What I know about covenants that run with the land could fill a thimble. Nearly to the top.
The last time I thought deeply about property law was back in law school. I took Property from a professor who subsequently became ambassador to the Vatican. What I largely remember from that class was that there's a series of cases of about who owns foxes and other wild animals. That's about it.
You can see why I decided not to become a real estate attorney.
But I nonetheless read this opinion -- several times, actually -- even though it's all about whether or not a particular covenant runs with the land. Part of that's because the dispute arises in my area (San Diego), and in a particularly chi-chi part of town at that (La Jolla). Part of it's also because the Court of Appeal reverses the trial court, so that's always fun. And part of it's because I don't know diddly about the subject, and was totally confused at various points in the opinion, so thought I'd try to push myself to figure out both (1) the facts, and (2) the relevant law.
After quite a while, I think I've accomplished both. Yet I'm still conflicted.
So I thought I'd share.
The facts are pretty simple. So you'd think there'd be an easy answer. (Even though, apparently, there's not.) Basically, A sells B a piece of land, and retains a piece of land right next door, but only on the condition that there's never going to be any building on one of the pieces. You can see why, right? Especially in La Jolla. You want to keep an ocean (or golf course) view. You don't want a neighbor right next door. Etc. Makes total sense.
Now, if you ask me -- or anyone else who knows absolutely nothing about property -- that's clearly got to be a covenant that runs with the land, right? Otherwise what's the point? It clearly concerns the land. It's all about it. And it makes no sense to sell some land to X only if he can't build on it if he can simply turn around and tell it to Y and Y can build on that. That'd defeat the whole purpose.
So when you sell someone a piece of property and expressly put (as here) a "Restriction" on the relevant deed that says (again, as here) that "A consideration of this sale is that no buildings will be erected now or at any future date" on the relevant property, well, that's surely a covenant that runs with the land. At least to my uneducated eyes.
But what counts as clarity gets far muddier when I actually read the relevant law. Yes, to run with the land, a covenant has to deal with the land. As it does here. But, apparently, under the relevant statute applicable here, a covenant only runs with the land if it is "made for the direct benefit of the property." In other words, if "a burdensome covenant contained in a deed [] in no way benefits the property conveyed," it's not binding.
Which means that, in this case, the dispute is all about whether a restriction that says you can't build on Property X actually "benefits" the relevant property.
But, of course, that's silly. Burdens on property rarely benefit that property. They usually benefit some other property (or owner thereof). Sure, in some cases, they may benefit everyone -- to a degree, at least; e.g., HOA regulations. But if the burdens actually benefitted the property, there wouldn't be a dispute in the first place, because the owner of that property wouldn't be trying to get around a covenant that benefits him.
So, in the end, this appeal all revolves around which property benefits -- if at all -- from the covenant at issue. And the Court of Appeal holds, in the end, that the relevant covenant benefitted the property at issue because (at least if I understand it correctly) the seller was selling a piece of property and was retaining the relevant piece of land for himself. So because the seller sold one piece of property and simultaneously promised not to build on the other piece of property -- the retained part -- that means the covenant runs with the land. Because the covenant was for the benefit of the property that was "conveyed" (that was sold) even though the restriction burdened the property that was retained.
Okay, I get that. That's analytically sound, I guess.
But it just seems super weird to me. It sounds like even though this covenant runs with the land -- a result that makes sense -- it wouldn't have run with the land if the underlying transaction was only slightly different in form and yet identical in substance. So, yes, I get it, a seller can sell a lot and agree not to build on the next door lot, and that runs with the land. But if a seller sells the same next door lot and agrees that the next door lot won't have any buildings on it, that covenant would not run with the land.
That makes no sense. At all. At least to me. It shouldn't mater in the slightest how the transaction is structured. If Seller owns A and B -- two lots next door to each other -- and wants to make sure that one of them gets sold and the other doesn't have any buildings on it, they should totally be able to do that any way they want. As long as the Buyer agrees, it shouldn't matter (to my uneducated mind, anyway) whether Seller disposes of A, or retains B, or retains A, or sells B, or whatever. One of the lots stays vacant, the other has a building on it. Forever. Seems like as long as A and B are both on board for that result -- which they obviously must be for the sale to go through -- it shouldn't matter the form the transaction takes.
Yet, here, it dispositively does. So much so that the trial court's ruling gets reversed.
So I understand the result here. One I'm sympathetic with. But the underlying legal principles are nonetheless baffling to me.
P.S. - Plus, to make things even more troubling, having looked at Google Maps, it looks like the side that won below has at this point pretty much already built his house on the relevant piece of land. So what do you do now, since the Court of Appeal has held that, nope, the covenant runs with the land. Tear the thing down? Pay extortionate rent-seeking to the appellate victor? What a nightmare.
