BAR FLASHCARDS - P9 Covenants (1)

Question 1

RESTRICTIVE COVENANTS

Answer 1

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Question 2

Covenant

Answer 2

Covenant = Promise to do or not do something.

The covenant is a written promise to do or not do something related to land (for example, to maintain a fence, or to not build a multifamily dwelling).

It’s unlike the easement because it is not the grant of a property interest.
Instead, it is a contractual limitation or promise regarding land.

Real covenants are normally found in deeds and when certain requirements are met they run with the land at law, which means that subsequent owners may enforce or be burdened by the covenants.

Question 3

Negative/Restrictive Covenant

Answer 3

Refrain from doing something related to land. (I promise not to build for commercial purposes).

Covenants can be negative. These are known as restrictive covenants.
A restrictive covenant is a promise to refrain from doing something related to land. What are some examples of restrictive covenants? Refrain from some commercial activity.

Question 4

Affirmative Covenant

Answer 4

Do something related to land (I promise to maintain our shared fence).
Affirmative Covenants: Covenants can be affirmative: The affirmative covenant is a promise to do something related to land.
What are some examples? I promise to water our shared garden.

Question 5

Covenant vs. Equitable Servitude

Answer 5

On the exam, the same set of facts could seem to give rise to either a covenant or an equitable servitude.
How will you know which analysis to apply? On the basis of the remedy plaintiff seeks.
-Money damages: Construe as covenant at law. if the plaintiff wants money damages, you must construe the promise as a covenant.
-Injunction: Construe in equity as equitable servitude. If the plaintiff wants an injunction, you must construe the promise as an equitable servitude.

Question 6

Running with the Land

Answer 6

In covenant parlance, one tract is burdened by the promise and another is benefited.
Our key question in this area is figuring out when a covenant will run with the land. In other words, when is a covenant capable of binding successors? When will the burden and/ or benefit run to successors?
1. Does the BURDEN run? Harder for burdens to run, WITHN.
2. Does the BENEFIT run?

Question 7

Requirements for Burden to Run

Answer 7

If requirements are met, any successor in interest to the burdened estate will be bound by the covenant as if they themselves had expressly agreed to it.
For the requirements for the burden of a covenant to run, remember W I T HVP N:
• Writing: The original promise (between A and B) must have been in writing.
• Intent:
• Touch and concern
• Horizontal and vertical privity
• Notice

Question 8

Requirements for Burden to Run: W I T HVP N

Answer 8

Writing, Intent, Touch and Concern, Horizontal AND Vertical Privity, Notice

Question 9

Requirements for Burden to Run: Intent

Answer 9

The original covenanting parties (A and B) must have intended that the covenant would run (meaning they intended that successors to the originally promising parties would be bound by the covenant). This intent may be inferred from circumstances surrounding the creation of the covenant, but is usually found in the language of the conveyance itself (for example, “A promises on behalf of herself, her successors and assigns…”). Courts are generous in finding the requisite intent.

Question 10

Requirements for Burden to Run: Touch and Concern

The promise must…

Restrictive covenants touch and concern the land if…

Affirmative covenants touch and concern the land if…

Answer 10

The promise must affect the parties’ legal relations as landowners and not simply as members of the community at large.
Restrictive covenants touch and concern the land if they restrict the burdened parcel owner in her use of that parcel of land.
Affirmative covenants touch and concern the land if they require the holder of the servient estate to do something that increases her obligations in connection with the land.

Covenants to pay money to be used in connection with the land (such as homeowners’ association fees) and covenants not to compete do touch and concern the land.

Question 11

Requirements for Burden to Run: Horizontal AND Vertical Privity

Answer 11

Both horizontal and vertical privity are required for the burden to run.

Horizontal Privity:
This requirement rests on the relationship between the original covenanting parties. Specifically, horizontal privity requires that, at the time the promisor entered into the covenant with the promisee, the two shared some interest in the land independent of the covenant (e.g., grantor-grantee, landlord-tenant, mortgagor-mortgagee).

Horizontal privity refers to the nexus between the original promising parties (A and B).

It requires that they be in succession of estate, meaning that they were in a grantor-grantee*** or landlord-tenant or mortgagor-mortgagee relationship when the covenant was created.
In other words, at the time the promisor entered into the covenant with the promisee, the two must have shared some interest in the land independent of the covenant. Horizontal privity is difficult to establish. Its absence is the reason why many burdens will not run.

Vertical Privity: Vertical privity refers to the nexus between the successor in interest (A-1) and the originally covenanting party (A). It simply requires some non-hostile nexus, such as contract, devise, or descent. The only time vertical privity will be absent is when the successor acquired her interest through adverse possession.

