by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
SERVITUDES; COVENANTS; TERMINATION: A covenant purporting to prohibit a present property owner and her successors from developing the property with adjoining land is unenforceable, both under statute and common law principles.
Garland v. Rosenshein, 649 N.E.2d 756 (Mass. 1995).
Investor acquired a certain valuable tract of land. There was an adjacent parcel that the investor believed could be developed in conjunction with the parcel just acquired, and the investor set out to acquire the adjacent parcel as well. But the investor was unable to close a deal on the adjacent parcel.
Apparently bitter from the attempt to acquire the adjacent parcel, and perhaps suspicious of the future intentions of the owner of that parcel, the investor elected to sell the original parcel subject to a condition restricting the development of the original parcel in conjunction with the adjacent parcel. The covenant included prohibitions against permitting easements across the original parcel for utility lines or vehicular access to the adjacent parcel, the construction of buildings "straddling" both parcels, and even provided that the original grantor could require any future owner to construct a fence along the boundary between the parcels.
Subsequently, the original parcel changed hands several times. Then an owner of the parcel, who bought it for a price substantially lower than the price for which the investor sold it, attempted to get a judicial declaration that the restriction was unenforeceable.
Held: The restriction is unenforceable as a matter of statutory law because it confers no benefit on the party claiming rights of enforcement. It also is unenforceable as a matter of state common law, because it does not satisfy the traditional "touch and concern" test for covenants running with the land.
On the statutory point, the court applied M.G.L. c. 184 30 (1992) which states that a restriction will be enforced only if it is "at the time of the proceeding, of actual and substantial benefit to a person claiming rights of enforcement." The court held that to be "actual" the benefit must come from the existence and enforceability of the restriction, rather than from the price of releasing the restriction.
The restriction failed under traditional common law principles also. The only benefit from the restriction was the potential economic gain that the defendant might have received if someone were willing to pay the defendant in order to release the restriction. This benefit was personal and did not confer a direct physical advantage to any piece of the land owned by the defendant. The court stated the general rule that where the benefit is personal, the burden of the covenant does not run with the land. This follows from the notion that such a covenant does not meet the "touch and concern" requirements as articulated in the Restatement of Property Sec. 537. The Restatement provides that the burden of a covenant does not run with the land if the benefit of the covenant is personal.
The court acknowledged that the new draft Restatement of Servitudes would replace the "touch and concern" test with a new test, the court declined to depart from the old rule in this case:
"[A]lthough we have expressed a willingness to reconsider common law rules concerning the creation, validity and enforcement of servitudes, see Bennett v. Commissioner of Food & Agric.,. . . 576 N.E.2d 1365 (Mass. 1991), this is not a case where `old common law rules barring the creation and enforecement of easements in gross have no continuing force.'" (quoting from Bennett, which enforced a servitude in the absence of a dominant estate where enforcement was consistent with public policy.)Note: The petitioners also had sought a ruling as to whether the covenant was invalid as a restraint on alienation. Clearly, under many judicial interpretations, it would have been an indirect restraint on alienation, or even a direct restraint to the extent that it prohibited the creation of easements. The court, however, made no ruling on this argument.
Comment 1: Obviously, if the state legislature has directed the courts to behave in a certain way, then the court should follow this direction. The court's interpretation of the legislative will is a reasonable one, and consequently the editor has no quarrel with the outcome here.
Comment 2: The analysis of the common law point deserves further discussion.
This was a silly restriction which, in context, should have been denied specific enforcement, even against the original promissor. There is no reason, however, that a land restriction freely agreed to, clearly expressed, and known to all parties, should not form the basis of a damage action if it is breached. If there are no damages, then that is the end of the matter. But, absent a specific declaration by statute, or recognition of the traditional prohibition against restraints on alienation, courts should not involve themselves in the treacherous business of striking down as unenforceable contract provisions that they deem to be "unreasonable." Let the parties decide what is reasonable.
Of course, there are outside limits on any position one takes on judicial intervention in contract enforcement. There probably are provisions that the editor would agree should be struck down, even as a matter of common law. This provision might be one, but only because in inhibits alienability, not because it is, arguably, of no "value." Value should be defined by the contracting parties.
Note that the current owner of the property paid about half what the property sold for originally with the restriction. That owner would not be bringing this declaratory relief action if it did not stand to gain significantly from the striking down of the restriction.
Comment 3: As to the restriction on covenants running with the land, based upon the "touch and concern" requirement, the editor sees no particular benefit in imposing special requirements upon the running of covenants other than clarity and notice. The editor agrees with the new Restatement's rejection of the nebulous "touch and concern" requirement as a restriction on running covenants. The the editor would not replace the restriction with any other restriction. As to commercial covenants, the traditional judicial discretion to withhold specific performance and leave the parties to their damage remedy should be enough to curb excess.
Obviously, we may want to have different rules in the context of residential property, such as in subdivisions and condominiums. But that is because the realities of modern consumer marketing alter the market economics. In any event the alternative rules for consumer transactions should address enforceability without regard to the question of whether the restrictions in question run with the land. Here, too, the only questions that ought to affect the issue of wehther covenants "run" at common law should be clarity and notice. The question of whether covenants should be permitted to last "forever" does not have to do with "running" per se and in any event is best left to the legislature.
Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Laprica Mims at the ABA. (312) 988 6233 or LaPricaMims@staff.abanet.org
Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.