Private Controls and Private Controls and AgreementsAgreements

Private AgreementsPrivate Agreements

In Land DevelopmentIn Land Development

CCRCCR

Conditions, Covenants & Conditions, Covenants & RestrictionsRestrictions

Basic ConceptsBasic Concepts

Covenants, Conditions and Restrictions Covenants, Conditions and Restrictions (CC&Rs) are established by property owners (CC&Rs) are established by property owners with respect to real property they own.with respect to real property they own.

The CC&Rs are a part of the deed to the land The CC&Rs are a part of the deed to the land and can affect all subsequent purchasers of and can affect all subsequent purchasers of the land. the land.

CC&Rs are usually employed by developers CC&Rs are usually employed by developers who intend to subdivide a large tract of land who intend to subdivide a large tract of land and want to protect its value for the present and want to protect its value for the present and subsequent owners and tenants and subsequent owners and tenants

Some Property Rights ImpactedSome Property Rights Impacted

How long these contracts runHow long these contracts run Prohibit certain usesProhibit certain uses Design Controls and GuidelinesDesign Controls and Guidelines Reserve Rights to Owners/LeasersReserve Rights to Owners/Leasers Prevent activities such as long term Prevent activities such as long term

parkingparking Require fees to be paidRequire fees to be paid Require common land to be maintainedRequire common land to be maintained Enforce environmental restrictionsEnforce environmental restrictions How they are modifiedHow they are modified

What CC&Rs Cannot DoWhat CC&Rs Cannot Do

Prohibition from illegal acts: racial Prohibition from illegal acts: racial discrimination, fraud, unreasonable discrimination, fraud, unreasonable burdensburdens

Run in perpetuity (maybe conditions?)Run in perpetuity (maybe conditions?) Survive substantially changed Survive substantially changed

conditionsconditions Be stated in confusing terms giving Be stated in confusing terms giving

rise to various interpretationsrise to various interpretations

Promises, PromisesPromises, Promises

Located about 58 miles from Washington D.C. and 70 miles from BaltimoreSherpherdstown

Harper’s Ferry

Cottrell v Nurnberger (West Cottrell v Nurnberger (West Virginia1948)Virginia1948)

Nurnberger subdivided 6 ½ acres of land Nurnberger subdivided 6 ½ acres of land in Jefferson County, West Virginiain Jefferson County, West Virginia

The plat was recorded in 1940The plat was recorded in 1940 While making lot sales, Nurnberger While making lot sales, Nurnberger

made promises that lot 45 was reserved made promises that lot 45 was reserved solely for playground purposessolely for playground purposes

However, there is nothing recorded with However, there is nothing recorded with the deed or the plat to indicate that lot the deed or the plat to indicate that lot 45 was reserved for this purpose45 was reserved for this purpose

Valley View Falls AdditionValley View Falls Addition

LOT 45

Coal River

Valley View Drive

SOSO Nurnberger changes his mind and Nurnberger changes his mind and

decides to sell lot 45 for a guest decides to sell lot 45 for a guest house/hotel with a restauranthouse/hotel with a restaurant

Mrs. Cottrell Was Really MadMrs. Cottrell Was Really Mad

She had a really bad day and in the process decided to bring an action against the owner – Nurmburger – for breach of promise

Actually, this is what a really bad day looks like

Those That Purchased Lots Those That Purchased Lots Were Not HappyWere Not Happy

They felt like there were idiots and “had been had”

Questions Raised By Lot Questions Raised By Lot OwnersOwners

Can an easement to use be created Can an easement to use be created by parole or prescription?by parole or prescription?

May a license to use land be revoked May a license to use land be revoked at will by the licensor?at will by the licensor?

Are the lot owners estoppled from Are the lot owners estoppled from asserting fraudasserting fraud

Is there a remedy for all this?Is there a remedy for all this? Is there a land use God that prevents Is there a land use God that prevents

people from getting screwed over?people from getting screwed over?

