Real Covenants: What are They, and How Do They Work?
by Guest Post on Feb 15, 2018
Real covenants are a powerful concept in real estate law that not many people know about. Today, we’re going to be taking a look at what these terms mean, how they work, and how they differ from one another. If you ever actually encounter a real covenant in the wild, you should speak with a lawyer before taking action – this concept can get a lot more tricky than it looks.
Let’s begin with a discussion of real covenants. In its simplest terms, a real covenant is either a promise to do a particular thing with land (affirmative), or a promise to refrain from doing a particular thing with land (negative). An example of an affirmative covenant would be promising your neighbor that you’ll build and maintain a privacy fence between your backyard and his. On the other hand, you could have a negative covenant with your other neighbor under which you promise her that you’ll never use your backyard to stage bare-knuckle boxing matches.
In both affirmative and negative real covenants, there are two essential elements: the burden and the benefit. The burden describes your obligation to keep the promise you made in the covenant. In both examples above, the burden was on you – the burden to build and maintain a privacy fence, and the burden of never hosting a boxing match in your yard. The benefit, in turn, represents the other party’s right to hold you to your promise. In the examples above, your neighbors hold the benefits – if you fail to build and maintain a fence, or if you do use your backyard to hold boxing matches, your neighbors have a claim against you for breaching your affirmative and negative covenants, respectively.
Is Your Real Covenant Running?
Real covenants are pretty straightforward when it comes to the original parties who create them. If you make a promise to your neighbor, then obviously you have the burden of keeping that promise and your neighbor has the benefit of enforcing it. But what happens if you sell your house to someone else and move? Does the new owner inherit the duty to maintain the privacy fence you built? Conversely, what if your neighbor moves instead – does your new neighbor have a right to enforce the real covenant against you? As is so often the case with legal questions, the answer is: “it depends.” Whether a real covenant binds subsequent parties depends on whether the covenant “runs with the land.”
There is a slightly different analysis for whether a burden runs with the land, and for whether a benefit runs with the land. For a burden to run, the following five elements are required: (1) the real covenant must have been in writing; (2) both original parties must have intended for the real covenant to run with the land, which can usually be determined by whether the covenant identified one of the original parties specifically or if it was more general in its terms; (3) the real covenant must “touch and concern” the land, which means that it in some way relates to the use and enjoyment of the land; (4) there must have been horizontal privity between the original parties, meaning some sort of special (usually contractual) relationship; and (5) there must be vertical privity which is typically understood as the new owner owns the exact, burdened land as the previous owner.
For a benefit to run, you need to satisfy the first three elements of the burden test: the real covenant must be in writing, the parties must intend for it to run with the land, and it must touch and concern the land. Instead of horizontal and vertical privity, though, a benefit will run as long as there is “verticality.” Verticality simply requires the subsequent party to own some portion of the land owned by the original benefit holder in order for them to enforce the burden under the real covenant.
This seems fair, since the law makes it a bit harder to push a burden onto a subsequent party who wasn’t part of the original agreement, but allows benefits to flow a bit more freely to people down the line.
A real covenant can have a significant impact on how parties use and enjoy their land. If you are concerned about whether a real covenant will run with the new property you are planning to purchase, you would be wise to consult with a real estate lawyer who can interpret the elements above. They may sound simple enough on paper, but there is a lot of nuance packed into the analysis of whether a real covenant runs with the land.
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