property law: april 13 2010 class notes.

last week in property class... 

looked at covenants, and how they are enforced against successors.

then, injunction -- we didn't have to ask what type of privity was available. we don't care what is available in equity against the successor to interest in land held by the promisor.

we discussed why we might want to enforce these types of promises, and what we came to was that the decision of not/enforce comes down to who determines how the land is used.

land lasts longer than we do. the question is whether interests that arrive first/earlier in time have a greater say over interests that arrive later. that's what we mean when we say 'running with the land' -- decisions made in the past are going to bind us in the future even if new interests arise.

that may seem abstract, but it is very important in common interest communities.

the equitable servitude that allows common interest communities spring up from the ruling of tucks v. moxhay.

equitable servitude: elements
1. for a property to be held in ES, OPPs must have intended to be enforced by/against successors.
2. if the party against whom sought is a purchasor as opposed to a grat successor, then the purchaser is not bound by covenant unless he has notice (**the recording system: we want to protect value against surprise** -- use the title record system; for example if you are buying a condo in a building where every unit looks the same, even if no covenant on record regarding the condo, you may be charged with being on notice about certain covenants about the building)
3. in order to run with the land, the covenant must "touch and concern land"
4. for the benefit to run with land, there must be vertical privity of estate on the benefit side.

the rockways;

neponsit property owners v. emigrant
neponsit created by real estate developer. the contractor filed record for the community he wanted to build. the plan provided for certain restrictions on the land, which is written into each deed that is given to each first purchasor.
the deed states:
1. charges to be paid to neposit and assignee, apportioned to the public portions of the property.
2. neponsit can assign to a HOA
3. lien against the land if you don't pay
4.

emigrant savings bank bought a property that was in arrears on its assessment.
the HOA asserts: "this debt you own operates as a lien on your property. we can sell the property (foreclose) and recover."

is this true?

let's look at the ES:
1. for a property to be held in ES, OPPs must have intended to be enforced by/against successors? yes -- it is explicitly stated!
2. if the party against whom sought is a purchasor as opposed to a grat successor, then the purchaser is not bound by covenant unless he has notice -- yes, because they saw the original deed
3. in order to run with the land, the covenant must "touch and concern land" -- that's the argument. the moneys collected will be used to touch and concern land that is the infrastructure of the property owners organization, which the association doesn't really own, it's part of the entire community's.

on the one hand, we have the argument "hey, this is just a promise to pay money. there's no T&C to the land, just a promise to pay for services."

on the other hand, we have to argument "but those services are what T&C the land, and that's what you were contracting for."

4. for the benefit to run with land, there must be vertical privity of estate on the benefit side. 
the court says that the T&C test is about


the issue that is considered and the rule are discussed in this great chart.


Neponsit Property Owner’s Association_ Inc. v. Emigrant Industrial Savings Bank

everyone paying for the property increases the value for the burdened subsequent purchasor's interest in the land. but it also increases everyone else's interest in the land. reciprocal benefits that arise when everyone in the community subjects themselves to these burdens.

but what about the bank's argument? any affirmative covenant is a personal covenant/ covenant in gross, that is not succeeded because since it concerns to parties it doesn't T&C. you're not promising to maintain this infrastructure for yourself and neighbors every year, you're promising to pay money. that $4 a year (1911!!) doesn't really build any benefits for your community. it's only when you pay the assignee, they may use it for something that may eventually have some benefit to you.

how does the court deal with this case? the court says that it's just a technical difference between the HOA saying "give me money and i will do something concerning the land" and "i will do something concerning this land" -- the court says it is the same and is at equity at common law

but what is the neponsit doing? they are creating a private community, and collecting fees parallel to taxes.

who seeks to enforce against the other party (the benefit side)? who seeks the benefit of the covenant of this case? HOA
so, is there vertical privity of estate on the benefit side between the original promisor (neponsit) and the current party (HOA)? 
who is seeking

what is this covenant about? how can you say you're predecessors to a privity in estate if you don't own the land. the HOA doesn't own the land, it is just expecting the homeowners to pay.
so we're looking technically -- there's no duty to pay, because the party on the benefit side does not have any interest in the land.

BUT...

the HOA is a tool used by the parties, a proxy. the people represented do have interest in the land acquired by the original promisee through a chain of voluntary transfers of estate in land.
rather than look at the formal relationships, we're looking at the practical relationships created from covenants....

if we're looking now at the functional relationships set up by these private interests by covenants enforceable in equity, are there any limits to how these parties can set up their affairs?

affirmative covenant (agreement to do something) v. negative covenant (build within a certain distance from the landline)
affirmative could become problematic because the fees could exceed the value of the burden taken on (for example, the property is only worth $5k but the fees are $1k/month) the way a negative covenant can't (the most you can lose is the exact value of the land)

the land as security = conversion to a lien enforceable in foreclosure

when looking at negative covenants, we can say that from an economic prospective, they are less burdensome b/c cthey can't create a breater burden, but they can create different burdens....


