Monday, March 31, 2025

Covenants: Prior Party Enforcement

Date 1 Grutz ----->A (A covenants)

Date 2 Grutz ----->B (B covenants)

Date 3 Grutz ----->C (C covenants)

Date 4 Grutz ----->D (D covenants)

Date 5 Grutz ----->E (E covenants)

Against which of the owners of lots 1-4 may E enforce the covenant?

Against all of them, because when A, B, C, and D agreed to restrict lots 1-4 to the covenants, which lots received the benefit of the covenants? All of the lots retained by the Grantor Grutz. Thus, when Grutz sold Lot 5 to E the benefit of those covenants ran with lot 5 to E.

Do you all see that?

Against whom may A enforce the covenants?

 In theory, against no one because A does not own land benefited by any covenants.

Why not? Because at Time 1,  Lots 2-5 had not yet been restricted by any covenants.

This is where a common scheme of development has a valid role. Suppose that when Grutz began selling lots in Grutz Acres, he had a sales office where purchasers could go to purchase a lot in this new subdivision. And suppose there was a beautiful model of Grutz Acres on display in the office showing 100 beautiful little single family homes on the subdivision. And the brochures advertised what a lovely, exclusive single-family neighborhood Grutz Acres would become.

Now, A can argue that when E agreed to restrict Lot 5 to the single-family scheme of covenants he intended to benefit all of the lots within the common scheme as third party beneficiaries of the covenants he agreed to when he purchased Lot 5.