Points of Practice
Will the Covenant Run with the Land? Ensuring the Enforceability of Contracts Restricting Property Use BY ADAM R. TODD Property owners and developers enter into a variety of contracts to restrict the use of real property. For instance, a developer may wish to maintain the architectural integrity of a neighborhood or prevent a property use that might disturb the community’s character. A seller of property may want to require future buyers of the property to honor certain promises. Creating such a restriction requires attention.
Requirements Generally, contractual obligations only bind the parties signing the agreement. To bind subsequent property purchasers or successors-in-title, the contracting parties must create a restrictive covenant that “runs with the land.” Ohio courts examine the parties’ agreement to determine if the agreement runs with the land using three criteria: 1. There must be a clear intent of the original contracting parties for the covenant to bind successors; 2. The restrictive covenant must touch and concern the land; and 3. There must be privity of contract.i The intent of the parties is an important element. The parties should clearly express their intent for the agreement to bind subsequent purchasers and “run with the land” in a written agreement that is recorded with the county recorder to ensure enforceability.
To “touch and concern” the land, the agreement must burden or benefit the property. A covenant that is personal in nature does not run with the land.ii The final element requires that the original contracting parties be in “privity of contract.” This common law principle provides that a contract cannot confer rights or impose obligations upon a person who is not a party to the contract. Said another way, only parties to contracts (and their direct successors) should be able to sue to enforce their rights.
Example Cases To better understand restrictive covenants, it is helpful to review cases where Ohio courts examined them. One such case involves a historic theatre. A property development company, Capital City Community Urban Redevelopment Corporation, bought the Lincoln Theatre on the near east side of Columbus in 1991.iii Capital City’s president, Charles Adrian, had a personal history
26 | Columbus Bar L aw yers Quarterly Winter 2020