Opinion ID: 1954389
Heading Depth: 1
Heading Rank: 6

Heading: validity of the covenant

Text: The precise question of whether a property owner is bound by a covenant to pay dues to a homeowners' association for the maintenance of recreational facilities is one of first impression in Nebraska. Other jurisdictions have considered the issue, and we turn to those cases for guidance. The nature of the covenant to pay dues to the RHA, that is, whether the covenant runs with the land, is central to the determination of the issue before the court. A covenant is either real or personal. Covenants that run with the land are real as distinguished from personal covenants that do not run with the land. Raintree Corp. v. Rowe, 38 N.C.App. 664, 669, 248 S.E.2d 904, 907 (1978). A personal covenant is not assignable. See, e.g., Whitney v. Combe, 151 Neb. 401, 37 N.W.2d 613 (1949); Raintree Corp. v. Rowe, supra . If the covenant at issue is personal, it is not binding on the Egermayers; if the covenant is real, it runs with the land, and the Egermayers are bound by the terms of the Declaration. The general rules governing the running of covenants are rooted in the English common law. It was Spencer's Case, 5 Co. Rep. 16a, 77 Eng. Rep. 72 (1583), which first stated that for a covenant to run with the land it must touch or concern the land, and it must expressly bind assigns. As the law of covenants evolved, the English courts distinguished between negative covenants, which bind the covenantor not to perform an act, and affirmative covenants, which require the covenantor to perform an act. See 5 Richard R. Powell, The Law of Real Property ¶ 675[1] (1993). The English courts looked with disfavor on covenants requiring affirmative action, and ultimately adopted the rule that affirmative covenants may not run with the land either at law or in equity. Id. at ¶¶ 670[2] and 675[1]. Generally, in the United States the three essential requirements for a covenant of any type to run with land are (1) the grantor and the grantee intend that the covenant run with the land, as determined from the instruments of record; (2) the covenant must touch and concern the land with which it runs; and (3) the party claiming the benefit of the covenant and the party who bears the burden of the covenant must be in privity of estate. See, e.g., Neponsit P.O. Ass'n v. Emigrant I. Sav. Bank, 278 N.Y. 248, 15 N.E.2d 793 (1938); Homeowners Assoc. v. Sellers and Homeowners Assoc. v. Simpson, 62 N.C.App. 205, 302 S.E.2d 848 (1983), cert. denied 309 N.C. 461, 307 S.E.2d 364; Lake Arrowhead Club v. Looney, 112 Wash.2d 288, 770 P.2d 1046 (1989); Streams Sports Club, Ltd. v. Richmond, 99 Ill.2d 182, 457 N.E.2d 1226 (1983). The Egermayers do not dispute that the first and third of these requirements are met. Moreover, the recorded instruments in the record support that the grantor, Regency, Inc., and the five original grantees intended the covenants contained in the Declaration to run with the land and that the Egermayers and RHA are in privity of estate. Rather, the Egermayers argue that the covenant in question does not touch and concern the land. Therefore, we limit our analysis to that issue. The touch and concern requirement of a real covenant is one with which many jurisdictions have struggled. The New York Court of Appeals has held that a covenant which runs with the land must affect the legal relationsthe advantages and the burdensof the parties to the covenant, as owners of particular parcels of land and not merely as members of the community in general, such as taxpayers or owners of other land. [Citations omitted.] That method of approach has the merit of realism. The test is based on the effect of the covenant rather than on technical distinctions. Does the covenant impose, on the one hand, a burden upon an interest in land, which on the other hand increases the value of a different interest in the same or related land? Neponsit P.O. Ass'n v. Emigrant I. Sav. Bank, 278 N.Y. at 257-58, 15 N.E.2d at 796. In that case, the court held that purchasers of individual lots in a residential community also obtained the right of enjoyment of the roads, streets, beaches, and other improvements, and thus were liable for paying the costs of such improvements as required by covenant. The court further held that the property owners' association was entitled to enforce the covenant by foreclosure of its lien against the property owner. In Chesapeake Ranch Club v. CRC Members, 60 Md.App. 609, 483 A.2d 1334 (1984), the Maryland Court of Special Appeals held that a covenant to pay an annual road charge was one which touched and concerned the land, but held that a covenant requiring property owners to pay dues to a recreational and social club did not run with the land. The Maryland court stated that the test of whether a covenant runs with the land is `whether it tends directly or necessarily to enhance [the land's] value or render it more beneficial or convenient to those by whom it is owned or occupied,'  id. at 616, 483 A.2d at 1337, and found that the amenities of the club merely benefited the community as a whole and did not increase the value of individual lots. The Oregon Court of Appeals has held that severability of club membership from property ownership defeated the touch and concern requirement because property owners had no commonality of interest in the club property. Ebbe v. Senior Estates Golf and Country Club, 61 Or.App. 398, 657 P.2d 696 (1983). In that case, the court held that payment of an initiation fee for membership in a golf club did not touch and concern the land when membership was mandatory for initial purchasers, but membership was neither mandatory nor guaranteed for subsequent purchasers. The U.S. District Court for the Southern District of Alabama, applying Alabama law, found that covenants meet the touch and concern requirement when the provisions thereof enhance the value of the various individual lots in the ... [s]ubdivision, constitute a part of a common plan or scheme of development of the subject subdivision and grant rights of use of the common facilities to the Grantees. Boyle v. Lake Forest Property Owners Ass'n, 538 F.Supp. 