*Limitations on Private Land Use Controls (Ch. 10) - Public Policy Limitations on Covenants

Question 1

Public Policy Limitations on Covenants

Answer 1

• If covenant requires unlawful behavior – obviously not enforceable
• Acts can also be contrary to public policy

Question 2

• Lauerbaugh v. Williams – PA (1962) -

Unlawful Restraint on Alienation

Answer 2

o F: Covenant that when lots on lake are sold, buyer must be member of homeowner’s association; membership voting process allowed 3 objections to reject membership; P wants provision voided when selling her house
o H: For P – unreasonable limitation on alienation
 Unlimited in time
 Arbitrariness of membership process
 If these two conditions were different, could be enforceable
• Many states draw distinction between multi-unit condominiums and just regular lots (more permissive about restrictions on multi-unit condominiums)

Question 3

three types of restraints on alienation:

Answer 3

o 1. Forfeiture – estate forfeited to identified party if grantee attempts to sell/transfer
o 2. Disabling – prohibits grantee from selling/transferring interest but contains no forfeiture provision
 Many courts have invalidated because no one can terminate (whereas 1. and 3. can be terminated/released)
o 3. Promissory restraint – grantee promises on behalf of himself and his successors not to transfer his interest

Question 4

Change of Circumstances

Answer 4

• R: if the covenant loses its effectiveness due to change in neighborhood conditions, no point in allowing it to be enforced

Question 5

• El Di Inc. v. Town of Bethany Beach – DE (1984)

Answer 5

o F: Covenant against sale of alcohol on property in question; BYOB was allowed; P (restaurant) gets liquor license but D (town) sues to enjoin
o H: For D (restaurant) – original intent of ban was for quiet, residential community – the area had been developed and was large tourist center; property in question had actually been zoned commercial; town had grown much larger
 Area had been zoned commercial (breaking one of the provisions of the covenant to be residential)
 Covenant not really providing any benefit anymore – doesn’t make sense to enforce
• Public interest in controlling the availability and consumption of alcohol – liquor license (instead of BYOB) would actually help further that
o Look to “fundamental change” in character of neighborhood

Question 6

Abandonment & Selective Enforcement

Answer 6

• Equitable defenses to enforcement of covenant:
o Merger, release, unclean hands, acquiescence, abandonment, laches, estoppel, changed neighborhood conditions
o Can voluntarily release right to enforce
• If parcel of land subject to restrictive covenant is condemned by eminent domain, majority view is that those benefitting from the covenant are entitled to just compensation
o Some courts have said that benefit of covenant is not a form of property for which compensation must be paid

Question 7

• Mountain Park Homeowners Association v. Tydings – WA (1994)

Answer 7

o F: P ass’n sues D because D has TV satellite antenna which breaks covenant
 D argues that many covenants not being enforced equally (selective enforcement)
o H: For P
 Different covenants w/in the CCR are severable (e.g. not enforcing one covenant doesn’t mean that the antenna covenant, here, couldn’t be enforced)  don’t abandon the right because it’s not enforced
• CCR itself said that provisions were severable
 Antenna covenant here had been enforced (several cases showing) – thus not “selective” in re that covenant

Question 8

Matters of Public Policy

Answer 8

• Public policy can supersede private contract – as long as “reasonably necessary to important public purpose” (means reasonably related to important ends)
• Restatement has broad view – invalidate if 1) arbitrary, spiteful, capricious; 2) unreasonably burdens a fundamental constitutional right; 3) imposes unreasonable restraint on alienation; 4) imposes unreasonable restraint on trade/competition; 5) is unconscionable

Question 9

• Crane Neck Association Inc. v. New York City/Long Island County Services Group – NY (1984)

Answer 9

o F: Restrictions to limit property use to single family homes (functionally private counterpart to zoning law); P sues because D is operating a group home for 8 mentally handicapped persons
o H: For D; declines to enforce for public policy reasons
 Court agrees that this is not a “single family home” per the covenant – so covenant is violated
 But unenforceable here because there is a strong public policy of supporting the mentally disabled and reintegrating them to society
• Looks to the Mental Hygiene Laws which facilitated transition/de-institutionalization of the mentally disabled

Question 10

Nahrstedt v. Lakeside Village Condominium Association – CA (1994) “Cats”

Answer 10

Unreasonable Covenants

o F: P sues because there is a no pets covenant in CCR and she has 3 cats
 P argues right to privacy – cats are not affecting anyone and it is intrusive to enforce covenant
o H: For D; restriction here is reasonable
 Rule: Restriction must be uniformly enforced in the condominium development to which it was intended to apply, unless P can show that the burdens it imposes on affected properties so substantially outweigh the benefits of the restriction that it should not be enforced against any owner  look at the broader picture only (not just as applied to P here; doesn’t matter if her cats specifically wouldn’t harm anyone  efficiency concern; want less litigation)
 Defining unreasonable: “wholly arbitrary, violate fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit”
o Dissent – cat lady judge says this is unfair for society, everyone should have a pet
o Statute passed saying 1 pet allowed

Question 11

Procedural Fairness

Answer 11

• Concern that homeowners associations will enact unfair/arbitrary rules after creation of subdivision – reasonableness standard thus applies
o Private communities are starting to look more like public actors – can’t be arbitrary/capricious in their policies, must assure fair process

Question 12

• Riss v. Angel – WA (1997)

Answer 12

o F: D rejects P’s construction plan on P’s lot; P sues because says rejection process is unfair given circumstances of architectural review; members of review board spread untrue info, encouraged vote against P
o H: For P
 Can’t make covenants substantially more strict after they are enacted / land is sold with them attached
 Need consistency of enforcement – rejection here was unreasonable (covenants themselves were enforceable)
• Conclusory language used, didn’t actually employ architect to check P’s plan until after had already been rejected
• Business judgment rule – higher standard of accountability on members of homeowners association boards and related entities (more than just reasonableness)
o Duty to act in accord with the good faith exercise of business judgment, similar to corporate governance