Daily Development for Wednesday, October 20, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

COVENANTS; ENFORCEMENT; "TOUCH AND CONCERN" REQUIREMENT: Utah upholds assessment requirements that do not "touch and concern" the burdened property.  

Workman v. Brighton Properties, Inc., 976 P.2d 1209 (Utah 1999).

Silver Lake Estates consists of two noncontiguous subdivisions more than a mile apart,  No. 1 and No. 2, and is managed by Brighton Properties, Inc. ("Brighton"). Only the lot owners hold the shares of Brighton, and one share is issued per lot. Both subdivisions are governed by a single set of documents including articles of incorporation, bylaws, and restrictive covenants.

In 1986, the Workmans purchased a lot in subdivision No. 2 subject to the restrictive covenants of Silver Lake Estates, and they received one share of Brighton. In 1996, Brighton notified all owners of a $300 assessment to fund an engineering feasibility study on the water system, which the Workmans refused to pay. The Workmans sued for declaratory and injunctive relief, arguing that they did not have to pay for the study because it would benefit only the lot owners of subdivision No. 1. The trial court entered judgment for Brighton.

On appeal: held: Affirmed. The Supreme Court of Utah noted that the documents containing the controlling terms of the relationship among the lot owners and Brighton contained no provisions restricting assessments to those that would provide a direct benefit to the lot owner.

As to the argument of the lot owner that improvements ought to benefit all lot owners, and not just those in one subdivision, the court responded:

   "Brighton responds that because of the physical separation of the   two subdivisions, it was necessarily contemplated that not every   improvement in each subdivision would provide a specific   benefit to every lot owner in both subdivisions, and there is   nothing in any of the provisions relied on by Workman that so   requires. We agree. Neither the covenants nor our case law   supports Workman's claim.

   First, the various provisions in question clearly contemplate   improvements within both subdivisions, but not necessarily   improvements that benefit both at once. Indeed, it is hard to   imagine very many improvements that, if efficiently planned and   undertaken, would simultaneously benefit two physically separate   subdivisions. Second, the "general benefit" language of Section   15 of the restrictive covenants is only part of an introductory   clause describing in general terms the reasons for the express   membership and assessment requirements that follow. It   certainly is not limiting as to those clear requirements."  The court went on to conclude that there was no evidence that the managers of Brighton were unfairly distributing the benefits and burdens of the assessments inequitably.

Comment 1: The court is not crystal clear on the vital question (but not so vital to this court) of whether the lot owner was the original promissor or bought the property from another who was the original promissor. In other words, it is not absolutely clear that the case involves a question of whether the covenant "ran with the land." But since the court's entire discussion focusses upon the fact that the lot owner was bound because he bought "subject to the Declaration," the editor concludes it is safe to assume that the court was talking about a test that would be applied to covenants running with the land, even if that was not the case here.

Comment 2: The traditional rule, of course, is that covenants do not run with the land unless they "touch and concern" the land, at least as to burden. Despite some early authority that assessment requirements are not of a nature that touch and concern land under any circumstances, the generally accepted view today is that assessment obligations do run with the land, but still there is the question of whether some further test of "touch and concern" the land ought to apply.

In light of that background, there are several ways to look at this case. One way is to view the court's decision as concluding that the promise to pay assessments for a water system for subdivision one "touched and concerned" the properties in subdivision two. An argument could be made, for instance, that subdivision 2 owners necessarily benefitted in their ownership of their properties by subdivision 1 being a healthy subdivision with adequate water service.  Or, in the alternative, it might be argued that there was a comprehensive plan being carried out in stages, and that subdivision two ultimately would benefit in the same way that subdivision one was benefitting now, and that subdivision one landowners would pay for that thus balancing the concerns.

But another way to look at the problem is to take the view that the court was saying that the subdivision two landowners are bound by the covenants whether the covenants touch and concern their lots or not.  The new Restatement of Servitudes takes the position that covenants ought to run if the parties intend them to run, regardless of any further requirement that they "touch and concern" the land. The Restatement basically takes the position that the "touch and concern" requirement as an independent requirement for running covenants has long since lost any clear content, and at best is a surrogate for policy analysis by the courts. The Restatement authors would prefer that such policy analysis be more specific, and thus would authorize a court to refuse to enforce a running covenant when it was inconsistent with public policy, but otherwise the Restatement recommends that courts let clearly expressed running covenants run.

Comment 3: The editor agrees that the "touch and concern" requirement was a mess, and usually used by courts as a "hide behind" whereby courts fashioned their own rules about the fairness and propriety of proposed running covenants. But the editor wonders whether the Restatement has thrown out the baby with the bath water. The Restatement's proposed replacement of the "touch and concern" requirement with public policy considerations may justify courts in imposing all manner of personal and political values on private agreements that are not intended by the parties and unrelated to the real estate interests involved.

Not being the "philosopher king" that he sometimes pretends to be, the editor is not ready to suggest his own test as to the validity of running covenants, and agrees that there should be some limit. Nevertheless, the author would prefer some clearer test than simple statement that covenants run except where they violate "public policy." (The editor grants that the Restatement also would bar covenants from running under a few other traditionally recognized circumstances.)

In this case, had the court been required to focus more carefully upon the question of whether the burden of providing water services ought to fall on the owners of properties a mile away from the location of the benefit really "touched and concerned" the burdened land, it might have come to a different conclusion,  Certainly its conclusion would have provided a little more substantiation for its position other than "it's in the title so you're bound." Even though the author believes that most covenants in most subdivisions ought to be upheld anyway, the permissive attitude suggested in this approach, when applied in the residential subdivision context, likely will lead to more evil than good.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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 six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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