Findings By Appeals CourtFindings By Appeals Court Nurnberger’s statements can be Nurnberger’s statements can be

characterized as a promise (parole), characterized as a promise (parole), covenant, or representationcovenant, or representation

These type of rights cannot be created These type of rights cannot be created by a license to use – only by an by a license to use – only by an easement which requires a contract for easement which requires a contract for sale, a note, or memorandum to be in sale, a note, or memorandum to be in writing and signed by both partieswriting and signed by both parties

In short, his statement must be regarded In short, his statement must be regarded as an oral promise and therefore as an oral promise and therefore ineffective to create a valid easement or ineffective to create a valid easement or covenantcovenant

How About Being RevokedHow About Being Revoked

Since an oral promise cannot be construed as Since an oral promise cannot be construed as a license to use property, the grant of words a license to use property, the grant of words may be revoked at willmay be revoked at will

Nurnberger’s statements must be treated as Nurnberger’s statements must be treated as an oral promise instead of a representation – an oral promise instead of a representation – non-performance does not amount to fraudnon-performance does not amount to fraud

Fraud can only occur when the thing in Fraud can only occur when the thing in question involves a representation of existing question involves a representation of existing or past factor past fact

A future promise is not susceptible to A future promise is not susceptible to estoppleestopple

ConclusionConclusion No equitable remedyNo equitable remedy Nurnberger is in the rightNurnberger is in the right The other parties are charged and presumed to know The other parties are charged and presumed to know

that the promise is unenforceable and that they are that the promise is unenforceable and that they are acting under riskacting under risk

There is no land use God thatThere is no land use God that

looks over foolslooks over fools

In Re Davies, 1955In Re Davies, 1955 Sometime before 1880 common land Sometime before 1880 common land

around a private park was allotted and soldaround a private park was allotted and sold Each lot purchaser was granted an Each lot purchaser was granted an

easement to use this private land know as easement to use this private land know as Ellenborough ParkEllenborough Park

The privilege to use this park was The privilege to use this park was conditioned on a fair and just payment for conditioned on a fair and just payment for a portion of the upkeep of the Parka portion of the upkeep of the Park

The easement to use (in the form of a The easement to use (in the form of a license) was granted to all adjacent land license) was granted to all adjacent land owners and heirs and assigns in perpetuityowners and heirs and assigns in perpetuity

Ellenborough Park AllottmentEllenborough Park Allottment

PRIVATE PARK

LOT 1 LOT 2

LOT 3

LOT 4LOT 5

LOT 6

The ControversyThe Controversy

The plaintiffs are the trustees for Davies The plaintiffs are the trustees for Davies who purchased the parkwho purchased the park

The trustees are attempting to block the The trustees are attempting to block the sale of the private park (as a building lot) sale of the private park (as a building lot) by the heir of the original ownerby the heir of the original owner

Court ReviewCourt Review

The Court first examines the The Court first examines the essential qualities of an easementessential qualities of an easement There must be a dominant and a servient tenementThere must be a dominant and a servient tenement

LOT 6

Dominant Tenement

PARK

Servient Tenement

The 2The 2ndnd Quality of An Easement Quality of An Easement

The easement must accommodate The easement must accommodate the dominant tenementthe dominant tenement It must be connected with purpose, enjoyment and It must be connected with purpose, enjoyment and

benefitbenefit

33rdrd Quality Quality

The dominant and servient The dominant and servient tenements must be different personstenements must be different persons

LOT 6

This tenement owner by someone else

This tenement owned by Davies’ heirs

44thth Quality Quality

The right claimed must be capable of The right claimed must be capable of forming the subject of a grantforming the subject of a grant

In other words, it is in the form of an In other words, it is in the form of an easement as a license to use. Not an easement as a license to use. Not an oral promise (parole).oral promise (parole).

