Restrictive Covenants and Public Policy
Certain “private” forms of land-use regulation are still in widespread use. One of the most pervasive—but often least noticed—is the restrictive covenant.
From one point of view, restrictive covenants look like a fairly straightforward promise by one landowner to another—a promise to refrain from doing something on one’s own land. One landowner might promise not to cut down the trees in their yard, for example, or promise not to paint their house a garish shade of bright green. But from a legal perspective, restrictive covenants are much more than this. Not only do covenants represent a sort of contractual promise between parties, they help to define the durable “bundle of rights” in the land itself—that is, covenants are said to run with the land and can, at least in theory, long outlast the original parties to the covenant. This possibility raises some difficult questions for courts in how they define the basic character of covenants along with their consequences.
What distinguishes a valid, enforceable covenant from an invalid (and therefore unenforceable) one? Part of this determination, as we will see, turns on a set of formal criteria for establishing a valid covenant. But validity can also be determined through an analysis of the various extrinsic reasons why courts might refuse to enforce an otherwise valid covenant. Here, we will focus mainly on the grounds of “public policy” as a reason for refusing to enforce covenants found to be discriminatory or against other foundational values.
Even where restrictive covenants meet the formal requirements to run with the land, there may be circumstances in which the terms of a covenant will be rendered invalid. The courts in Re Drummond Wren and Re Noble and Wolfe v Alley address two of these circumstances.
In the first, a court might render invalid and unenforceable a restrictive covenant that is against public policy. In Re Drummond Wren, the court was willing to strike down a discriminatory restrictive covenant—similar to the one attached to 3000 Funston Street—on this basis. But in the subsequent case of Re Noble and Wolfe v Alley addressing a restrictive covenant with substantially the same terms—decided just a few years later—the courts refused to rely on grounds of public policy.
In the second circumstance, a court might find that a restrictive covenant is a prohibited attempt to restrain alienation. The approach takes us back to our discussion of restraints on alienation. From one perspective, this second grounds might be regarded as a subset of the first, based on the public policy and public interest in ensuring the free alienability of property rights.
How could the doctrine of public policy be applied to the restrictive covenant in our case study at 3000 Funston Street for this week? Is it likely that the restrictions preventing the city from building affordable housing on the site might be found invalid according to this doctrine? On some other grounds?
As you read the cases below to understand the contours of the doctrine of public policy as applied to restrictive covenants, consider again the features of the modern style of common law reasoning and the extent to which they frame and motivate judicial analysis of these cases.