Property Learning Set 5

A developer created an exclusive residential subdivision. In his deed to each lot, the following language appeared: Grantee agrees for himself and assigns to use this property solely as a single-family residence, to pay monthly fees as levied by the homeowners' association for upkeep and security guard services, and that the backyard of this property shall remain unfenced so that bicycle paths and walkways may run through each backyard, as per the subdivision master plan [adequately described], for use by all residents of the subdivision. The developer sold lots to an actuary, a baker, and a coroner. All deeds were recorded. The subdivision was developed without backyard fences, with bicycle paths and walkways in place in accordance with the general plan. The actuary in turn sold to an accountant by a deed that omitted any mention of the covenants above, and the accountant had no actual knowledge thereof. Shortly thereafter, the accountant started operating a tax preparation business out of his home. The baker in turn sold to a barber, who knew of, but refused to pay, the monthly fees levied by the homeowners' association. The coroner leased her property for 10 years to a chiropractor, who erected a fence around the backyard, unaware of the covenant against such fencing. According to common law principles, which of the following statements is correct?

If the barber sues the chiropractor to obtain removal of her backyard fence, the barber would win because the covenant regarding fencing is enforceable in equity against the chiropractor. If the barber sues the chiropractor to remove her backyard fence, the barber would win because the covenant regarding fencing is enforceable against the chiropractor as an equitable servitude. An equitable servitude is a covenant that, regardless of whether it runs with the land at law, equity will enforce against the assignees of the burdened land who have notice of the covenant. The benefit of an equitable servitude runs to successors if: (i) the original parties so intended, and (ii) the servitude touches and concerns the land. The burden runs if (i) and (ii) are met and (iii) the subsequent purchaser has actual or constructive notice of the covenant. Privity of estate is not needed to enforce an equitable servitude because it is enforced not as an in personam right against the owner of the servient tenement, but as an equitable property interest in the land itself. Here, the original parties intended for the fencing covenant to be enforceable by and against assignees, as shown by the specific language of the covenant ("Grantee agrees for himself and assigns") and its purpose to provide bicycle paths and walkways running through each backyard for the use of all subdivision residents. The benefit of the covenant touches and concerns the barber's property because it increases his enjoyment thereof by providing him with such paths and walkways. Therefore, the barber is entitled to enforce the covenant. The burden of the covenant touches and concerns the land occupied by the chiropractor because it restricts the landholder in her use of the parcel (i.e., her rights in connection with the enjoyment of the land are diminished by being unable to fence in the backyard). The chiropractor will be deemed to have inquiry notice of the restriction because the subdivision is sufficiently developed in accordance with a general plan for the subdivision. Moreover, any neighbor in a subdivision can enforce a covenant contained in a subdivision deed if a general plan existed at the time he purchased his lot. As has been noted, the maintenance of access to all backyards for use as bike paths and walkways was part of such a general plan. Finally, the fact that the chiropractor did not succeed to the coroner's entire estate, but rather a leasehold interest, is irrelevant because privity is not required to enforce an equitable servitude. Therefore, all of the requirements are in place for the existence of an equitable servitude, which can be enforced by the barber against the chiropractor. (A) is incorrect because there is privity between the developer and the accountant. There was horizontal privity between the original covenanting parties because, at the time the actuary entered into the covenant with the developer, they shared an interest in the land independent of the covenant (i.e., they were in a grantor-grantee relationship). The accountant holds the entire interest held by the actuary at the time the actuary made the covenant; thus, there is vertical privity. (B) is incorrect because the remedy sought is the payment of money. Breach of a real covenant, which runs with the land at law, is remedied by an award of money damages, whereas breach of an equitable servitude is remedied by equitable relief, such as an injunction or specific performance. Because the homeowners' association seeks to obtain from the barber the payment of money, it is inaccurate to refer to this as a situation involving an equitable servitude. (D) is incorrect because, as explained above, if equitable relief is sought, the covenant must be enforced as an equitable servitude rather than a real covenant.