Findings Of The CourtFindings Of The Court The tenement was created at the time of The tenement was created at the time of

allotment. The lots were dominant and the allotment. The lots were dominant and the Park was servientPark was servient

The purpose of attaching the Park was to The purpose of attaching the Park was to create “a pleasure ground” for the lot owners create “a pleasure ground” for the lot owners to enhance the value of their property and by to enhance the value of their property and by creating open space to the front of each ownercreating open space to the front of each owner

The dominant and servient owners have The dominant and servient owners have always been different peoplealways been different people

A license was created in the express deed A license was created in the express deed granting full enjoyment of the Park to each granting full enjoyment of the Park to each ownerowner

ClaimClaim

The heir of Davies claims that he cannot The heir of Davies claims that he cannot be bound by the promise of the original be bound by the promise of the original owner to hold the park for enjoyment in owner to hold the park for enjoyment in perpetuityperpetuity

Easements cannot be created, they claim, Easements cannot be created, they claim, that run forever and bind subsequent heirs that run forever and bind subsequent heirs or ownersor owners This seems

to go on forever

ConclusionConclusion

This is a valid easement and grantThis is a valid easement and grant So long as the owners continue to pay So long as the owners continue to pay

their claim for upkeep, the subsequent their claim for upkeep, the subsequent owners and heirs of Ellenborough Park owners and heirs of Ellenborough Park must maintain it for the pleasure and must maintain it for the pleasure and value of the lot ownersvalue of the lot owners

Suck it up DaviesSuck it up Davies

Sloan v Johnson - 1995Sloan v Johnson - 1995

1934, Hagan and his wife conveyed part of 1934, Hagan and his wife conveyed part of Lot 13 and all of Lot 14 in the subdivision to J. Lot 13 and all of Lot 14 in the subdivision to J. Frederick Abel and his wife as joint tenants. Frederick Abel and his wife as joint tenants. The deed contained this express language:The deed contained this express language: "This conveyance is made subject to the following "This conveyance is made subject to the following

conditions and restrictions which shall remain in force until conditions and restrictions which shall remain in force until July 1, 1943, and shall then be automatically renewed for a July 1, 1943, and shall then be automatically renewed for a period of ten years and shall be automatically renewed period of ten years and shall be automatically renewed every ten years thereafter unless a majority of the property every ten years thereafter unless a majority of the property owners at a yearly meeting suspend this rule:owners at a yearly meeting suspend this rule:

4. Not more than one residence shall be erected upon this 4. Not more than one residence shall be erected upon this lot, the cost of which shall be not less than $4,000.00."lot, the cost of which shall be not less than $4,000.00."

Over The YearsOver The Years

For the next 50 years the two lots were For the next 50 years the two lots were sold again and again to different partiessold again and again to different parties

Each sale contains the same language in Each sale contains the same language in the deedthe deed

Finally, in 1992 the Johnson’s inherited the Finally, in 1992 the Johnson’s inherited the two lots and filed a subdivision plan which two lots and filed a subdivision plan which was approved by the Zoning Administratorwas approved by the Zoning Administrator

LOT 14

LOT 13

LOT 13

The NeighborsThe Neighbors Two neighbors filed and injunction to prevent Two neighbors filed and injunction to prevent

the Johnson’s from building a second residence the Johnson’s from building a second residence on their loton their lot

The trial court voided the covenant because The trial court voided the covenant because the complainants' evidence failed to establish the complainants' evidence failed to establish a general scheme or plan of development a general scheme or plan of development imposed on lots in the subdivision.imposed on lots in the subdivision.

In other words, the original owners should have In other words, the original owners should have made it clear that this one lot/one house made it clear that this one lot/one house restriction was applicable to all the lots in the restriction was applicable to all the lots in the original subdivision. You can’t make a original subdivision. You can’t make a covenant personal – it must be applicable to allcovenant personal – it must be applicable to all

The Lot Owners AppealThe Lot Owners Appeal

The Appeals Court begins by saying:The Appeals Court begins by saying: Covenants, express or implied, which restrict the Covenants, express or implied, which restrict the

free use of land are not favored and must be free use of land are not favored and must be strictly construed (courts always say this because strictly construed (courts always say this because it is common law doctrine)it is common law doctrine)

