Invalidating Covenants that Restrain Alienation

In the realm of property law, covenants can end in numerous ways, one of which is by private agreement. Some ways that may happen include the following:

  • The covenant may say that it lasts only for a certain period of time, in which case it expires by its own terms when that time comes.

  • Uniform covenants may provide for termination at an unspecified time by the vote of a majority or a specified percentage of lot owners.

  • Even if the covenants don’t say that they will expire on a certain date, or upon certain action by property owners, a benefited party can agree at any time to release her covenant. Of course, she can do so only for herself, not for other benefited parties.

  • If the same party comes to own both the benefited and the burdened land, the covenant ends because one can’t have a covenant on her own land.

  • Some states have statutes that automatically terminate covenants after a specified number of years.

A covenant not to transfer ownership of the burdened land may be unenforceable. The freedom to transfer land is so fundamental to ownership of property, and so important to society generally in order to maximize the value of land, that restrictions on that freedom must be limited and reasonable, or they won’t be enforced.

A covenant restraining transfer is reasonable if it serves a sufficiently important purpose and is limited so that it doesn’t restrain transfer beyond what’s necessary to accomplish that purpose. For example, landlords have a substantial interest in who possesses leased property, so leases may include covenants preventing or limiting transfer of the leasehold.

Even single-family homeowners have some interest in who their neighbors are. But the relationship between neighbors is much less direct than the relationship between a landlord and a tenant, who have an interest in the very same property.

A covenant might say that owners of lots in a subdivision can sell their lots only to other members of a homeowners’ association, and the association has the right to decide who can be a member. Such a covenant would probably be unenforceable because the interest in the identity of neighbors is less significant and because the association’s power to decide who can be a member is unlimited.

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