Covenants & Servitudes — Real Property

You buy a house in a quiet neighborhood because every home around it is a single-family residence. A year later the owner next door decides to open a machine shop in his garage. Customers all day, compressors running. Nothing in his deed says he cannot. Can you stop him?

Usually, yes. Because a covenant is a promise about land that travels with the dirt, binding not just the two neighbors who struck the deal but everyone who owns those lots afterward. And here is the move that decides this whole topic. Ask what you actually want. Money, or the machine shop shut down. That one question picks your theory, and each theory has its own checklist.

Here's the route. First, the two devices, and why the remedy you want selects between them. Then the six boxes for a real covenant burden, with horizontal and vertical privity up close, because that is where most of them die. Then the equitable servitude, which drops the privities. Then servitudes implied from a common scheme. And finally termination, and the equitable defenses.

Start with the split that organizes everything. The same promise about land can be enforced two ways, and each has its own checklist. A real covenant is enforced at law, and its remedy is money damages. An equitable servitude is the same use-promise enforced in equity, and its remedy is an injunction. An order to stop the forbidden use, or to perform the required act.

So the plaintiff picks the theory by the remedy. Want money for a past breach? Prove a real covenant, which carries demanding privity requirements. Want the violation stopped? Go in equity, which needs no privity at all. Only notice. And because most neighbors want the machine shop closed rather than a check, the equitable servitude is the workhorse here.

Now sort every covenant on two independent axes. What the promise demands, and which court enforces it. A negative covenant is a promise to refrain. No commercial use, nothing taller than two stories. An affirmative covenant is a promise to act, usually to spend money. Pay $600 a year in association dues.

The axes are independent, and that trips people. Equitable servitude is not a kind of subject matter. It is a label for how and where a promise is enforced. So an affirmative promise to pay assessments can absolutely be an equitable servitude, and equity routinely orders owners to pay.

Between the two people who actually made the promise there is no mystery. It is an ordinary contract, and the only real hurdle is the Statute of Frauds. A promise about land needs a signed writing. Two neighbors who shake hands over coffee and write nothing down have an unenforceable promise, even against each other.

The hard questions start when the land changes hands. And build one discipline now. Split every promise into two sides. The burden, the duty to perform or refrain, and the benefit, the right to enforce. Each side runs under its own requirements, and one can run while the other does not.

For damages the burden is the harder side, because the law protects owners against surprise obligations on their land. Six boxes. Writing, satisfying the Statute of Frauds, nearly always the deed or a recorded declaration. Intent that the burden bind successors, shown by heirs and assigns, or runs with the land, or inferred from a common plan.

Third, touch and concern, which asks whether the promise concerns the land rather than the person. Building height, permitted use, upkeep, all qualify. And a money promise qualifies when the money is tied to the land. Dues maintaining the subdivision roads are the classic case. A promise to pay $500 a year to a charity the seller admired, unconnected to the lot, is not.

Fourth, notice, in three forms. Actual, meaning he in fact knew. Record, meaning the restriction sits in his chain of title, and he is charged with it whether or not he read it. And inquiry, meaning the visible uniform character of the neighborhood would lead a reasonable buyer to investigate. Any one will do, and a purchaser for value with none takes free.

Which leaves the two boxes belonging to real covenants alone. Horizontal privity, and strict vertical privity. This is where most damages claims die.

Horizontal privity is the relationship between the two original promising parties. The traditional rule asks whether they shared an interest in the land apart from the promise. Normally that means the covenant appears in the deed by which one conveyed to the other, or they are landlord and tenant.

So two neighbors who already own their lots and simply sign a stand-alone side agreement traditionally lack it. And the consequence is precise. Without horizontal privity the burden does not run at law, so no damages. But the promise still works as an equitable servitude. Missing horizontal privity is the single most common reason a real covenant fails.

