Key point 7-13. A restrictive covenant is a restriction on the use of property. Such restrictions often are noted in deeds to property, but they may appear in other documents as well. Such restrictions apply to a church’s use of its property.

* A North Carolina court ruled that a “restrictive covenant” in a deed to a church’s property requiring it to use the property for residential purposes was not legally enforceable because of nonresidential uses by several lots covered by the covenant, and because the restrictions had been waived. In 1914, a real estate company developed a plat of land consisting of 14 lots. The deed to 12 of these lots contained a “restrictive covenant” requiring the property to be used solely for residential purposes. The deeds to the remaining 2 lots did not contain a restrictive covenant. Over the next 75 years a church acquired 7 of the 12 restricted lots, removed or demolished at least five structures, and built several buildings for the church complex. One of the remaining five restricted lots belonged to a charity, which also demolished the house on the lot. Two of the remaining lots belonged to a local college and were used for parking, classes and social events. The remaining two restricted lots belonged to a married couple (the “Wilsons”) who used both lots for a single residence. In 2000, the Wilsons filed a lawsuit in which they asked a court to enforce the residential restrictions against the church, the charity, and the college. A trial court dismissed the case, and the Wilsons appealed.

A state appeals court began its opinion by observing that “restrictive covenants are generally not favored by the courts.” On the other hand, "such covenants must be reasonably construed to give effect to the intention of the parties, and the rule of strict construction may not be used to defeat the plain and obvious purposes of a restriction." The court noted that restrictions under a general plan of development may be enforced against future purchasers of the land who acquire property “with notice” of the restriction. The court pointed out that restrictive covenants may be terminated in several ways: “Covenants may be terminated when they provide for their own termination. Covenants may also be terminated when changes within the covenanted area are so radical as practically to destroy the essential objects and purposes of the agreement.” Even if a restrictive covenant has not been terminated, it is possible that it will not be given effect if it has been “waived.”

radical change

The court noted that the restrictive covenant that applied to the 12 lots contained no termination provision, but it concluded that the covenant was no longer enforceable because of the “changes within the covenanted area are so radical as practically to destroy the essential objects and purposes of the agreement.” The court acknowledged that although the Wilsons continued to use their 2 lots for residential purposes, all of the other 10 restricted lots had been used for non-residential purposes for many years. Three of the lots were used for parking (one of them for 40 years), meaning that a fourth of the original 12 restricted lots were used for parking. The court considered this to be a radical change from the purpose of the original restrictions. One of the original 12 restricted lots was used as a vehicle “turn-around” by the church. Two more lots had been used by the church for offices and classrooms for half a century. The remaining lots had been used by the charity and college for non-residential purposes, or were vacant.

Based on these facts, the court concluded that the changes to the original 12 restricted lots were "so radical as practically to destroy the essential objects and purposes of the agreement." It conceded that the residential restriction was put in place for the "protection and general welfare of the community," and that residential restrictions are generally “a property right of distinct worth.” However, in this case, “the changes have destroyed the uniformity of the plan and the equal protection of the restriction."

waiver

The court concluded that even if the restrictive covenant requiring the 12 lots to be used for residential purposes had not terminated, the Wilsons had waived their right to enforce it. The court defined a waiver as "an intentional relinquishment or abandonment of a known right or privilege." It noted that almost any right may be waived, so long as the waiver is not illegal or contrary to public policy. It also cautioned that waiver is an “affirmative defense” that must be pleaded in the answer to a lawsuit or it is forfeited. The court ruled that there had been an “implied waiver” by the Wilsons of their right to enforce the restrictive covenant. It noted that “a waiver is implied when a person dispenses with a right by conduct which naturally and justly leads the other party to believe that he has so dispensed with the right."

Application. This case illustrates a very important point. Many churches have purchased property that contains one or more restrictive covenants. Such covenants restrict a church’s lawful use of its property. If church leaders are not aware of the existence of a covenant, they may inadvertently violate it. This can trigger an immediate lawsuit by neighboring landowners. Here are the rules to note: (1) Be careful to inspect the proposed deed to any property you are acquiring by purchase or gift. Does it contain one or more restrictive covenants that could hinder the church’s use of the property? If so, this issue must be resolved before title to the property is transferred to the church. (2) Check out the deed to your current property to see if it contains one or more restrictive covenants. If it does, has your church (and other neighbors) been violating them for years? If so, you could argue (like the church in this case) that the restrictions have been “waived” by continual violation without objection, and that they have been “terminated” by substantial changes in the lots covered by the restriction. Medearis v. Trustees of Meyers Park Baptist Church, (N.C. App. 2001).

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