Private Controls and Agreements

Private Controls and Agreements Private Agreements In Land Development CCR Conditions, Covenants & Restrictions

Basic Concepts • Covenants, Conditions and Restrictions (CC&Rs) are established by property owners with respect to real property they own. • The CC&Rs are a part of the deed to the land and can affect all subsequent purchasers of the land. • CC&Rs are usually employed by developers who intend to subdivide a large tract of land and want to protect its value for the present and subsequent owners and tenants

Some Property Rights Impacted • How long these contracts run • Prohibit certain uses • Design Controls and Guidelines • Reserve Rights to Owners/Leasers • Prevent activities such as long term parking • Require fees to be paid • Require common land to be maintained • Enforce environmental restrictions • How they are modified

What CC&Rs Cannot Do • Prohibition from illegal acts: racial discrimination, fraud, unreasonable burdens • Run in perpetuity (maybe conditions?) • Survive substantially changed conditions • Be stated in confusing terms giving rise to various interpretations

Promises, Promises Harper’s Ferry Located about 58 miles from Washington D.C. and 70 miles from Baltimore Sherpherdstown

Cottrell v Nurnberger (West Virginia1948) • Nurnberger subdivided 6 ½ acres of land in Jefferson County, West Virginia • The plat was recorded in 1940 • While making lot sales, Nurnberger made promises that lot 45 was reserved solely for playground purposes • However, there is nothing recorded with the deed or the plat to indicate that lot 45 was reserved for this purpose

Valley View Falls Addition Coal River LOT 45 Valley View Drive

SO • Nurnberger changes his mind and decides to sell lot 45 for a guest house/hotel with a restaurant

Mrs. 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 Were Not Happy They felt like there were idiots and “had been had”

Questions Raised By Lot Owners • Can an easement to use be created by parole or prescription? • May a license to use land be revoked at will by the licensor? • Are the lot owners estoppled from asserting fraud • Is there a remedy for all this? • Is there a land use God that prevents people from getting screwed over?

Findings By Appeals Court • Nurnberger’s statements can be characterized as a promise (parole), covenant, or representation • These type of rights cannot be created by a license to use – only by an easement which requires a contract for sale, a note, or memorandum to be in writing and signed by both parties • In short, his statement must be regarded as an oral promise and therefore ineffective to create a valid easement or covenant

How About Being Revoked • Since an oral promise cannot be construed as a license to use property, the grant of words may be revoked at will • Nurnberger’s statements must be treated as an oral promise instead of a representation – non-performance does not amount to fraud • Fraud can only occur when the thing in question involves a representation of existing or past fact • A future promise is not susceptible to estopple

Conclusion • No equitable remedy • Nurnberger is in the right • The other parties are charged and presumed to know that the promise is unenforceable and that they are acting under risk • There is no land use God that looks over fools

In Re Davies, 1955 • Sometime before 1880 common land around a private park was allotted and sold • Each lot purchaser was granted an easement to use this private land know as Ellenborough Park • The privilege to use this park was conditioned on a fair and just payment for a portion of the upkeep of the Park • The easement to use (in the form of a license) was granted to all adjacent land owners and heirs and assigns in perpetuity

Ellenborough Park Allottment LOT 1 LOT 2 LOT 3 PRIVATE PARK LOT 6 LOT 4 LOT 5

The Controversy • The plaintiffs are the trustees for Davies who purchased the park • The trustees are attempting to block the sale of the private park (as a building lot) by the heir of the original owner

Court Review • The Court first examines the essential qualities of an easement • There must be a dominant and a servient tenement LOT 6 Dominant Tenement PARK Servient Tenement

The 2nd Quality of An Easement • The easement must accommodate the dominant tenement • It must be connected with purpose, enjoyment and benefit

3rd Quality • The dominant and servient tenements must be different persons LOT 6 This tenement owner by someone else This tenement owned by Davies’ heirs

4th Quality • The right claimed must be capable of forming the subject of a grant • In other words, it is in the form of an easement as a license to use. Not an oral promise (parole).

Findings Of The Court • The tenement was created at the time of allotment. The lots were dominant and the Park was servient • The purpose of attaching the Park was to create “a pleasure ground” for the lot owners to enhance the value of their property and by creating open space to the front of each owner • The dominant and servient owners have always been different people • A license was created in the express deed granting full enjoyment of the Park to each owner

Claim • The heir of Davies claims that he cannot be bound by the promise of the original owner to hold the park for enjoyment in perpetuity • Easements cannot be created, they claim, that run forever and bind subsequent heirs or owners This seems to go on forever

Conclusion • This is a valid easement and grant • So long as the owners continue to pay their claim for upkeep, the subsequent owners and heirs of Ellenborough Park must maintain it for the pleasure and value of the lot owners • Suck it up Davies

Sloan v Johnson - 1995 • 1934, Hagan and his wife conveyed part of Lot 13 and all of Lot 14 in the subdivision to J. Frederick Abel and his wife as joint tenants. The deed contained this express language: • "This conveyance is made subject to the following conditions and restrictions which shall remain in force until July 1, 1943, and shall then be automatically renewed for a period of ten years and shall be automatically renewed every ten years thereafter unless a majority of the property owners at a yearly meeting suspend this rule: • 4. Not more than one residence shall be erected upon this lot, the cost of which shall be not less than $4,000.00."