Vertical privity is the relationship between an original party and the successor now holding the land. For the burden most courts require it strict. The successor must hold the same entire estate the promisor had. Quick challenge. An owner bound by a paint-color covenant does not sell. She leases for five years, keeping her reversion, and the tenant paints the house purple. Can the neighbor collect damages from him?

No. The tenant took only a leasehold, so she kept a reversion and strict vertical privity is broken. The burden never ran to him at law. But notice what that does not mean. An injunction on an equitable-servitude theory needs no vertical privity at all.

For the benefit, vertical privity relaxes. The successor need only take some interest in the benefited land, so a life tenant can enforce, and so can an adverse possessor. The benefit needs no horizontal privity and no notice either, because the person enforcing is not the one being restricted.

Now the injunction track, and back to our machine shop. When you want the use stopped, the privity requirements vanish. Equity enforces the promise against anyone who takes the burdened land with notice, because it would be unconscionable to let a buyer who knew of a restriction ignore it. Four boxes. Writing, intent, touch and concern, notice.

Which is why the pivot matters. Give me neighbors with no conveyance between them and the damages claim is dead on horizontal privity. The injunction claim is untouched. Same promise, same successor, same notice, opposite results, because the plaintiff walked into a different courthouse.

Next, what happens when the writing is missing. Developers slip up. One writes residential use only into the first forty-eight deeds of a fifty-lot subdivision and forgets the last two. Under the common-scheme doctrine, the implied reciprocal negative servitude, equity can still bind those lots, treating the scheme as an exception to the writing requirement.

Two requirements. A common scheme, meaning that when sales began the developer had a plan to restrict all the lots. Proof includes a recorded plat, a uniform pattern in the other deeds, or marketing promises. And notice, which the uniform built-out look of the neighborhood commonly supplies by itself.

And two limits decide the hard cases. Timing, because the scheme must already exist when the developer sells the lot in question, so lots sold before the plan came together stay free. And subject matter, because courts imply only negative servitudes this way, never an affirmative duty to pay.

Transfer is simpler than it looks. Once a covenant runs it is appurtenant to the land, so benefit and burden pass automatically with each parcel, and nobody signs a fresh agreement at each sale. A buyer of the benefited lot gains the right to enforce even if her own deed never mentions it.

One transfer point worth memorizing. A benefit in gross is held by a person or organization rather than tied to a parcel. Traditionally disfavored, and it would not run at law. Modern law permits them, which is what lets a homeowners association owning no lot enforce the community covenants.

Then termination. Release, in writing from the benefit holder. Merger, when the benefited and burdened parcels come into common ownership, because one cannot hold a servitude against oneself, and it does not revive if they are split again. Expiration by the covenant's own terms, thirty years say. Abandonment. Condemnation. Estoppel. Changed conditions.

Be careful with abandonment. It takes conduct showing intent to give up the restriction, usually tolerating so many violations that the plan is dead. Mere non-use is not enough. Fifteen years in which nobody built a taller fence, and nobody tolerated one either, is not abandonment. It is a covenant working.

And now the part that surprises people. An injunction is a creature of equity, so a defendant can defeat one with equitable defenses even when every element is satisfied. Unclean hands, where the plaintiff violates the restriction he is enforcing. Acquiescence, where he stood by while others violated it. Estoppel. Laches. And changed conditions.

Changed conditions is the most heavily tested, so know its limit. A court lifts a servitude only when the change is so pervasive it defeats the restriction's purpose throughout the restricted area. Quick challenge. Commercial development has crept up to the subdivision boundary and the perimeter lots are no longer desirable homes. The interior lots are still a quiet enclave. An interior owner wants to build an office. Does the defense work?

No. Changes at the edge are not enough. That interior lot still enjoys the benefit, so the servitude stands against him. That is the classic trap. And note a split on remedy. Most courts denying an injunction for changed conditions also deny damages, though some still award them.

