Facts
- A developer subdivided land for a residential community and conveyed lots by deeds containing an annual assessment (not exceeding $4 per 20x100 lot, proportionally adjusted).
- The deed stated the assessment was a “covenant running with the land,” binding the grantee’s heirs and assigns until a fixed expiration date.
- The assessment proceeds were designated for maintaining and operating community facilities (including roads and parks) benefiting the lots.
- The deed granted the developer, “its successors and assigns,” enforcement rights, including foreclosure of a lien for nonpayment.
- The developer assigned its covenant rights to a property owners’ association formed to act for lot owners’ common interests.
- A bank acquired a lot at a judicial sale under a deed reciting that the conveyance was “subject to” the assessment covenant.
- The bank did not pay the assessment, and the association sued to foreclose the lien.
- The bank argued the covenant did not run with the land and that the association lacked privity or capacity to enforce because it owned no land in the subdivision.
Issues
- Whether an affirmative covenant to pay periodic assessments for maintenance of common facilities “runs with the land” and binds a successor owner.
- Whether a property owners’ association that owns no land may enforce the covenant and foreclose the lien as assignee and representative of benefited lot owners.
Decision
- The Court of Appeals of New York affirmed orders denying the bank’s motion for judgment on the pleadings and striking the bank’s defenses and counterclaim.
- The court held the assessment covenant ran with the land and was enforceable against the bank as a successor in title.
- The court held the association could enforce the covenant as assignee and effective representative of the benefited lot owners, notwithstanding the association’s lack of ownership of benefited land.
Legal Principles
- A covenant runs with the land when (1) the parties intended it to run, (2) it “touches and concerns” the land, and (3) there is privity of estate between the party claiming the benefit and the party burdened.
- Express deed language binding “heirs and assigns” and describing the obligation as running with the land supports intent to bind successors.
- A promise to pay money may “touch and concern” land when the payment is tied to maintenance or improvement of facilities that directly benefit the land’s use, enjoyment, and value.
- An owners’ association may enforce such covenants where it functions as the assignee and agent of the owners of the benefited land, supplying privity in substance for enforcement purposes.
- A purchaser at a judicial sale takes subject to recorded covenants expressly referenced in the deed and is bound as a successor when the covenant otherwise runs with the land.
Conclusion
The court enforced a recorded assessment covenant as a real covenant (or its functional equivalent) because it was intended to bind successors and materially related to the land through funding of community improvements, and it allowed a property owners’ association to foreclose the covenant lien as the lot owners’ assignee and representative despite the association’s lack of land ownership.