The Appeals Court reverses the trial The Appeals Court reverses the trial court and allows the covenant to be court and allows the covenant to be enforcedenforced It was very clear that the original owners did not It was very clear that the original owners did not

try to make this restriction personal during their try to make this restriction personal during their lifetime. They intended to make the covenant run lifetime. They intended to make the covenant run with the land as a general plan that you cannot with the land as a general plan that you cannot build two homes on an original lotbuild two homes on an original lot

ConclusionConclusion In legal terms “privity” means that you cannot In legal terms “privity” means that you cannot

enforce an obligation of contract to third parties. enforce an obligation of contract to third parties. Terms are only enforceable between the two Terms are only enforceable between the two parties to the contractparties to the contract

There is an exception: Contracts that restrict or There is an exception: Contracts that restrict or impact upon the use of land (eg. an impact upon the use of land (eg. an easement) ) may be enforceable upon the next land-owner, may be enforceable upon the next land-owner, even though they were not privy to the original even though they were not privy to the original contract. This is an old exception to the rule of contract. This is an old exception to the rule of "privity of contract" that is still applicable today"privity of contract" that is still applicable today

Held for the JohnsonsHeld for the Johnsons

Stuart v Chawney, 1997Stuart v Chawney, 1997 In 1967 a 12 lot subdivision know as Lincoln In 1967 a 12 lot subdivision know as Lincoln

Green was constructed in the Village of Beverley Green was constructed in the Village of Beverley Hill, Mich.Hill, Mich.

One of the covenants filed with this subdivision One of the covenants filed with this subdivision created an architectural review committeecreated an architectural review committee

This committee, using reasonable standards, was This committee, using reasonable standards, was charged with reviewing all construction plans to charged with reviewing all construction plans to assure that each home in Lincoln Green would be assure that each home in Lincoln Green would be compatible with a dominant design schemecompatible with a dominant design scheme

This covenant would run for 10 years and be This covenant would run for 10 years and be automatically renewed unless a majority of the automatically renewed unless a majority of the lot owners modified itlot owners modified it

Design SchemeDesign Scheme

All of the homes in Lincoln Green All of the homes in Lincoln Green incorporated “Colonial Styling”incorporated “Colonial Styling”

The Architectural Review The Architectural Review CommitteeCommittee

The "Developer" heretofore The "Developer" heretofore designated, his successors and designated, his successors and assigns, shall constitute the assigns, shall constitute the Architectural Control Committee.Architectural Control Committee.

The Architectural Control Committee The Architectural Control Committee shall have authority to pass on plans shall have authority to pass on plans and specifications and otherwise and specifications and otherwise guide the development of the guide the development of the subdivision as planned and restricted subdivision as planned and restricted herein.herein.

The Committee Does What?The Committee Does What? The committee shall have the right to refuse to The committee shall have the right to refuse to

approve any such plans or specifications or grading approve any such plans or specifications or grading plans which are not suitable or desirable in its opinion plans which are not suitable or desirable in its opinion for aesthetic or other reasonsfor aesthetic or other reasons

In so passing upon such plans, specifications and In so passing upon such plans, specifications and grading plans, it shall have the right to grading plans, it shall have the right to take into take into consideration suitability of the proposed buildings or consideration suitability of the proposed buildings or other structure to be built on the site upon which it is other structure to be built on the site upon which it is proposed to erect the same, the harmony thereof with proposed to erect the same, the harmony thereof with the surroundings and the effect of the building or the surroundings and the effect of the building or other structuresother structures

It is understood that It is understood that the purpose of this paragraph is the purpose of this paragraph is to cause the subdivision to develop into a beautifully, to cause the subdivision to develop into a beautifully, harmonious, private residence section harmonious, private residence section and that the and that the Architectural Control Committee shall not be arbitrary Architectural Control Committee shall not be arbitrary in its decisions.in its decisions.

What Happens Next?What Happens Next?