One curveball to watch for. A racially restrictive covenant, barring sale to or occupancy by people of a particular race, is unenforceable. Judicial enforcement is state action violating the Equal Protection Clause, and the covenant independently violates the Fair Housing Act. No court will enforce it, however perfectly the elements line up.

And know the direction of travel. The modern Restatement merges the two devices into one category and dismantles the old gatekeepers. § 2.4 abolishes horizontal privity. § 3.2 supersedes touch and concern. § 3.1 makes a servitude valid unless illegal, unconstitutional, or against public policy. Apply the traditional elements as the majority rule, but know where it is heading.

A word on authorities. This episode named no cases, and that was deliberate. The source teaches this through elements and checklists, and NextGen questions do the same. They hand you a promise, a successor, and a remedy request, and ask whether it runs. This topic is starred, so nothing gets printed for you. You produce the checklists cold.

If you keep only three things, keep these. Privity is required for damages and never for an injunction. Analyze the burden and the benefit separately, because one can run while the other fails. And the six boxes for a real-covenant burden, which are the four-box equitable-servitude test plus horizontal privity and strict vertical privity.

Now the traps, straight from the examiners' favorites. One. Privity is a real-covenant requirement only. If the call of the question asks for an injunction, do not deny relief for missing horizontal or vertical privity. Two. Match the remedy to the theory. Damages means real covenant and privity. Injunction means equitable servitude and notice.

Three. Analyze burden and benefit separately. Four. Horizontal privity needs a conveyance between the original parties, so a stand-alone side agreement between two existing neighbors usually lacks it. Five. Notice cuts off the burden of both devices against a purchaser for value with no actual, record, or inquiry notice.

Six. A money covenant can touch and concern. Dues maintaining shared land are enforceable, so do not dismiss them as merely personal. Seven. A common scheme implies negative servitudes only, never an affirmative duty to pay. And eight. Never enforce a racially restrictive covenant, whatever the elements say.

Time for the quick check, and this one comes straight from the BARGO question bank. A neighbor seeks an injunction to enforce a recorded residential-use restriction against the successor owner of a nearby lot. He has begun running a commercial landscaping business, with trucks and crews arriving each morning. Everyone agrees the successor bought with clear record notice. His lawyer concedes the writing, the intent to bind successors, and touch and concern. But he argues the neighbor still cannot win without also proving horizontal and vertical privity.

Is that privity argument a valid defense to the injunction? Option one. Yes, because both horizontal and vertical privity are always required to enforce. Option two. Yes, because vertical privity, though not horizontal, is required in equity. Option three. No, because an equitable servitude requires no privity of any kind. Pause here if you want a moment.

The answer is option three. To enforce a burden in equity you need four things. A writing or a common scheme, intent, touch and concern, and notice. Privity is not on the list. Option one imports the real-covenant test into equity, which is the single error this topic is built to catch. Option two is the subtler version of the same mistake, splitting the privities and keeping one. Equity keeps neither.

He asked for an injunction, so privity never entered the room. There are thirty plus more questions on this topic alone, each with every option explained like that.

Five things to take away. One. The remedy picks the theory. Damages means a real covenant with privity. An injunction means an equitable servitude with notice and no privity. Two. Split every promise into burden and benefit and run each on its own, because one can run while the other fails.

Three. The burden of a real covenant needs six boxes. Writing, intent, touch and concern, notice, horizontal privity, and strict vertical privity. Drop the last two and you have the equitable servitude test. Four. A common scheme plus notice can imply a negative servitude onto a lot whose deed forgot it, never an affirmative duty. Five. Screen every injunction for the equitable defenses.

Which is why you can stop the machine shop. You do not want his money. You want the compressors off. Ask for the injunction, prove notice, and privity never comes up. Next time, Real Estate Contracts.

Practice this topic with more than 2,900 exam-style questions, free to start, at nextgenbargo.com. This episode is for education and exam preparation only, not legal advice, and we are not affiliated with or endorsed by the NCBE or any bar examining authority.