Is That Restrictive Covenant Enforceable?

When and how can a current owner of real property control the future use of that property?

An owner may attempt to restrict the future use of property being conveyed by delivering a deed with certain restrictions, or covenants, that require future owners to use the property a certain way or to prevent certain use.

However, whether the deed restriction is enforceable can be an open question.

For example, covenants that impose racial or religious restrictions after the sale of a property are unenforceable. Shelley v. Kraemer, 334 U.S. 1 (1948).

A restrictive covenant is usually enforceable only by the person for whom the benefit was intended. That person generally has an interest in some land that is benefited by the restriction.

In most jurisdictions, when an owner no longer holds title to land that is benefited by a covenant, that former owner is no longer entitled to enforce it.  However, in Illinois, restrictive covenants may be enforced by someone who does not own property in the vicinity of the property encumbered by the covenant.

If the value or use of certain land is negatively impacted by a restrictive covenant, there are options to have the covenant removed by legal process, which include:

  • Obtaining a written release or modification of the covenant from the party or parties who are entitled to enforce it. However, in many cases, the grantor of the release does not have the power to release the grantee from the effect of covenants which were granted earlier in the chain of title (e.g., owner B cannot release grantee C from a restrictive covenant that was created by prior owner A before B took title to the property).
  • Merging the benefitted land and the bound land. If title to two adjacent lots is merged in a common owner, the benefit and the burden vest in the same owner, which generally extinguishes the restrictive covenant.
  • Providing evidence (in court) that violations of the covenant were allowed and tolerated by the party entitled to the benefit, where that party is now seeking to enforce the covenant against a new owner/violator (the “you did not enforce it before, so you should not be able to now”).
  • Proving (in court) conduct by owners of benefitted land which shows an intent to relinquish the covenant, such as where a benefitting owner seeks to enforce a building line against an adjacent owner, but the benefitting owner has violated the restriction they seek to enforce against their neighbor (the “you violated it, so you cannot now enforce it”).

This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

Wendy M. Reutebuch | Real Estate, Real Estate Finance and Creditors’ Rights

Wendy represents clients in both Illinois and Wisconsin in a wide variety of commercial real estate and real estate finance transactions. In addition to handling acquisitions, dispositions and leases, Wendy also advises lenders on loan transactions, loan workouts, loan restructurings, forbearance and pre-foreclosure matters.  If you need assistance with a related matter, contact Wendy.