Restrictive covenants and your title insurance policy.
A recent case in US District Court of New Jersey was all about a restrictive covenant that prohibited certain types of use of the property.
Now, restrictive covenants come in all shapes and sizes. A covenant may prohibit using a parcel of property to raise pigs, or sell liquor, or manufacture vitriol (we now call it sulfuric acid.) More heinous restrictive covenants forbade the sale of the land to Italians, Jews and African-Americans. Those are now deemed unenforceable by the courts, but they are still in the land records.
Now comes, Cherry Hill Towne Ctr. Partners, LLC v. GS Park Racing, L.P., D.N.J. (Bumb, U.S.D.J.) (20 pp.)
Plaintiff filed an action seeking a declaration that a restrictive covenant encumbering plaintiff's property was unenforceable; in response, defendant moved for a preliminary injunction to enjoin plaintiff from opening a sports wagering business on its property.
Following the legalization of sports wagering in New Jersey, plaintiff sought to apply for a sports wagering license. However, plaintiff's property was subject to a restrictive covenant in favor of defendant that prohibited wagering activities, gambling, and gaming of any sort on the property by any party other than defendant and its successors and assigns.
When defendant notified plaintiff of the restrictive covenant, plaintiff responded by filing the present action; defendant then filed its cross-motion for preliminary injunction.
The court first ruled that the case was ripe for review despite plaintiff having not yet applied for a sports wagering license, since plaintiff asserted that a declaratory judgment would aid it in deciding whether to undertake the time and expense of an application, thereby giving a judgment practical utility.
The court denied defendant's motion for a preliminary injunction. The court first ruled that defendant had demonstrated a likelihood of success on the merits. The court ruled that defendant would likely prevail on its argument that the restrictive covenant on plaintiff's property was enforceable, finding the language of the covenant unambiguous and supported by consideration.
The court further ruled that the covenant was reasonably restrictive in its scope and did not impose an unreasonable restraint on trade. However, the court ruled that defendant was not entitled to injunctive relief because it had not demonstrated that it would suffer from immediate irreparable harm in the absence of a preliminary injunction, since plaintiff conceded that it would not be opening a sports wagering facility on the property anytime in the immediate future. [Filed Sept. 4, 2019]
Here we are. An ancient method of privately regulating one's use of his property is still valid! What does it mean for you?
When you buy property, your attorney will order a title commitment. The title agent will then search the title to determine if there are any liens or encumbrances affecting the title or the proposed use. That's what we do!
If a restrctive covenant is found, your attorney will advise you whether it is enforceable or if affects your use of the property in any other way.
For your real estate purchase or mortgage refinance or
Stephen M. Flatow, Esq.
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