Exclusionary Covenant

A covenant, in its most general and historical sense, is a solemn promise to engage in or refrain from a specified action. Under historical English common law, a covenant was distinguished from an ordinary contract by the presence of a seal. Because the presence of a seal indicated an unusual solemnity in the promises made in a covenant, the common law would enforce a covenant even in the absence of consideration. In United States contract law, an implied ''covenant'' of good faith is presumed.

A covenant is an agreement like a contract. A covenantor makes a promise to a covenantee to perform an action ''(affirmative covenant'' in the United States or ''positive covenant'' in England and Wales) or to refrain from an action (negative covenant). In real property law, the term real covenants means that conditions are tied to the ownership or use of land. A "covenant running with the land", meeting tests of wording and circumstances laid down in precedent, imposes duties or restrictions upon the use of that land regardless of the owner.

A covenant for title that comes with a deed or title to the property assures the purchaser that the grantor has the ownership rights that the deed purports to convey. Non-compete clauses in relation to contract law are also called restrictive covenants.

Landlords may seek and courts may grant forfeiture of leases such as in leasehold estates for breach of covenant, which in most jurisdictions must be relatively severe breaches; however, the covenant to pay rent is one of the more fundamental covenants. The forfeiture of a private home involves interference with social and economic human rights. In the case of leases commuted to a large sum payable at the outset (a premium), that has prompted lobbying for and government measures of leasehold reform particularly in the law of ground rents and service charges.

Restrictive covenants are somewhat similar to easements and equitable servitude."Integration of the Law of Easements, Real Covenants and Equitable Servitudes"
''Washington Law Review''. In the US, the Restatement (Third) of Property takes steps to merge the concepts as servitudes. Real covenant law in the US has been referred to as an "unspeakable quagmire" by one court.

Related to land

In property law, land-related covenants are called "real covenants", " covenants, conditions and restrictions " (CCRs) or "deed restrictions" and are a major form of covenant, typically imposing restrictions on how the land may be used (negative covenants) or requiring a certain continuing action (affirmative covenant). These may also "run with the land" (called a ''covenant appurtenant''), meaning that any future owners of the land must abide by the terms, or may apply to a particular person (called a ''covenant in gross'' or ''of a purely personal nature''). Under English law, affirmative covenants typically do not run with the land; in the United States such covenants are examined more closely, but with exceptions affirmative covenants have been permitted to run with the land.

The covenant may be shown in the deed and should be disclosed to prospective purchasers; it may also be recorded, or in the case of Commonwealth countries shown in Torrens title. Real covenants and easements or equitable servitudes are similar and in 1986, a symposium discussed whether the law of easements, equitable servitudes, and real covenants should be unified. As time passes and the original promisee of the covenant is no longer involved in the land, enforcement may become lax.

Covenants may be imposed through homeowner associations, and controversy has arisen over selective enforcement. Historically, particularly in the United States, exclusionary covenants were used to exclude racial minorities. Some covenants exist for safety purposes, such as a covenant forbidding the construction of tall buildings in the vicinity of an airport or one restricting the height of fences/shrubs at street corners (so as not to interfere with drivers' sight lines). Covenants may restrict everything from the height and size of buildings to the materials used in construction to superficial matters such as paint color and holiday decorations. In residential areas, covenants may forbid "dirty" businesses (such as feedlots or chemical production facilities) or business use entirely, or modifications such as amateur radio antenna. Amateur radio restrictions have been particularly controversial; in 1985 the U.S. Federal Communications Commission issued PRB-1 preempting state and local restrictions, but not private restrictions; in 2012 after Congress passed a law requiring study of this issue (at the urging of amateur radio group ARRL), the FCC declined to extend this preemption. Some US states have enacted legislation requiring homeowners' associations to provide reasonable accommodations for amateur radio antennas under the rationale that amateur radio provides public service communications in the event of an emergency, major disaster, or special event.

Application by jurisdiction

Canada

In Canada, governmental authorities may use restrictive covenants as well as zoning. For instance, the City of Calgary's requirement that buildings in the general vicinity of Calgary International Airport be under a certain height is registered against virtually every title in the northeast quadrant of the city as a restrictive covenant, not as a zoning by-law.

England and Wales

At common law, the benefit of a restrictive covenant runs with the land if three conditions are met:
* The covenant must not be personal in nature – it must benefit the land rather than an individual
* The covenant must 'touch and concern' the land – it must affect how the land is used or the value of the land
* The benefited land must be identifiable.

At common law, the burden of a restrictive covenant does not run except where strict privity of estate (a landlord/tenant relationship) exists.

The burden can be enforced at law in limited circumstances under the benefit/burden test - that is, whoever takes the benefit must also shoulder the burden. In ''Halsall v Brizell'' 957Ch 169, a covenant requiring the upkeep of roads was found to bind the successor in title to the original covenantor because he had elected to take the benefit. The rule in ''Halsall v Brizell'' is limited to cases where the benefit can be linked to a specific burden and where the covenantor's successors in title can physically elect to take the benefit. For example, a restrictive covenant to contribute to the maintenance costs of a common area will not be binding if the covenantor's successors in title have no legal right to use them. Rules for ascertaining whether the benefit of a covenant has been passed to another person who wishes to enforce the covenant were summarised in ''Small (Hugh) v Oliver & Saunders (Developments) Ltd''. in 2006, namely by an express assignment of the benefit, through a building scheme arrangement, usually for a new development of multiple properties, or through the application of section 78 of the Law of Property Act 1925, which only applies for covenants made since 1 January 1926.

A positive burden can run in law, but not in equity, as it is deemed to be analogous to a contract, to which equitable principles do not apply (''Rhone v Stephens'' (1994)).

The burden of a restrictive covenant will run in equity if these prerequisites are met:
* The burden cannot be a positive burden (that is, it requires expenditure to meet it);
* The purchaser must have notice of the covenant
* The covenant must benefit the covenantee's land
* The covenant must be intended to run with the covenantor's land.

The leading case on restrictive covenants in equity is generally regarded as that of ''Tulk v Moxhay'', in which it was determined that the burden could run in equity subject to the qualifications listed above.

The risk of an undisclosed restrictive covenant coming to the notice of a buyer or developer after they have acquired a site has been seen as especially high in regard to infill residential development. Restrictive covenant indemnity insurance is often available to mitigate this risk.Edwards, L.
Restrictive covenants - are they enforceable?
''RICS'', published on 15 November 2006, archived on 28 March 2007, accessed on 26 September 2024

Requirements in US law

The covenant will typically be written in the deed, and must be in writing due to the statute of frauds. Although scholars have argued that some of the following should be significantly relaxed, in order for the burden to run with the land the following must apply:
* The covenant must be in writing to satisfy the Statute of Frauds.
* The original parties to the agreement must have intended that successors be bound by the agreement.
* A subsequent owner must have had actual notice