Question 12

Horizontal privity

Answer 12

Horizontal privity concerns the connection between the original parties. No matter that it’s the successors in interest who are trying to enforce the covenant, horizontal privity is determined on the basis of the connection between the originally covenanting parties.

Horizontal Privity: Horizontal privity refers to the nexus between the original promising parties (A and B). It requires that they be in succession of estate, meaning that they were in a grantor-grantee*** or landlord-tenant or mortgagor-mortgagee relationship when the covenant was created.
In other words, at the time the promisor entered into the covenant with the promisee, the two must have shared some interest in the land independent of the covenant. Horizontal privity is difficult to establish. Its absence is the reason why many burdens will not run.

Question 13

Requirements for Burden to Run: Notice

Answer 13

The successor must have had notice of the promise when she took.
Why? Because under modern recording acts, to be bound by a covenant, a subsequent purchaser for value must have had actual, inquiry, or record notice of the covenant at the time of purchase.

Under the recording statutes, a subsequent purchaser for value will not be bound by the covenant if that purchaser for value took without either actual, inquiry, or record notice of the covenant.

Question 14

Under the recording statutes, will a subsequent purchaser for value be bound by the covenant if that purchaser for value took without either actual, inquiry, or record notice of the covenant?

Answer 14

Under the recording statutes, a subsequent purchaser for value will not be bound by the covenant if that purchaser for value took without either actual, inquiry, or record notice of the covenant.

Question 15

Requirements for Benefit to Run

Answer 15

EASIER than burden.
What you’re asking here is, does the successor (B-1) have standing to enforce the covenant?
If the following requirements are met, the promisee B’s successor in interest (B-1) may enforce the covenant. For the benefit of a covenant to run, remember W I T V:
• Writing
• Intent
• Touch and concern
• Vertical privity

Question 16

Requirements for Benefit to Run: W I T V:

Answer 16

• Writing
• Intent
• Touch and concern
• Vertical privity

a. Writing: The original promise (between A and B) must have been in writing.
b. Intent: The originally covenanting parties (A and B) must have intended that the benefit would run, meaning they intended that successors in interest to the promisee would be able to enforce the covenant.
c. Touch and Concern: The benefit of a covenant touches and concerns the land if the promised performance benefits the promisee and her successors in their use and enjoyment of the benefited land. In other words, the promise must affect the parties as landowners.
d. Vertical Privity: There must be a non-hostile nexus between the original promisee (B) and the successor in interest (B-1).

Question 17

for the benefit to run, do you need Horizontal privity?

Answer 17

NO!
Horizontal privity is not required for the benefit to run (that’s why it’s easier for the benefit to run than for the burden to run).
Thus, where horizontal privity is lacking, the promisee B’s successor (B-1) can enforce the covenant against the original promisor (A), but not against the promisor’s successor (A-1).

Question 18

Specific Situations Involving Real Covenants

Answer 18

Generally, promises to pay money to be used in connection with the land (for example, homeowners’ association fees) and covenants not to compete run with the land. Racially restrictive covenants are unenforceable.

Question 19

Remedy for a breach of a real covenant

Answer 19

Damages. A breach of a real covenant generally is remedied by an award of money damages, collectible from the defendant’s general assets. If an injunction is sought, the promise may be enforced as an equitable servitude (see 9.2., infra).

Question 20

Termination of a covenant: (3)

Answer 20

As with all other nonpossessory interests, a covenant may be termi- nated by: (1) a written release, (2) the merger of the benefited and burdened estates, or (3) the condemnation of the burdened property. (See 7.5, supra.)

Question 21

EQUITABLE SERVITUDES

Enforced against who?

Wb bona fide purchasers?

Relief?

Answer 21

Equitable servitude = Promise equity will enforce against successors of burdened land (regardless of whether it runs with the land at law).

An equitable servitude is a promise that equity will enforce against successors of the burdened land regardless of whether it runs with the land at law, unless the successor is a bona fide purchaser (meaning, a subsequent purchaser for value without notice of the covenant).

The equitable servitude is accompanied by which form of relief? INJUNCTIVE relief

Question 22

.

Answer 22

A single promise can create both a real covenant and an equitable servitude. For the bar exam, the main difference between the two will be the remedy sought. If money
damages are sought, you should use the real covenant analysis. If a party seeks an injunction, you should consider whether the require- ments for enforcement as an equitable servitude have been met.

