covenanting. (5) Vertical Privity: Yes (assuming Charles bought Alex's entire interest). (6) Notice: Yes (recorded). Because horizontal privity is missing, the burden does not run at law in most jurisdictions. Benefit (Betty to David): (1) Writing: Yes. (2) Intent: Yes. (3) Touch & Concern: Yes (benefits David's land). (4) Vertical Privity: Yes (relaxed privity is sufficient). Conclusion: Because the burden likely does not run at law due to lack of horizontal privity, David probably cannot enforce the covenant at law (i.e., seek damages) against Charles. (However, he might seek an injunction under equitable servitude principles, see below).

Exam Warning

Pay close attention to the privity requirements. The lack of horizontal privity prevents the burden of a real covenant from running at law, but does not prevent the benefit from running. For the burden to run, strict vertical privity is also needed, while only relaxed vertical privity is needed for the benefit.

Equitable Servitudes

An equitable servitude is a covenant concerning land use that is enforceable in equity by injunction against subsequent owners who have notice of the covenant. It is similar to a real covenant but has requirements that are easier to meet, primarily because privity of estate is not required for the burden to run.

Requirements for Enforcement

For an equitable servitude to be enforceable against a successor owner (the burden to run), the following elements are generally required:

  1. Writing OR Common Scheme: Generally, the promise must be in writing satisfying the Statute of Frauds.
    • Exception—Implied Reciprocal Negative Servitudes: In subdivisions, reciprocal negative covenants restricting land use may be implied from a common scheme of development, even if not in the specific deed of the burdened lot, provided the purchaser had notice.
  2. Intent: The original parties must have intended the restriction to be enforceable by and against successors.
  3. Touch and Concern: The restriction must touch and concern the land (affecting the parties as landowners).
  4. Notice: The successor owner of the burdened land must have had notice (actual, record, or inquiry) of the servitude when they acquired the land.

Privity (both horizontal and vertical) is not required for an equitable servitude to be enforceable against successors.

Key Term: Equitable Servitude A covenant regarding land use enforceable in equity (by injunction) against successors with notice, even if privity of estate is lacking.

Key Term: Common Scheme (or Plan) A plan for developing a residential subdivision where all parcels are intended to be subject to the same restrictions, often evidenced by recorded plats or representations to early buyers. Can give rise to implied reciprocal negative servitudes.

Implied Reciprocal Negative Servitudes

This doctrine allows restrictions found in the deeds of early buyers in a subdivision to be enforced against a later buyer whose deed does not contain the restriction, provided there was a common scheme of development and the later buyer had notice.

  • Common Scheme: Must exist when sales began. Evidenced by maps, marketing, or uniform restrictions in early deeds.
  • Notice: The later buyer must have had actual, record, or inquiry notice of the restriction. Inquiry notice often arises from observing the uniform character of the neighborhood.

Worked Example 1.2

Developer subdivided a tract into 10 lots (Lots 1-10). The deeds for Lots 1-8 expressly restricted use to single-family residences and stated the restrictions were for the mutual benefit of all lot owners. Developer sold Lot 9 to Buyer via a deed with no restrictions. The neighborhood is uniformly residential. Buyer plans to open a bookstore. Owner of Lot 2 seeks an injunction. Will Owner likely succeed?

Answer: Yes. This involves an equitable servitude. The lack of restriction in Buyer's deed prevents enforcement as an express covenant. However, an implied reciprocal negative servitude likely arose. (1) Common Scheme: Yes, evidenced by uniform restrictions in the first 8 deeds. (2) Intent: Yes, implied by the scheme and express language in other deeds. (3) Touch & Concern: Yes, land use restriction. (4) Notice: Buyer had at least inquiry notice due to the uniform residential character of the subdivision, and likely record notice from the prior deeds from the common grantor (Developer). Privity is not required. Owner can likely obtain an injunction.

Termination of Covenants and Servitudes

Real covenants and equitable servitudes can be terminated in several ways:

  • Merger: If the benefited and burdened estates come into the ownership of the same person, the covenant/servitude merges into the fee simple and is extinguished.
  • Release: A written release, complying with the Statute of Frauds, from the holder(s) of the benefit terminates the covenant/servitude.
  • Acquiescence: If the benefited party acquiesces in a violation of the covenant by the burdened party, they may be estopped from later enforcing it.
  • Abandonment: If the benefited party demonstrates by conduct (e.g., violating the restriction herself) an intent to abandon the covenant, it terminates. Mere nonuse is not sufficient.
  • Unclean Hands: A court may refuse to enforce a servitude if the party seeking enforcement has violated a similar restriction on their own land.
  • Laches: Unreasonable delay in enforcing the restriction, causing prejudice to the burdened party, may bar enforcement.
  • Estoppel: If the benefited party represents that they will not enforce the covenant, and the burdened party detrimentally relies on that representation, the benefited party may be estopped from enforcing it.
  • Changed Conditions: If conditions in the neighborhood have so fundamentally changed that the original purpose of the restriction can no longer be accomplished, enforcement may be denied. The change must be so pervasive that all benefited lots lose the benefit. Zoning changes alone are insufficient but may be relevant evidence.
  • Condemnation: Condemnation of the burdened property by eminent domain terminates the covenant/servitude.

Revision Tip

Remember the key difference in remedies: Damages for real covenants, injunction for equitable servitudes. The requirements for equitable servitudes are generally easier to meet (no privity needed, notice is key). If damages are sought, analyze as a real covenant; if an injunction is sought, analyze as an equitable servitude.

Summary

Restrictive covenants control land use through promises that can bind subsequent owners. Real covenants require writing, intent, touch & concern, horizontal privity (for burden), vertical privity (strict for burden, relaxed for benefit), and notice (via recording acts); the remedy is damages. Equitable servitudes require writing (or common scheme), intent, touch & concern, and notice; privity is not required, and the remedy is an injunction. Implied reciprocal negative servitudes arise from a common scheme with notice. Both types can be terminated through various means, including merger, release, and changed conditions.

Key Point Checklist

This article has covered the following key knowledge points:

  • Distinction between Real Covenants (damages) and Equitable Servitudes (injunction).
  • Requirements for the burden of a real covenant to run: Writing, Intent, Touch & Concern, Horizontal Privity, Strict Vertical Privity, Notice.
  • Requirements for the benefit of a real covenant to run: Writing, Intent, Touch & Concern, Relaxed Vertical Privity.
  • Requirements for an equitable servitude to run: Writing (or Common Scheme), Intent, Touch & Concern, Notice (NO privity needed).
  • Implied Reciprocal Negative Servitudes arise from a common scheme and require notice.
  • Methods of termination include Merger, Release, Abandonment, Estoppel, Changed Conditions, Condemnation.
  • Horizontal privity relates to the original parties; Vertical privity relates to successors.

Key Terms and Concepts

  • Restrictive Covenant
  • Horizontal Privity
  • Vertical Privity
  • Equitable Servitude
  • Common Scheme (or Plan)
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