nahrstedt v. lakeside village
P says she didn't know about the covenants, conditions and restrictions (CCR)
one of the CCR is "no pets" and she has cats.
even though they are indoor cats, they wanted P to remove the cats. when she refused, they started assessing her fines, which can act as a lien on her interests in the condo.
so rather than wait, P sues and enjoins the assessments saying that the fees are incorrect under california statute that makes enforcement of certain CCR rules unavailable because the CCR is unreasonable.

how do we determine if a HOA's CCR are unreasonable?
- are they against public policy?
- are they an undue burden?
- are they unconstitutional or unlawful discrimination?
- are they arbitrary?

does it matter if the CCR are applicable against everyone, as opposed to just against the P?
yes!
- equal protection: the rule will be analyzed as a whole when challenged, and only if we see it's being enforced in different ways against different people we'll find problem with the rule
is this how the trial court viewed it? the tr ct said that the condo could prove reasonableness by showing that her specific cats somehow impacted everyone else in the condo....

basically, if these cats aren't bothering anyone, then the enforcement is unreasonable.
the other way of looking at the rule is to say that cats anywhere in any condo of the property is a problem and is enforced by the HOA.

the court basically says, well -- these are the private interests of the condo and so if you want your cats, you have to move. or if you want interest in the real property in this building, you have to do something else -- either get rid of the cats or continue paying the fee.

what if every condo in a fifty mile radius has the same covenant, or every condo in a fifty mile radius has the covenant where "no convicted sex offender can own interest in this condo building"?


- is it against public policy? is it invidious discrimination?
    
- are they an undue burden?
- are they unconstitutional or unlawful discrimination?
- is it arbitrary?
     we're balancing the interests of the children and the interests of
     the registered sex offender, in the interest of the children...
     but what if *every* place has the same restriction???

the dissent calls it "better to be in the mouse in a cat's mouth than to be a man in a lawyer's hand"

see shelly v. kramer

to analyze, you're not looking at the particular facts: you are looking at the restrictions at their whole across the whole community.

coop is a situation where all the interest in the FSA is held by a corporation, and the shareholders are the residents. the residents don't own the property, instead they own shares appurtenant to a proprietary lease (the ownership interest is proprietary but it is still a lease of the unit in relation to the shares). the relationship between the owner and the community are governed by a hybrid of corporate and landlord tenant law. the rules that govern the common interest community can arise different ways:
- lease covenants (landlord/tenant)
- bylaws
- shareholders have a responsibility for maintaining the property (maintenance fee assessed against the shares in the property used for mortgage, super, taxes, grounds, repairs, etc)
-

40 w. 67th st. v. pullman
pullman bought an apartment in 1998, and immediately started causing problems for the community.
 he is a troublemaker!!! how did he get in in the first place? he is a scion of the pullman traincar -- he's got this.
the board tries to restrain his proprietary lease, and it's a unanimous decision to make him vacate.
pullman ignores the notice and they sue him for a declaratory judgement cancelling shares and for use and occupancy, and attorney fees in removal, etc. all against the apartment that the co-op intends to sell, and will hand the remainder of the sales over to pullman.
the court dismissed saying that the board failed to establish an adequate factor from the statute on real prop and perceedings: "if a landlor wants to remove a tenant for being unreasonable, the landlord has the burden of proof."

but how do we analyze the decision "we don't want you here anymore?"
the business judgment rule:
- not furthering legitimate interests
- in bad faith (you have to have a legitimate reason and can't be acting
  in the furtherance of a discriminatory intent, malice, arbitrariness, or favoritism)
- not in furtherance of its corporate interests?
- was the board acting out of respect of its authority?


let's apply the rule to the board:
- not furthering legitimate interests
- in bad faith (you have to have a legitimate reason and can't be acting in the furtherance of a discriminatory intent, malice, arbitrariness, or favoritism): how do we know that the coop wasn't discriminating? how do we know that there wasn't malice or favoritism on the board's decisions?
- not in furtherance of its corporate interests? it was: the whole community voted unanimously that they wanted him out, but the court didn't ask a lot about this... what might be the furtherance of the corporate interest? the interest is choosing your neighbors
- was the board acting out of respect of its authority? the board has been given authority by the corporation and acted within its scope with the

all of our studies so far are
but they haven't been the right to decide who buys the lot next to you. if you own that lot, you get to choose who to contract with.
but here we're seeing a corporate interest that the law in real property otherwise would not have entertained.


nahrstedt -- restrictions on behavior, that can be analogized to police power restrictions
pullman -- common interests communities acting like mini-governments get opportunities to make decisions that we would never give at large otherwise

rights that can be exercised by private interests are new and different restrictions than we've previously thought about. but perhaps since we trust these decentralized communities and they are subject to market competition, we're willing to tolerate this kind of power....


but think about if this is a good idea:
would you be comfortable if mayor bloomberg did that? or if pres obama did that?