Neponsit Property Owners' Ass'n v. Emigrant Industrial Savings Bank

New York Court of Appeals · 1938 · Property

Propertycovenants running with the landtouch and concernprivityhomeowner associationreal covenantstouch and concernprivity of estate

Facts

Neponsit Realty Company developed a residential tract in Queens County and in 1917 conveyed the lot now owned by the defendant's predecessor with a deed covenant imposing an annual charge of up to four dollars per lot. The covenant stated that the charge would be payable to the grantor or its assigns, including a property owners association, would become a lien on the land each year, and would be used for maintenance of roads, paths, parks, beach, sewers, and other public purposes in the tract. Every later deed in the defendant's chain of title, including the referee's deed to the defendant after a judicial sale, conveyed the property subject to prior recorded covenants and restrictions. The plaintiff association was organized to collect and expend the assessments for the benefit of tract owners and sued to enforce the charge against the defendant's land.

Issue

Can an annual-charge covenant in a deed requiring lot owners to pay money for maintenance of common roads, parks, beach, sewers, and similar facilities be enforced against a subsequent owner as a real covenant running with the land? If so, may a property owners association designated as the grantor's assignee enforce it despite the association's lack of technical ownership of the benefited land?

Rule

For a covenant to run with the land, it must appear that the original parties intended it to run, that it touches or concerns the land, and that there is privity of estate between the party claiming the benefit and the party bearing the burden. In determining whether a covenant touches and concerns land, the court looks to substance rather than form: the question is whether the covenant substantially affects the legal rights flowing from ownership of the land by imposing a burden on that land while increasing the value or enjoyment of related land or appurtenant rights. A covenant to pay money for maintenance of common facilities that are appurtenant to the land may therefore run with the land, and privity may be found in substance where a property owners association serves as the representative or agent of the benefited owners.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A developer created a residential subdivision outside Wilmington, North Carolina. Each deed stated that the lot and all successors would pay an annual assessment to Pine Harbor Owners Council for maintenance of the subdivision's private roads, shoreline walkway, drainage system, and greens, all of which each lot owner had a deeded right to use; a later purchaser, Dana Mercer, bought with record notice and refused to pay.

Is the assessment covenant most likely enforceable against Dana as a real covenant running with the land?

Explanation. The majority held that a covenant may run when the parties intended that result, the covenant touches and concerns the land, and privity exists in substance. A promise to pay money for upkeep of common roads, parks, beaches, sewers, and similar facilities can touch and concern the burdened parcel when the parcel carries appurtenant rights to use those facilities. The association can enforce if it functions as the representative or agent of the benefited owners. Mere notice alone is not enough, and the court did not say all affirmative covenants run; it recognized an important exception grounded in substance.