Common use of HISTORICAL DEVELOPMENT OF PROMISSORY SERVITUDES Clause in Contracts

HISTORICAL DEVELOPMENT OF PROMISSORY SERVITUDES. At English common law, agreements regarding land were only enforceable as real covenants. For a real covenant to bind subsequent owners of the properties in question, the parties to the original contract had to intend that it run, the contract needed to touch and concern the land, and there had to be privity both between the original parties (horizontal) and between those parties and the current residents or owners (vertical). Because horizontal privity was limited to landlord-tenant relationships and the dominant and servient tenements to an easement, relatively few of these restrictions were enforced. In other words, if a landlord wanted to bind people who took over his tenant’s leasehold, he could. If the dominant tenement holder wanted to enforce requirements related to his easement on all holders of the servient tenement, he could. But if a landowner wanted to divide his parcel and limit the activities of the purchaser of one portion of the lot, he could not make those limits binding on subsequent owners. Perhaps because there were lots of good reasons to allow the person dividing his parcel to create binding agreements, courts developed two ways to broaden the traditional limits on the enforceability of real covenants. First, in many jurisdictions in the United States, the definition of horizontal privity was expanded to include the grantor-grantee relationship. This allowed more contracts involving land to bind successors. Second, the English courts of equity invented the Equitable Servitude. This device allowed the courts to enforce these contracts in equity by granting injunctions where the parties to the original contract intended that it run, the contract touched and concerned the land, and the burdened party had notice of the restriction. The elimination of the privity requirements meant that not only could grantors create contracts that run with the land of their grantees, but for the first time neighbors whose property had no legal relationship could create contracts that ran with the land. The evolution of the modern subdivision in the US led to further development of these doctrines. As early as the middle of the 19th Century, American entrepreneurs were dividing up large parcels of land and selling the resulting smaller parcels for residential use. A humorous example of one of these early subdivisions is described in Xxxxxxx Xxxxxxx’x novel, Xxxxxx Xxxxxxxxxx. In any event, these subdivisions raised new issues. The law of real covenants and equitable servitudes is based on express promises made between the landowners. In the subdivisions, it was common for the seller to exact promises from the buyers, but less common for him to give explicit promises back. Because the later purchasers succeed to the interests of the developer, they can enforce the promises made by the earlier buyers. However, the earlier buyers could not enforce against the later ones because their lot was not one of the ones that was the recipient of the promise at the time it was made. For example, suppose there were four lots sold, each with a promise made to the developer: Buyer of Lot 1 promises to developer (who owns Lots 2-4) Buyer of Lot 2 promises to developer (who still owns Lots 3-4) Buyer of Lot 3 promises to developer (who still owns Lot 4) Buyer of Lot 4 promises to developer (who now owns nothing) If #1 violates his promise, #2-#4, the successors to the promisee, can enforce. But if #3 violates her promise, only #4 can enforce, because #3 only made her promise to the owner of #4. Because of this system’s apparent unfairness to the earlier purchasers, courts developed a couple of legal theories to allow the earlier purchasers to enforce against the later ones. One theory is that the developer implicitly promises the earlier purchasers that he will place identical restrictions on the lots sold later. Thus, the earlier purchasers can sue to enforce these implied promises. These are what some courts call “reciprocal negative easements,” although for our purposes, they should more accurately be called implied equitable servitudes. Plaintiffs claiming under this theory must show that the development was sold by a common owner with a common scheme in mind for the whole development. In other words, in order for the court to imply a promise, it has to believe that the developer intended to create a relatively uniform subdivision where all the lots were similarly restricted. The major theoretical drawback to this theory is that it binds subsequent purchasers to an unwritten promise regarding the use of land. Many jurisdictions were uncomfortable with this evasion of the statute of frauds, and so they developed an alternative theory. This theory is that the earlier purchasers are the intended beneficiaries of the promises made from the later purchasers to the developer, and as intended beneficiaries, they can sue to enforce the contract. This “third-party beneficiary approach” also requires a common scheme. There would be no reason to view the buyers as beneficiaries of each others’ promises in absence of a uniform scheme. The theory, however, will not work where there were no later purchasers or in a case where the later purchasers made no promises. Without an express promise from a later purchaser to enforce, the earlier purchasers have nothing to hang their hats on. The continued evolution of servitudes followed from the further development of the idea of the subdivision. Owners of adjacent properties became aware of the advantages of pooling their resources to acquire common recreational facilities, common maintenance services, etc. They created homeowners’ associations to collect money from the property owners and act as the owners’ agent in acquiring and maintaining the common areas and services.