A developer owned a 30-acre tract of farmland. As required by law, the developer filed a plat with the county planning board, but did not record it. The plat divided the parcel into 87 one-third-acre residential lots. A one-acre strip on the eastern edge of the parcel that abutted a busy highway was set aside for commercial development. The plat restricted each lot to a single residence and banned all "nonconforming detracting structures or appurtenances," including "free-standing flagpoles more than six feet in height, television antennas and receiving equipment of excessive size and obtrusiveness, and windmills." The restrictive clause was put into the deeds of all the residential lots in the subdivision, except for the deeds to lots 23, 24, and 25. This oversight was due to an error by the developer's secretary. All the other lots had deeds stating that the restriction applied "to the grantee and his or her heirs and assigns." A homeowner purchased lot 24 and duly recorded her deed in the office of the county recorder of deeds. The developer's salesperson had orally informed the homeowner of the general restrictions applicable to lots in the subdivision. A year later, a sports bar purchased the one-acre commercial strip and installed a large satellite dish. Two years later, the homeowner sold her property to a buyer. The homeowner never mentioned any of the restrictions to the buyer. The buyer put a satellite dish on top of his house. His dish was not as large as the bar's dish, but it was obviously bigger than any of his neighbors' modest antennas. The owners of 15 lots in the subdivision sue the buyer, demanding that he remove the dish. If the court finds for the buyer, what is the likely reason?

The buyer is not charged with record notice based on other deeds given by the common grantor. The most likely reason to find for the buyer is that the court is not charging him with record notice of deeds to other lots given by the developer. When a developer subdivides land into several parcels and some of the deeds contain negative covenants but some do not, negative covenants or equitable servitudes binding all the parcels in the subdivision may be implied under the doctrine of "reciprocal negative servitudes." Two requirements must be met before reciprocal negative servitudes will be implied: (i) a common scheme for development, and (ii) notice of the covenants. The second requirement may be satisfied by actual notice, record notice, or inquiry notice. Here, the buyer has not been given actual notice, and the antenna restriction is not so obvious that the appearance of the neighborhood would provide the buyer with inquiry notice. Finally, the buyer has no record of the restriction in his chain of title to establish record notice. If the buyer had been the first purchaser of the lot, some courts might require him to read all deeds given by a common grantor, but the better view does not require such a search. In any case, the buyer's grantor here is the homeowner, and the restriction was not contained in her deed; the buyer thus does not have record notice of it and is not bound. (B) is incorrect because the restriction could have been enforced against the homeowner as an equitable servitude even in the absence of an express restriction (oral or written). A common scheme for development existed and the developer's salesperson gave the homeowner actual notice of the restriction. (C) is incorrect because courts will allow prior purchasers to enforce the restriction against a subsequent purchaser even if the original grantor made no covenant in the deeds that all subsequent parcels would be subject to the restriction. One theory courts use is that an implied reciprocal servitude attached to the common grantor's retained land at the time the first lots were deeded to the prior purchasers, and the prior purchasers are merely enforcing this implied servitude against the purchaser of a subsequent lot. Hence, if the buyer were deemed to have had notice of the restriction, a court would allow prior purchasers to enforce it. (D) is incorrect. While "changed neighborhood conditions" is an equitable defense to enforcement of a servitude, the strip on the eastern edge of the parcel was always earmarked for commercial uses; the presence of a satellite dish on that property is not sufficient to bar enforcement of the restriction against the residential parcels.

Which of the following is not required for the burden of an equitable servitude to run to successors in interest?

There is vertical privity between the covenantor and his successor in interest. Vertical privity between the covenantor and his successor in interest is not required for the burden of an equitable servitude to run to successors in interest. An equitable servitude is a covenant (i.e., a promise to do or not to do something on the land) that, regardless of whether it runs with the land at law, can be enforced in equity against assignees of the burdened land who have notice of the covenant. The burden of an equitable servitude will run to successors in interest if: 1. The covenanting parties intended that successors in interest be bound by the covenant; 2. The successor in interest has notice of the covenant (if she has given value); and 3. The covenant touches and concerns the land (i.e., it benefits the covenantor and his successor in their use and enjoyment of the burdened land). Horizontal privity between the original covenanting parties and vertical privity between the covenantor and his successor in interest are not required.

