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Property Law: Interpreting Covenants

Even if a covenant applies to a particular property, the burdened party may still argue that the covenant doesn’t prohibit the activity of which the benefited party complains. So there may be substantial arguments about what a covenant requires or prohibits.

Traditionally, in property law, courts interpret covenants narrowly because they restrict the use and enjoyment of land. So if a covenant is ambiguous, a court will interpret the covenant in the way that will be less restrictive.

One common example of this narrow construction is interpretation of a covenant that says something to the effect that the property will be restricted to a “single-family house.” You might think that means that only a single family can live on the property, because how can you tell whether a house is a “single-family” house except by looking inside to see who is actually living there?

But many courts reason that such expressions are ambiguous, because they refer to the structures on the property rather than uses. So applying the preference for narrow construction, they conclude that such a covenant only requires any building on the property to look like a single-family house, regardless of how the building is actually used.

But as with other contracts, courts also say that covenants should be construed in a way most consistent with their evident intentions. So a court may consider the purpose of a covenant in deciding what vague or ambiguous terms mean. Courts often consider the meaning of covenants restricting uses of land to “residential uses” or “residential purposes,” for example.

Some may reason that the purpose of such a covenant is to prohibit nonresidential uses, meaning commercial activities. If so, the covenant would prevent a home business. Others may reason that the purpose is to prevent activities that are incompatible with the residential character of the area by generating extra traffic, noise, smoke, dust, and so on.

From that perspective, the covenant may allow some home businesses that are compatible with a residential neighborhood, such as a daycare business for neighborhood children or a professional doing tax work for clients in her home.

Despite the usual preference for construing covenants to minimize the restraint of land, courts broadly construe beneficial covenants, such as reciprocal subdivision covenants. Even though they restrict the use of each lot, they also benefit all the other lots and make them more enjoyable. So courts tend to construe such covenants liberally to accomplish the purposes of producing a desirable community.

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