765, 768-69 (S.D.Ala.1982). The court held that a covenant which required payment of dues to a homeowners' association to enable the association to acquire recreational facilities and other common areas from the developer of the subdivision was one which touches and concerns the land, and thus was an affirmative covenant running with the land. The club was open to all homeowners in the subdivision and to members of similar clubs established by the developer in other parts of the country. The court concluded that mandatory membership in the Lake Forest Yacht and Country Club enhanced the value of the individual lots in the subdivision. Similarly, the Illinois Supreme Court found that a covenant requiring condominium owners to pay dues to a for-profit sports club developed by the condominium developer touched and concerned the land because the facility was adjacent to the condominium units, was used by residents of the condominiums, and was part of a common building plan. Streams Sports Club, Ltd. v. Richmond, 99 Ill.2d 182, 457 N.E.2d 1226 (1983). California's touch and concern requirement is determined by statute. Section 1468 of the Civil Code embodies the common law requirements [that a burden touch and concern the land] by specifically stating that a covenant running with the land must relate `... to the use, repair, maintenance or improvement of ... such land or some part thereof....' Anthony v. Brea Glenbrook Club, 58 Cal.App.3d 506, 510, 130 Cal.Rptr. 32, 34 (1976). In that case, a covenant required membership in a homeowners' association which operated a clubhouse, swimming pool, and recreation area located within the subdivision. All members of the club were homeowners in the subdivision, and all fees paid to the homeowners' association were used for maintenance and support of the club. The court held that mandatory membership in the homeowners' association was a valid and enforceable covenant running with the land. The North Carolina Court of Appeals has held that [t]o touch and concern the land the object of the covenant must be annexed to, inherent in, or connected with, the land. Homeowners Assoc. v. Sellers and Homeowners Assoc. v. Simpson, 62 N.C.App. 205, 210, 302 S.E.2d 848, 852 (1983), cert. denied 309 N.C. 461, 307 S.E.2d 364. The court found that a covenant to pay fees to a homeowners' association for maintenance of recreational facilities touched and concerned the land. The recreational facility was within the subdivision, and the court found it irrelevant that the facility was not adjacent to each individual lot. All of these tests for whether a covenant touches and concerns the land are helpful, but none provides such a clear-cut rule as to be dispositive of the present case. Indeed, the New York Court of Appeals has aptly concluded that `[i]t has been found impossible to state any absolute tests to determine what covenants touch and concern land and what do not. The question is one for the court to determine in the exercise of its best judgment upon the facts of each case.' Neponsit P.O. Ass'n v. Emigrant I. Sav. Bank, 278 N.Y. 248, 256, 15 N.E.2d 793, 795 (1938). Nonetheless, for the purpose of analysis, we adopt the New York Court of Appeals' rule that the touch and concern requirement of a real covenant is met when the covenant affects the legal relationsthe advantages and the burdensof the parties to the covenant, as owners of particular parcels of land and not merely as members of the community in general, such as taxpayers or owners of other land. The covenant must impose, on the one hand, a burden upon an interest in land, which on the other hand increases the value of a different interest in the same or related land. Based upon the holdings of jurisdictions which have considered issues similar to the one before us, we believe the following factors are to be considered in determining whether a covenant to pay dues to a recreational facility touches and concerns the land: (1) whether the recreational facility and the residential area are part of a common scheme of development, (2) whether the recreational facility is in close proximity to the residential area, and (3) whether the covenant grants the right of common use of the recreational facility to all property owners. Applying the above factors to this case, we must first determine whether the residential area and the recreational areas of Regency were part of a common scheme of development. John Maenner, president of Maenner Company, the sales agent for all the property within Regency, was involved with the initial planning for the subdivision. Maenner testified that Regency was by far the largest of the more than 35 subdivisions he had helped develop in Omaha and that there was considerable planning and thought given to the special amenities for the area. Such amenities included the lake, the club, and related facilities. Louis R. Seybold, now retired from the Maenner Company, was also involved in the development of Regency, and testified that the subdivision was a planned community which was to have multiple uses, including an office park, apartments, townhomes, single-family homes, and sporting amenities. The sporting amenities included a 25-acre lake, a private lakeshore park, a 1-acre park in the residential area, and 4 acres of land upon which RLTC was ultimately built. Seybold testified that he had been involved in 10 to 12 other residential developments in the Omaha area and that Regency was far larger and more elaborate than any of the other developments. Such testimony by Maenner and Seybold leaves no doubt that the residential and recreational areas of Regency are part of a common scheme of development. Next, we must determine whether the RLTC is in close proximity to the residential area of Regency. The RLTC, while located in the Regency development, is located across a four-lane road from the residential area. The Egermayers complain of the fact that the RLTC is not centrally located within the residential area and is instead located next to a commercial area. The evidence reflects that while the RLTC is not in the single-family residential area of Regency, it is bordered on one side by the Regency Apartments, and