Daily Development for
Friday, June 30, 1995

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

Covenants; Beneficiaries: Developer of scheme of restrictive covenants establishing a "common plan" in a subdivision does not necessarily have the right to enforce the covenants after he has disposed of all the lots in the subdivision. Haldeman v. Teicholz, 611 N.Y.S.2d 669 (N.Y. App. Div. 1994). The plaintiff, owning a life estate in adjacent property, purchased a parcel of property and subdivided it into three parcels which he sold. Each deed contained a restriction against subdividing and further stated that the restrictions were for the benefit of the owners of the land in the subdivision. In addition, the declaration also stated that the restriction expired in 20 years, but was automatically extended for 10 year periods until the owners of a majority of the lots in the subdivision declared that the declaration is terminated.

The court found that covenants ran with the land and that the plaintiff did not have standing to enforce the covenants because the covenants were for the benefit of the owners of the land in the subdivision. The plaintiff was not the owner of a dominant estate that was intended to benefit from the restrictive covenant contained in the declaration of restrictions made by the plaintiff when he subdivided the property.

Drafting Tip: Lawyers who represent developers in these cases may want to inquire of their clients whether it would be appropriate to identify the developer as a beneficiary of the covenant, at least so long as developer owned property within a certain radius of the area. A covenant does not have to be reciprocal to be enforceable. The buyers, of course, get consideration for the covenant in the form of the transfer of the property. Developers may well desire to protect their interest in future developable property by retaining the right to enforce covenants in subdivisions they have already developed.

Restrictive Covenants; Architectural Controls: Even though developer no longer has any right, title or interest in any lots within a controlled subdivision, developer may retain right to waive restrictions pertaining to roofing materials. Jones v. Herald, 881 P.2d 116 (Okla. Ct. App. 1994). Comment One: The trend seems to be to permit such "in gross" rights for developers, at least when they are rationally related to the developer's interest in nearby projects. But this case (supported by only the sketchiest of opinions) is somewhat different. The court assumed that the developer had no interest in any property in the subdivision, and does not appear to require any other particular interest. The covenants gave the developer the right to waive the roofing materials restriction, and the court simply reads that right literally.

The court does comment that a majority of the homeowners in the subdivision had the right to amend the covenant regime to remove the developer's waiver right, but that this had not yet occurred. The court, however, does not indicate whether such control by the homeowners is essential to its conclusion.

Comment Two: Most other courts have solved this kind of problem by concluding that the parties could not possibly have intended that the developer would continue to have approval rights when there is no legitimate interest for the developer to protect. To conclude otherwise, of course, potentially gives the developer the right to "sell waivers" and thus destroy the reciprocal servitude regime under which the developer transferred all the properties. This opinion is too sketchy to conclude that the Oklahoma court fails to appreciate that concern, but the opinion does little to acknowledge it.

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