"That you may ruminate"

…On the Perversity of “Running with the Land”.

Posted by Steve on July 29, 2008

It has become a common practice for housing developers to enter into “bulk-billing” agreements telecom contracts. Common enough, at least, for this article about them to come to my attention. In these, the developer enters into a contract with a telecom provider, whereby a specified combination of phone, TV, and internet is provided to every house in the development for a specified cost, locked in for a time frame up to and including multiple decades, and no other telecom provider will be permitted to gain right-of-way or easements within the development. These contracts are then incorporated into the covenants on all the houses sold.

So, a company writes a contract with another company, granting them a monopoly over an area of land, then writes the contract into the sale contract in such a way that no matter how many times the property is bought and sold, buyers must assume the obligations of the contract and can’t quit the service – whether they want that service, or can afford that service, or not.

Now, there’s a group on the web working to get the FCC to ban the practice, and I support their efforts. Thing is, I think they’re targeting a specific symptom of a much larger core problem: the very existence of deed restrictions and covenants.

Ordinarily, contracts only bind the parties to the contract. It’s called the rule of privity, and it’s a pretty good thing for what I should think are obvious reasons: it’s the reason that if Joe enters a contract with Bob specifying that Shelly will perform some action for Bob, in exchange for which Bob will give Joe money, Shelly doesn’t have to do squat. It’s an excellent rule, the rule of privity.

So, under privity, a covenant or a deed restriction shouldn’t be binding on subsequent owners. After all, you buy a house, you aren’t who entered into the contract putting that restriction on the homeowner, so you shouldn’t be bound. Right?

Oh, nope! See, that covenant/deed restriction, it includes a nifty little dodge around privity: it’s written as a term in the initial property sale contract, along with a term that specifies it must be offered and agreed to in all future sales. In other words, it gets made a perpetual, perpetually non-escapable, and perpetually non-severable contract of adhesion. Not to mention, this adhesive contract with no privity – to either buyer or seller, once the property is resold – has been grafted into a contract based on extensive offer & counter offer, a property sale, to create a truly dreadful Moreauean hybrid. When you buy or sell property, the buyer and seller can negotiate every term of the contract – except the covenants and conditions and deed restrictions the Homeowner’s Association adopted in 1962, or the developer tacked into the deed when they subdivided it before building the house and selling it to the first resident three owners ago, or that the now-dead old man who lived there ten years ago negotiated with his also-now-dead neighbor.

Seems to me a good goal to work for would be getting deed restrictions and property covenants declared voided and henceforth banned as per se unconscionable.

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3 Responses to “…On the Perversity of “Running with the Land”.”

  1. Ames said

    Covenants running with the land are indeed hard to get out of the way, but it can happen: it’s the doctrine of “changed circumstances” that does the job, but circumstances have to change pretty far for a court to toss out a covenant. That’s why, say, your deed can’t be restricted so as to require you to build a castle suitable for thirty longbowmen, or something.

    If they’re hard to get out of, though, the law balances it by making covenants difficult to *create* – they have to “touch and concern” the land to even be entered into effect, which is what frankly boggles my mind on the telecom thing. Courts generally read the “touch and concern” requirement loosely, except where the covenant amounts to anticompetitive behavior, which is exactly what the problem you’re talking about IS! When it is anticompetitive behavior, courts toss the bitches out. See Wolf Petroleum v. Chock Full of Power Gas. Corp. (70 Misc.2d 314) (refusing to enforce covenant requiring gas station owner to purchase only one brand of gas, on thinly-disguised policy grounds). I agree that covenants to force you to buy crap are bad, but I think covenants in general are okay.

  2. Steve said

    The castle would be unlikely to pass zoning. Unless the zoning were changed – which is far easier to do than changing covenants. That seems another strike against them to me: they’re redundant to zoning and public land-use control in effect, but don’t have the flexibility of those public mechanisms to make them better at being situationally appropriate.

    Castle would be cool, though… now is that “suitable to house” 30 longbowmen, or “suitable to repel” 30 longbowmen?

  3. Ames said

    Both!

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