Opinion ID: 852463
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Heading: The Prevalence of Real Estate Covenants

Text: A restrictive covenant is an express contract between grantor and grantee that restrains the grantee's use of his land. Holliday v. Crooked Creek Villages Homeowners Ass'n, Inc., 759 N.E.2d 1088 (Ind.Ct.App.2001). Covenants control many aspects of land, including what may be built on the land (fence or above ground pool), how the land may be used (private or commercial), and alienability of the land. See, e.g., Robert G. Natelson, Law of Property Owners Associations 56-58, 153-66 (1989). Restrictive covenants are used to maintain or enhance the value of land by reciprocal undertakings that restrain or regulate groups of properties. Holliday, 759 N.E.2d at 1092. These covenants are common in condominium or other common-interest housing subdivisions. Prior to selling the first unit or plat, the subdivision or condominium owner creates a declaration or master deed that contains all of the restrictions. [4] Property owners who purchase their properties subject to such restrictions give up a certain degree of individual freedom in exchange for the protections from living in a community of reciprocal undertakings. Restrictions found in a declaration (like those found in a master deed) are clothed with a very strong presumption of validity which arises from the fact that each individual unit owner purchases his unit knowing of and accepting the restrictions to be imposed. Hidden Harbour Estates, Inc. v. Basso, 393 So.2d 637, 639 (Fla.Dist.Ct.App.1981). Analogizing restrictions in declarations to covenants running with the land, the Basso court held that restrictions in the declaration will not be invalidated absent a showing that they are wholly arbitrary in their application, in violation of public policy, or that they abrogate some fundamental constitutional right. Id. at 639-40. Today, as the Basso court anticipated, restrictive covenants function identically in planned subdivisions and condominiums and function identically regardless of whether they are found in a master deed or a declaration. Natelson, supra, at 58-60 (the integration between the law of condominium and the law of other covenanted subdivisions is well on the way to being complete, and thus, not proper to speak or write of `condominium law' and `homeowners association law' as if they were discrete topics). [5] Condominium associations frequently adopt no-lease covenants that bar rental of units and forbid absentee ownership. Jordan I. Shifrin, No-Leasing Restrictions on Condominium Owners: The Legal Landscape, 94 Ill. B.J. 80, 80-81 (2006). These covenants are adopted to address owners' concerns about the negative effects of high resident turnover and renters' perceived lack of attention to the property. Id. at 80. Some empirical data validates these concerns; a California study showed that [a] high number of leased units (over 30%) can impair significantly the market position of the subdivision. Robert G. Natelson, Consent, Coercion, and Reasonableness in Private Law: The Special Case of the Property Owners Association, 51 Ohio St. L.J. 41, 73 n. 150 (1990). Courts commonly enforce no-lease restrictive covenants. [6] See, e.g., Flagler Fed. Sav. & Loan Ass'n v. Crestview Towers Condo. Ass'n, Inc., 595 So.2d 198 (Fla.Dist.Ct.App.1992) (association may prohibit leasing; restrictions in declaration presumed valid); Seagate Condo. Ass'n, Inc. v. Duffy, 330 So.2d 484 (Fla.Dist.Ct.App.1976) (leasing restrictions not unreasonable restraints on alienation; restrictions promote residential character of community); Apple II Condo. Ass'n v. Worth Bank & Trust Co., 277 Ill.App.3d 345, 213 Ill.Dec. 463, 659 N.E.2d 93, 99 (1995) (leasing prohibition made part of declaration presumed valid and upheld unless restriction arbitrary, against public policy or violates some fundamental constitutional right of the unit owners).