J. Albert Lynch v. Town of Pelham

Covenant "In Gross" May be Enforced by Anyone with a "Legitimate Interest"
New Hampshire Supreme Court, No. 2013-064
Friday, October 24, 2014

In this important case, the NH Supreme Court reversed the decision of the superior court and held the following: 1) a deed need not state that a restrictive covenant was “in gross” for it to have that legal status and 2) anyone with a legitimate interest may bring a legal action to enforce a covenant “in gross.”

Two local developers, Fineman and Lynch, purchased 24 acres of land in Pelham with the intent to sell it to the Town of Pelham. The Town agreed that it would purchase 18 acres of the land. The land was then conveyed to the FIN-LYN Trust. Thereafter, the planning board approved the subdivision plan, which consisted of the 18-acre lot that would be sold to the Town and 6 one-acre building lots for single-family homes. The Trustee of the FIN-LYN Trust neither retained ownership of any portion of this land nor owned any other property in the Town.

The Town ultimately purchased the 18-acre lots, which the Trustee insisted be used only for municipal buildings, subject to several restrictive covenants set forth in the deed. These covenants prescribed particular building specifications, including that the buildings would be of Colonial architecture, including that the buildings would have only pitched roofs; the Town would plant a row of trees in a particular area on the property; and the Town would reconstruct and maintain a stone wall on the property. The deed did not specify whether the covenants were “appurtenant” or whether they were “in gross” or whether they were “personal” or “running with the land.” “Appurtenant” means that the rights and obligations associated with the covenant are tied to ownership or occupancy of a particular parcel of land. Therefore, an appurtenant covenant always requires two parcels of land: one that is benefitted by the covenant and one that is burdened by the covenant. In contrast, “in gross” means that the benefit of the covenant is not tied to ownership of another parcel of land. Either type of covenant may “run with the land”—meaning that it passes automatically to successors in interest—or be “personal”—meaning that it is not transferable to future owners of the land.

The Town developed the 18 acres in compliance with the covenants. The Town then submitted plans to build a new fire station on the property. Although the select board determined that the plans fully complied with the restrictive covenants, the Trustee disagreed and brought suit in superior court to enforce the covenants. The superior court dismissed the Trustee’s complaint. It determined that because the deed did not specify whether the covenants were in gross or appurtenant, the superior court must construe the covenants to be appurtenant. The Trustee could not enforce an appurtenant covenant because it did not own any land affected by the restrictive covenants. Furthermore, the trial court stated, even if the covenants were in gross, the Trustee had not established the “legitimate interest” required to confer standing on the Trustee bring a lawsuit. Therefore, regardless of the classification of the covenant, the Trustee did not have standing. The Trustee appealed the NH Supreme Court.

The Court reversed the superior court’s decision.

First, the Court interpreted the deed to create a covenant in gross, rejecting the superior court’s conclusion that any covenant not specifically classified in a deed as “in gross” must be construed as “appurtenant.” The Court stated that where the deed is silent, the parties’ intent is paramount in determining what kind of covenant the deed created. Here, at the time of the deed, the Trustee did not own any other property in Town, and no particular property was specified as benefiting from the covenant. Furthermore, if the Court interpreted it to be appurtenant, no one would have the power to enforce the covenant, making it entirely ineffective. Moreover, other restrictive covenants in the deed that were not at issue in this case clearly created appurtenant covenants, so this further supported the conclusion that these covenants were intended to be in gross.

Second, the Court had to determine what type of interest was required for individual to enforce a covenant in gross where, as here, the Trustee did not own any land in the vicinity of the restricted property. The Court adopted the rule set forth in the Restatement (Third) of Property: Servitudes, which states that a covenant in gross can only be enforced by someone with a “legitimate interest in enforcing the covenant.”

Finally, the Court determined that the Trustee did have a legitimate interest in enforcing the covenant. The Trustee need not have a financial interest or suffer an economic injury as a result of the alleged violations of the covenants; instead, it was sufficient that he sought judicial relief to enforce the covenant in order to advance the purposes for which it was created. Therefore, because the Trustee was seeking the force the Town to comply with the provisions of the covenants and not seeking damages, the Trustee had shown a legitimate interest and had standing to pursue this legal action.