A realty company developed a residential development encompassing single-family dwellings, town houses, and high-rise apartments. Included in the deed to each unit was a covenant under which the grantee and the grantee's "heirs and assigns" agreed to purchase electrical power only from a plant that the realty company had constructed within the development. The plant did not supply power outside the development. After constructing and selling half of the units, the realty company sold its interest in the development to an investment firm. The investment firm operated the power plant and constructed and sold the remaining units. Each conveyance from the investment firm contained the same covenant relating to electrical power that the realty company had included in the conveyances it had made. A woman bought a dwelling unit from a man who had purchased it from the realty company. Subsequently, the woman, whose lot was along the boundary of the development, ceased buying electrical power from the investment firm and began purchasing power from a power company that provided such service in the area surrounding the development. The investment firm instituted an appropriate action against the woman to enjoin her from obtaining electrical power from the power company. Both the power company and the investment firm have governmental authorization to provide electrical services to the area. If judgment is for the woman, what is the most likely reason?

The covenant does not touch and concern the land. If the woman prevails, it will be because the covenant does not touch and concern the land. The investment firm is seeking to enforce the covenant by means of an equitable remedy. Thus, this question concerns an equitable servitude. An equitable servitude relates to a promise that touches and concerns the land. A covenant touches and concerns the land when it makes the land itself more useful or valuable to the benefited party. Here, an agreement to purchase electrical power only from a specified source probably does not touch and concern the land. (B) is incorrect because a common development scheme is not necessary for an equitable servitude. Generally, equitable servitudes are created by covenants contained in a writing that satisfies the Statute of Frauds. Negative equitable servitudes that may be implied from a common scheme for development are one exception to the writing requirement. (C) is incorrect because the covenant here does not restrain alienation. (D) is incorrect because privity of estate is not required for enforcement of an equitable servitude. In any event, privity is present here because (i) at the time the promisor (the man) entered into the covenant with the promisee (the realty company), the two shared some interest in the land independent of the covenant-i.e., grantor-grantee (horizontal privity); and (ii) the successor in interest to the covenanting party (the woman) holds the entire durational interest held by the covenantor (vertical privity).

A developer prepared and recorded a subdivision plan, calling for 100 home sites on half-acre lots. There were five different approved plans from which a purchaser could choose the design of the home to be built on his lot. Each deed, which referred to the recorded plan, stated that "no residence shall be erected on any lot that has not been approved by the homeowners' association." A lawyer purchased a lot and built a home based on one of the approved designs. However, many of the lots were purchased by investors who wanted to hold the lots for investment purposes. Two years after the lots went on the market, one such investor sold her lot to an architect by a deed that did not contain any reference to the recorded plan nor the obligation regarding approval by the homeowners' association. In fact, because very few residences had been built in the subdivision since the lots were first available for purchase, no homeowners' association meetings had been held in two years. The architect began building a very modernistic house on her one-half acre. When the lawyer noticed the house being built, he brought an action to enjoin the construction. For which party will the court rule?

The lawyer, because the recorded subdivision plan, taken with the fact that all lots were similarly restricted and the architect had notice of this, gave him the right to enforce the covenant on her property. The lawyer will likely prevail. When a subdivision is created with similar covenants in all deeds, there is a mutual right of endorsement (each lot owner can enforce against every other lot owner) if two things are satisfied: (i) a common scheme for development existed at the time that sales of parcels in the subdivision began; and (ii) there was notice of the existence of the covenant to the party sued. Here, there was a common scheme evidenced by the recorded plan, and the fact that the covenant was in the architect's chain of title gave her constructive notice of the restriction. Therefore, not only does the covenant apply to the architect's land, but the lawyer (or any other lot owner) can enforce it as a reciprocal negative servitude. (A) is incorrect. While it is true that the architect's deed had no restrictions, those restrictions are binding if they are in her chain of title so as to give her notice of them. The restriction was in the deed from the developer to the investor, so the fact that it was omitted in the deed from the investor to the architect is of no significance. (B) is incorrect. While a covenant is normally only enforceable by the party receiving the promise (here, the developer), this is a situation of mutual rights of enforcement within a geographically defined area, a special situation that gives every lot owner in the area the right of enforcement, even though they did not directly receive the benefit of the promise. (D) is incorrect. The fact that gives the lawyer the right of enforcement is not just the fact that his deed contains the covenant, but that the same covenant was in all of the deeds from the developer, including the one to the architect's predecessor in title.

