Real Covenants and the Privity Requirement

MBE Substantive Law FAQ Series: Real Covenants and the Privity Requirement

We receive a lot of questions from our course students asking us to explain tricky areas of substantive law in more detail.  Some topics, however, turn up in questions far more frequently than others.  The goal of our MBE Substantive Law FAQ Series is to address areas of law tested on the bar exam that are often conflated or not properly understood.  We hope to explain them in a way that will help you process the concept and correctly answer questions if the issue turns up on the MBE!  In this post, we focus on a tricky area of real property: real covenants and privity!

MBE Substantive Law FAQ Series: Real Covenants and the Privity Requirement

Real Covenants

In simple terms, real covenants are a landowner’s promise to another person that it will do or refrain from doing something on its (the landowner’s) land.  Let’s take this very basic example: A and B are neighbors and there is a fence surrounding B’s property.  B promises A (in a written agreement) that B will continue to keep the fence in good repair.  A holds the benefit of this agreement as it gets to look at a nicely maintained fence.  B holds the burden as it is the one that has to maintain the fence.  If B does not maintain the fence, A can sue B for breach of the real covenant.

A covenant is different than a contract because it binds the land. If A and B simply entered into a contract to keep the fence in good repair, A could simply sell his land to C the next day and B would be out of luck. A covenant would bind C and any other future successors. 

Now, where it gets complicated is when one of the involved parties sells their land to another.  In order to determine if the real covenant can be enforced either against or by successors, we have to evaluate whether the covenant runs with the land to bind those successors. There are four requirements for a real covenant to bind successors: privity, intent for the covenant to bind successors, notice to the person the covenant is being enforced against, and the covenant must touch and concern the land (you can remember these by the mnemonic PINT!).

The Privity Requirement

Of these requirements, we see most of our students struggle with privity.  Real covenants and privity can best be understood by thinking through an example.  *Note that while we are only analyzing privity here, you will still have to make sure that all of the other requirements are met when analyzing a real covenant problem on the MBE!  Privity comes in two forms: horizontal and vertical.  Horizontal privity refers to a specific type of relationship between the two original parties who entered into the covenant.  Vertical privity refers to a specific type of relationship between successors in interest.  When we want the benefit of the real covenant to run to a successor, we only need vertical privity (plus the INT).  When we want the burden of the real covenant to run to a successor, we need both vertical and horizontal privity (plus the INT).

Example

Let’s go back to our earlier example.  A and B are neighbors and there is a fence surrounding B’s property.  B promises A that B will continue to keep the fence in good repair.  Now let’s say that A sells his property to C.  C is the new holder of the benefit of looking at a nicely maintained fence, while B still has the burden of keeping the fence maintained.  If B stops maintaining the fence, then we have to consider whether C can sue B (i.e. whether C can enforce the real covenant against B).

Since C’s property is the holder of the benefit, we need the benefit to run with the land in order for C to be able to sue B, which would require vertical privity  This means that there must be some sort of successor relationship between A and C.  In this case there is, since A sold the property to C.  So the vertical privity requirement is met. (And on the MBE, you would make sure to look for the presence of the other INT requirements before concluding that C can enforce the real covenant against B.)

In this example, it appears that A and B are just your standard neighbors, so they do not have the required horizontal privity relationship.  Since horizontal privity is not present, this means that the burden cannot run with the land and none of B’s successors will be able to be sued for breach of the real covenant.  C (nor A, if A had not sold its interest to C) cannot sue D for breach of real covenant.

Remember just because vertical privity isn’t present, this does not mean B’s successors are off the hook on the promise.  They are off the hook for breach of real covenant.  But an equitable servitude does not require privity to run with the land.  Remember that one sues for breach of the covenant if they are requesting money damages, but one is suing under the equitable theory or equitable servitude if they sue for an equitable remedy like an injunction ordering the burdened party to perform.  So even though C can’t sue D for money damages if it fails to maintain the fence, it is possible that C could bring a suit for an injunction demanding that D maintain the fence, as long as the other requirements for equitable servitudes are met (touch and concern, intent, and notice).

On the MBE, make sure you read the call of the question very carefully to determine if it is asking about recovery based on a real covenant or equitable servitude theory specifically, or asking about more general recovery avenues.

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