Government agencies restrict land use through zoning requirements and other ordinances. But private entities, such as real estate developers, have their own set of tools to control what happens on their land. Covenants, easements, and licenses are three forms of agreements between private parties that dictate how the land can be used. Each can take the form of an express, written agreement between the land grantor and grantee (though licenses are often unwritten, and easements can be created without any agreement at all). This overview examines each in turn.
A real covenant is a written contract to do (or not to do) something to the land. Covenants often exist to promote uniformity within neighborhoods or housing developments. A covenant might set a lower limit on the size of a house within a development, or regulate the color and style of homes. It might limit the number of homes that can be built on a lot, or establish a particular distance the house must be set back from the street. By maintaining uniformity throughout the neighborhood, covenants protect the property value of the included properties.
Covenants can be positive (requiring parties to do something) or negative (prohibiting parties from doing something). Positive covenants can require upkeep, such as timely sweeping of leaves, repairing visible areas of a house, or paying a small amount into a fund used to pay a maintenance agency. Negative covenants can prohibit the owner from building a swing-set in the front yard, or from building a fence.
Some covenants expire upon a transfer of the property—these are called covenants in gross. Others are said to “run with the land”, meaning that the covenants apply to the new owner just as they did to the old owner. These are referred to as covenants appurtenant. In order to run with the land, the covenant must meet certain requirements. It must be in writing and the subsequent owner must have had notice of the agreement (although constructive notice is enough). Also, the covenant must “touch or concern the land”:
“Generally speaking, a covenant touches or concerns the land if it is such as to benefit the grantor or the lessor, or the grantee or lessee, as the case may be. As the term implies, the covenant must concern the occupation or enjoyment of the land granted or demised and the liability to perform it, and the right to take advantage of it must pass to the assignee.” Pelser v. Gingold, 214 Minn. 281, 285 (Minn. 1943).
Additionally, the parties must have meant for successors to be bound by the agreement.
Easements are rights to use the property of another for a particular purpose. They can be express, written agreements, or they can be established over time without any discussion between the parties. Like covenants, easements may be positive or negative. A positive easement might allow passage over another’s land through the use of a driveway. A negative easement might prevent a neighbor from blocking the sunlight and casting a shadow over one’s pool. Typically, easements are irrevocable, and run with the land. Written easements should be included in the deed, and subsequent owners should have notice of them. Written easements are governed by contract law.
One interesting type of easement increasingly used by real estate developers is a conservation easement. When developing a tract of land into, say, a housing development, the developer might prohibit construction on a section of that tract, preserving the area in its natural state. The easement is a legally binding agreement between the landowner and a conservation organization, and the restriction passes to all future owners of the land. For many owners, creating such an easement is a way to help the environment. For others, creating conservation easements is a way to get a nice tax benefit. If the easement qualifies, the owner will receive tax credit for a charitable donation equal to the decrease in fair market value caused by preserving (rather than developing) the land.
A license gives permission from the owner to another to use the property for a specific purpose. It can be in the form of an owner simply giving permission—one neighbor offers to let the other use their driveway. In this case, the license could be revoked at any time. A license could also be a written contract with a set date on which the right will expire, the terms of which would keep the license from being revoked.
Licenses are similar to leases, and are often used as a less formal version of a lease. Unlike a lease, though, licenses do not transfer an interest in the real property. It is personal to the licensee and cannot be transferred. A lease, on the other hand, gives the exclusive use of the property, and the lessor can grant the use to a third party if they desire. Maybe the biggest difference between a lease and a license is that a license does not carry with it the right to exclude anyone from the property. As a license becomes more and more detailed, and more conditions are agreed to, it comes to resemble a lease.
Ordinarily, a license is a revocable privilege. However, a license will become irrevocable if the licensee makes substantial expenditures of money or labor in reliance on the permitted use. When this occurs, the license has essentially become an easement. For example, assume two properties are divided by a slope, with one parcel at the top of the hill and the other at the bottom. The uphill neighbor grants a license to the lower neighbor to build a wall at the top of the hill, so that it will give both neighbors privacy. He also gives the lower neighbor permission to use the sloped land on the low side of the wall. After building the wall, the lower neighbor builds a gazebo structure on the sloped area but still within his neighbor’s land. The uphill neighbor eventually sells the property. Because the lower neighbor expended money/labor in reliance on the permitted use, the new uphill owner will not be able to force the lower neighbor to remove either structure—an irrevocable license has been established.
Private parties have many options by which to allow certain uses of land without granting title, or to restrict the use of land. Covenants, easements, and licenses are all useful tools for maintaining control over land use, and each may be appropriate under the right circumstances.