Which of the following is required for the burden of an equitable servitude to run to a subsequent purchaser of the land?

The purchaser must have notice of the covenant. For the burden of an equitable servitude to run to a subsequent purchaser of the land, the purchaser must have notice of the covenant. An equitable servitude is a covenant (i.e., a promise to do or not do something on the land) that, regardless of whether it runs with the land at law, can be enforced in equity against assignees of the burdened land who have notice of it. The burden of an equitable servitude will run to a subsequent purchaser if: 1. The covenanting parties intended that successors in interest be bound by the covenant; 2. The purchaser has notice of the covenant; and 3. The covenant touches and concerns the land (i.e., it benefits the covenantor and his successor in their use and enjoyment of the burdened land). The requisite notice may be acquired through actual notice (direct knowledge of the covenants in the prior deeds); inquiry notice (the neighborhood appears to conform to common restrictions); or record notice (if the prior deeds are in the grantee's chain of title he will, under the recording acts, have constructive notice of their contents). Thus, there the restriction need not be in the buyer's record chain of title for the buyer to be burdened by it-as long as the buyer has some kind of notice. Horizontal privity between the original covenanting parties is not required. Horizontal privity means the original parties to a real covenant shared some interest in the land independent of the covenant at the time they entered it (e.g., as grantor and grantee). Horizontal privity is required to enforce the burden of a real covenant at law, but it is not required to enforce the burden of an equitable servitude. A common scheme for development is not required for the burden of a written equitable servitude to run to a subsequent purchaser. Generally, equitable servitudes are created by covenants contained in a writing that satisfies the Statute of Frauds. However, reciprocal negative servitudes may be implied absent a writing if there is a common scheme for the development of a subdivision and the grantee had actual, record, or inquiry notice of restrictions that do not appear in his deed. The common scheme exception applies only to negative covenants and equitable servitudes; affirmative covenants must be in writing.

In a residential subdivision, will a commercial builder be bound by a residential-use restriction that was omitted from his deed?

Yes, a commercial builder will be bound by the restriction if the builder had inquiry notice of a common scheme for development. An equitable servitude is a covenant (i.e., a promise to do or not do something on the land) that, regardless of whether it runs with the land at law, can be enforced in equity against assignees of the burdened land who have notice of it. Generally, equitable servitudes are created by covenants contained in a writing that satisfies the Statute of Frauds. However, in the absence of a writing, reciprocal negative servitudes may be implied if:

May a grantee be bound by a covenant that does not appear in his deed or chain of title?

Yes, if there is a common scheme for development and the grantee had notice of the covenant. A grantee may be bound by a covenant that does not appear in his deed or chain of title if there is a common scheme for development and the grantee had notice of the covenant. An equitable servitude is a covenant (i.e., a promise to do or not to do something on the land) that, regardless of whether it runs with the land at law, can be enforced in equity against successors to the burdened land who have notice of the covenant. Generally, equitable servitudes are created by covenants contained in a writing that satisfies the Statute of Frauds. However, in the absence of a writing, negative equitable servitudes may be implied if (i) there is a common scheme for development (i.e., a plan existing at the time sales of the subdivision parcels began that all parcels be developed within the terms of the negative covenant), and (ii) the grantee had actual, record, or inquiry notice of the covenant.