Over The Years • For the next 50 years the two lots were sold again and again to different parties • Each sale contains the same language in the deed • Finally, in 1992 the Johnson’s inherited the two lots and filed a subdivision plan which was approved by the Zoning Administrator LOT 13 LOT 13 LOT 14

The Neighbors • Two neighbors filed and injunction to prevent the Johnson’s from building a second residence on their lot • The trial court voided the covenant because the complainants' evidence failed to establish a general scheme or plan of development imposed on lots in the subdivision. • In other words, the original owners should have made it clear that this one lot/one house restriction was applicable to all the lots in the original subdivision. You can’t make a covenant personal – it must be applicable to all

The Lot Owners Appeal • The Appeals Court begins by saying: • Covenants, express or implied, which restrict the free use of land are not favored and must be strictly construed (courts always say this because it is common law doctrine) • The Appeals Court reverses the trial court and allows the covenant to be enforced • It was very clear that the original owners did not try to make this restriction personal during their lifetime. They intended to make the covenant run with the land as a general plan that you cannot build two homes on an original lot

Conclusion • In legal terms “privity” means that you cannot enforce an obligation of contract to third parties. Terms are only enforceable between the two parties to the contract • There is an exception: Contracts that restrict or impact upon the use of land (eg. an easement) may be enforceable upon the next land-owner, even though they were not privy to the original contract. This is an old exception to the rule of "privity of contract" that is still applicable today • Held for the Johnsons

Stuart v Chawney, 1997 • In 1967 a 12 lot subdivision know as Lincoln Green was constructed in the Village of Beverley Hill, Mich. • One of the covenants filed with this subdivision created an architectural review committee • This committee, using reasonable standards, was charged with reviewing all construction plans to assure that each home in Lincoln Green would be compatible with a dominant design scheme • This covenant would run for 10 years and be automatically renewed unless a majority of the lot owners modified it

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

The Architectural Review Committee • The "Developer" heretofore designated, his successors and assigns, shall constitute the Architectural Control Committee. • The Architectural Control Committee shall have authority to pass on plans and specifications and otherwise guide the development of the subdivision as planned and restricted herein.

The Committee Does What? • The committee shall have the right to refuse to approve any such plans or specifications or grading plans which are not suitable or desirable in its opinion for aesthetic or other reasons • In so passing upon such plans, specifications and grading plans, it shall have the right to take into consideration suitability of the proposed buildings or other structure to be built on the site upon which it is proposed to erect the same, the harmony thereof with the surroundings and the effect of the building or other structures • It is understood that the purpose of this paragraph is to cause the subdivision to develop into a beautifully, harmonious, private residence section and that the Architectural Control Committee shall not be arbitrary in its decisions.

Lincoln Green Street What Happens Next? • There was a parcel of land located to the east of Lincoln Green that was planned for condominiums • During a series of public hearings the owners of this land agree to split off a portion of this land next to Lincoln Green and to subject it to the Lincoln Green covenants New Lot Original Parcel

And Then • Chawney was an architect for the owners of the new lot • He drew up plans and tried to locate the homeowners association for Lincoln Green • The Village zoning administrator referred him to a person who he thought represented the homeowners assoc. • This person reviewed the plans for the new home and approved the design

The Owners Respond • While the clients were building their new home Mr. Chawney was contacted by an attorney for the residents of Lincoln Green informing him that the new home did not meet the design guidelines of Lincoln Green • The trial court ruled that the residents of Lincoln Green were not entitled to enforce the covenant: • Under the terms of the original covenant the current Lincoln Green Residents did not constitute an architectural review committee • The term “harmonious” development is ambiguous and overbroad

The House Plan Submitted This is what was submitted This is what they wanted

Is This Harmonious Development?

Or This?

Harmony

The Appeal • The residents of Lincoln Green appeal this decision • The Appeals court reverses: • Although the residents were not the architectural review committee – each owner maintained an independent cause of action to protect their own property through the binding covenant • The covenant is not vague, ambiguous, overbroad, and unenforceable. That intent may be gleaned from surrounding circumstances, the location and character of the entire tract, the purpose of the restriction, and whether there was a general plan for the development of property. Here, the intent was to "cause the subdivision to develop into a beautifully, harmonious, private residence section .

No Comes the Supreme Court • The Court agrees with the trial court because there was no properly constituted architectural control committee, i.e., no method for enforcing the standards of "beauty" and "harmony.“ • It is undisputed that from the time the restriction agreement was recorded in 1967, to the beginning of the construction of the defendants' home in 1991, no architectural control committee separate from the original developer had been convened to consider proposed construction in Lincoln

Breach of Agreement • This is CRITICAL • The residents had no independent cause of action because they breached the original agreement (contract) to form an architectural review committee • No one got off their collective rear ends to form this committee and the original developer did nothing to transfer his right of review to the residents of Lincoln Green

The Architect, Chawney and his Wife Celebrate Their Victory

Private Controls and Agreements