There was a parcel of land located to the There was a parcel of land located to the east of Lincoln Green that was planned for east of Lincoln Green that was planned for condominiumscondominiums

During a series of public hearings the During a series of public hearings the owners of this land agree to split off a owners of this land agree to split off a portion of this land next to Lincoln Green portion of this land next to Lincoln Green and to subject it to the Lincoln Green and to subject it to the Lincoln Green covenantscovenants

Lincoln Green Street

Original Parcel

New Lot

And ThenAnd Then

Chawney was an architect for the owners Chawney was an architect for the owners of the new lotof the new lot

He drew up plans and tried to locate the He drew up plans and tried to locate the homeowners association for Lincoln Greenhomeowners association for Lincoln Green

The Village zoning administrator referred The Village zoning administrator referred him to a person who he thought him to a person who he thought represented the homeowners assoc.represented the homeowners assoc.

This person reviewed the plans for the This person reviewed the plans for the new home and approved the designnew home and approved the design

The Owners RespondThe Owners Respond While the clients were building their new While the clients were building their new

home Mr. Chawney was contacted by an home Mr. Chawney was contacted by an attorney for the residents of Lincoln Green attorney for the residents of Lincoln Green informing him that the new home did not informing him that the new home did not meet the design guidelines of Lincoln meet the design guidelines of Lincoln GreenGreen

The trial court ruled that the residents of The trial court ruled that the residents of Lincoln Green were not entitled to enforce Lincoln Green were not entitled to enforce the covenant:the covenant: Under the terms of the original covenant the current Under the terms of the original covenant the current

Lincoln Green Residents did not constitute an Lincoln Green Residents did not constitute an architectural review committeearchitectural review committee

The term “harmonious” development is ambiguous and The term “harmonious” development is ambiguous and overbroadoverbroad

The House Plan SubmittedThe House Plan Submitted

This is what was submitted

This is what they wanted

Is This Harmonious Is This Harmonious Development?Development?

Or This?Or This?

HarmonyHarmony

The AppealThe Appeal The residents of Lincoln Green appeal this The residents of Lincoln Green appeal this

decisiondecision The Appeals court reversesThe Appeals court reverses::

Although the residents were not the architectural Although the residents were not the architectural review committee – each owner maintained an review committee – each owner maintained an independent cause of action to protect their own independent cause of action to protect their own property through the binding covenantproperty through the binding covenant

The covenant is not vague, ambiguous, overbroad, and The covenant is not vague, ambiguous, overbroad, and unenforceable. That intent may be gleaned from unenforceable. That intent may be gleaned from surrounding circumstances, the location and character surrounding circumstances, the location and character of the entire tract, the purpose of the restriction, and of the entire tract, the purpose of the restriction, and whether there was a general plan for the development whether there was a general plan for the development of property. Here, the intent was to "cause the of property. Here, the intent was to "cause the subdivision to develop into a beautifully, harmonious, subdivision to develop into a beautifully, harmonious, private residence section .private residence section .

No Comes the Supreme CourtNo Comes the Supreme Court The Court agrees with the trial court The Court agrees with the trial court

because there was no properly constituted because there was no properly constituted architectural control committee, i.e., no architectural control committee, i.e., no method for enforcing the standards of method for enforcing the standards of "beauty" and "harmony.“"beauty" and "harmony.“

It is undisputed that from the time the It is undisputed that from the time the restriction agreement was recorded in restriction agreement was recorded in 1967, to the beginning of the construction 1967, to the beginning of the construction of the defendants' home in 1991, no of the defendants' home in 1991, no architectural control committee separate architectural control committee separate from the original developer had been from the original developer had been convened to consider proposed convened to consider proposed construction in Lincolnconstruction in Lincoln

Breach of AgreementBreach of Agreement

This is CRITICALThis is CRITICAL The residents had no independent cause of action The residents had no independent cause of action

because they breached the original agreement because they breached the original agreement (contract) to form an architectural review (contract) to form an architectural review committeecommittee

No one got off their collective rear ends to form No one got off their collective rear ends to form this committee and the original developer did this committee and the original developer did nothing to transfer his right of review to the nothing to transfer his right of review to the residents of Lincoln Greenresidents of Lincoln Green

The Architect, Chawney and his The Architect, Chawney and his Wife Celebrate Their VictoryWife Celebrate Their Victory