it is also bordered by Regency Lake. Moreover, while the Egermayers perceive the location of the RLTC to be a negative, it is entirely conceivable that some property owners might perceive the location favorably. There are valid reasons why a property owner might not want to live in very close proximity to a recreational facility. The increase in noise, litter, and traffic often occasioned by such a facility are some reasons which come immediately to mind. Because the RLTC is located within the Regency development, even though it is across a four-lane street from the single-family residential area, we find that the RLTC is in close proximity to that residential area. As to the third factor, the language of the covenant leaves no doubt that all Regency property owners have a right of common use of the RLTC. The introductory paragraph of § 4 of the Declaration states that [t]he involved property ... will be ... included in membership in [RHA].... Section 4b states that every lot will be automatically included in membership in [RHA].... The Egermayers do not deny that as Regency property owners, they have a right of common use of the RLTC. Instead, their position is that because Regency property owners are not the exclusive users of RLTC, the covenant requiring payment of dues to RHA does not touch and concern the land. The Egermayers assert that the existence of a special membership class for those who live outside the Regency subdivision makes RLTC a public facility which has no particular value to property owners in Regency. This argument fails for two reasons. First, as previously noted, RLTC cannot be characterized as a public facility. Second, even though special members are allowed to join RHA and use the RLTC facility, the Regency property owners still have a common property right with one another. All Regency property owners are required to pay dues to RHA for membership in RLTC, and all have a common right to use of the facilities. The existence of a special membership class is not dispositive. See Boyle v. Lake Forest Property Owners Ass'n, 538 F.Supp. 765 (S.D.Ala.1982) (holding that requirement to pay dues for maintenance of club, which was used by property owners in subdivision as well as members of other clubs owned by same developer, was a valid covenant running with the land). Cf. Ebbe v. Senior Estates Golf and Country Club, 61 Or.App. 398, 657 P.2d 696 (1983) (holding that club membership had been severed from property ownership when subsequent purchasers were neither required to join nor were they guaranteed membership in golf club, and mandatory initiation fee could not be assessed as a lien against the property of such a purchaser). This brings us to the ultimate question of whether RLTC enhances the value of individual properties in the Regency subdivision. George Egermayer testified that in his opinion, RLTC adds no value whatsoever to his property because the facility is located across four lanes of traffic from the residential area, it is not centrally located, it is next to a commercial area, and it is open to the public. Another homeowner in the Regency subdivision testified that in his opinion, mandatory membership in the RHA definitely enhanced the property values in the area and that property values would be adversely affected if membership in RHA were to be voluntary rather than mandatory. Two of the original developers of the Regency subdivision, neither of whom lives in Regency, also testified that the absence of mandatory dues to RHA would be detrimental to property owners and that property values would be lowered. Whether membership in RHA benefits individual Regency homeowners is a material issue of fact in determining whether the covenant requiring membership touches and concerns the land. The only evidence that membership in RHA does not benefit individual property owners was offered by the party seeking to avoid payment of the mandatory dues. After considering all the testimony on this issue, we agree with the California Court of Appeals that the maintenance of a well-kept clubhouse, recreational area and swimming pool ... enhance[s] the value of each home therein.... [T]he so-called `burden' of maintaining membership in this association would in reality be an asset to each and every property owner in the use of his land. Anthony v. Brea Glenbrook Club, 58 Cal.App.3d 506, 511, 130 Cal.Rptr. 32, 34 (1976). Apart from the social amenities offered by RLTC, we find that membership in RHA provides numerous other benefits to property owners. There was testimony that RHA dues pay for maintenance of a 1-acre park within the subdivision, as well as the green areas at the 96th Street entrance to the subdivision. George Egermayer concedes that maintenance of the common areas of the subdivisions, parks, drives, and trees adds value to his property. We can only conclude that maintenance of the green areas owned by RHA and paid for through part of the annual $225 assessment contributes some of this added value. Dues also paid for the services of a private security patrol for the residential neighborhood until sometime after the subdivision was annexed by the city of Omaha. Financial statements entered into evidence reflect that as much as $17,128 per year was spent for security patrol through the fiscal year ending May 31, 1985. Private security service is an asset which enhances the value of individual properties. The bylaws of RHA provide for an architectural control committee and authorize the expenditure of funds by that committee. The architectural review committee reviews and approves all new construction, as well as additions or modifications to existing structures, to ensure that the external designs of all buildings and structures are in harmony with the surroundings, topography, and other relevant architectural factors of concern. A former president of RHA testified that while he was president the committee met from time to time and incurred certain expenses, including payments to experts to advise the committee. Again, this is a function of RHA which benefits all property owners in Regency by protecting against unsightly or inappropriate building in the subdivision.