Question 23

Creation of Equitable Servitudes

Answer 23

Generally, as with real covenants, equitable servitudes are created by promises contained in a writing that satisfies the Statute of Frauds. To create an equitable servitude that will bind successors, remember W I T N E S:
• Writing: Generally, but not always, the original promise was in writ- ing (the common scheme doctrine, discussed below, is an excep- tion to this requirement)
• Intent: The original parties intended that the promise would be enforceable by and against successors
• Touch and concern: The promise affects the parties as landowners
• Notice: Subsequent purchasers of land burdened by the covenant had actual, inquiry, or record notice of the covenant when they acquired the land. (Note: This rule is part of the law of equitable servitudes, and exists apart from the recording acts, so notice is required to bind a subsequent purchaser regardless of whether they seek the protection of a recording act. On the exam, though, a recording act will usually be involved. Note also that in most states, successors of burdened land who are not purchasers (such as donees) are bound by the covenant whether or not they had notice).
• ES, for equitable servitudes

Question 24

Equitable serrvitude, look for

Answer 24

Injunctrive relief.

DO NOT need horizontal privity.

Question 25

What is required for an equitable servitude to be enforceable by and against assignees?

Answer 25

In contrast to real covenants, which require vertical and horizontal privity of estate for burdens to run, and vertical privity for benefits to run,
no privity of estate is required for an equitable servitude to be enforceable by and against assignees.

Question 26

The Implied Equitable Servitude—The General or Common Scheme Doctrine

Answer 26

an excep- tion to the general requirement that the original promise be in writing.

Under the common scheme doctrine, the court will imply a reciprocal negative servitude to hold the unrestricted lot holder to the promise. (Reciprocal negative servitude means an implied equitable servitude).

Thus, if a developer subdivides land, and some deeds contain restrictive covenants while others do not, the restrictive covenants will be binding on all parcels provided there was a common scheme of development and notice of the covenants.

Question 27

The Implied Equitable Servitude—The General or Common Scheme Doctrine - EXAMPLE:
Suppose A subdivides her land into 50 lots. She sells lots 1 through 45 through deeds that contain covenants restricting use to residential purposes. A then sells one of the remaining lots to a commercial entity, B, by deed containing no such covenant. B now seeks to build a convenience store on his lot. Can B be enjoined from doing so?

Answer 27

YES.

Question 28

a. Elements of the Common Scheme Doctrine

Answer 28

The two elements of the general or common scheme doctrine:
• When the sales began, the subdivider (A) had a general scheme of residential development which included the defendant’s lot (the scheme may be evidenced by: a recorded plat, a general pattern of restrictions, or oral representations to early buyers); and
• The defendant lot-holder (B) had notice of the promise con- tained in those prior deeds when it took.

Notice
For the three forms of notice, remember A I R:
• Actual notice, meaning the defendant had literal knowledge of the promises contained in the prior deeds
• Inquiry notice, meaning the neighborhood seems to conform to the common restriction (it’s the “the lay of the land”)
• Record notice, meaning the form of notice sometimes imput- ed to buyers on the basis of the publicly recorded documents (so, there’s a prior deed with the covenant in grantee’s chain of title)

Question 29

Forms of notice

Answer 29

• Actual notice (literal knowlekdge)
• Inquiry notice (lay of the land)
• Record notice (public docs)

Question 30

If the scheme arises after some lots are sold…

Answer 30

If the scheme arises after some lots are sold, no implied servitude can arise with respect to the lots already sold without express covenants. So remember, if Lots 1
through 5 are sold without a restrictive covenant and the deeds to Lots 6 through 50 contain one, the covenant cannot be enforced as a servitude against the owners of Lots 1 through 5.

Question 31

Equitable Defenses to Enforcement

Answer 31

A court will not enforce an equitable servitude if:
a. The neighborhood conditions have changed so significantly that enforcement would be inequitable. The changed circum- stances alleged by the party seeking release from the terms of an equitable servitude must be so pervasive that the entire area or subdivision has changed. What’s never good enough here is piecemeal change or mere pockets of limited change;
b. The person seeking enforcement is violating a similar restriction on his own land (unclean hands);
b. A benefited party acquiesced in a violation of the servitude by a burdened party;
c. A benefited party acted in such a way that a reasonable person would believe the covenant was abandoned or waived (estoppel); or
d. The benefited party fails to bring suit against the violator within a reasonable time (laches).

Question 32

Termination of an equitable servitude

Answer 32

Like other nonpossessory interests, an equitable servitude may be extinguished by:
(1) written release from the benefit holders,
(2) merger of the benefited and burdened estates, or
(3) condemnation of the burdened property. (See 7.5, supra.