Title Insurance Client Alert – Supreme Court of Virginia Holds Restrictive Covenant Unenforceable
By James L. Windsor, Clark J. Belote, Real Estate Claims & Title Insurance Solutions
Wells v. Beville, Record No. 210469
Yesterday, in an unpublished order, the Supreme Court of Virginia held that a covenant restricting the sale of property on Smith Mountain Lake was unenforceable due to changed circumstances. (click here for opinion)
A July 10, 1970 deed conveying two adjacent lots (Lots 1 and 2) contained eight restrictive covenants. One of the covenants stated: “[n]o more than one cabin or residence shall be built on a single lot unless the lot exceeds one acre. Lots 1 and 2 shall be considered one lot.” Another stated that “Lot No. 1 herein conveyed shall not be sold unless Lot No. 2 is sold to the same person at the same time.”
In 2016, the Bevilles purchased Lots 1 and 2. The deed into the Bevilles expressly stated that the conveyance was “subject to such restrictions and covenants as set forth in the . . . deed of July 10, 1970, if and as to the extent they may still be applicable or enforceable.”
The Bevilles then sold Lot 2 by itself to Mr. Wells and others (collectively, “Wells”). The deed into Wells was “subject to easements, conditions and restrictions of record insofar as the same may lawfully affect the property.”
Later, the Bevilles entered into a contract to sell Lot 1 to Mr. Rodenbough. When Wells learned of the pending sale, they attempted to purchase Lot 1 from the Bevilles, but the Bevilles refused. Wells then filed suit for a declaratory judgment seeking enforcement of the restrictive covenants and asking that the circuit court: “(1) set aside the contract between the appellees [Bevilles] regarding the sale of Lot 1, and (2) order the Bevilles to convey Lot 1 to the appellants [Wells] “after arriving at a price” for the property.”
Among other grounds finding for the Bevilles, the circuit court held that the restrictive covenants were no longer enforceable. The Supreme Court of Virginia affirmed.
Reiterating that restrictive covenants are disfavored and strictly construed in Virginia (1) , the court held that neither of the restrictive covenants remained enforceable because the Bevilles’ standalone sale of Lot 2 to Wells constituted changed circumstances defeating the essential purpose of the covenants.
“Specifically, while the restrictive covenants expressly require Lot 1 to be sold contemporaneously with Lot 2, the covenants do not contain any reciprocal language requiring Lot 2 to be sold contemporaneously with Lot 1.” Slip Op. at 3. “Under the terms of the restrictive covenants, then, Lot 2 may be sold separately from Lot 1.” Id. “Thus, the Bevilles did not violate the restrictive covenants when they sold Lot 2 to the appellants.” Id.
Once Lot 2 became a separately owned parcel, the essential purpose of the covenants – that Lots 1 and 2 be treated as one lot – was defeated. Moreover, enforcement of the covenants would “substantially limit the alienability of Lot 1.” As a result, the court held “[t]he separate sale of Lot 2 to [Wells] brought about a change in circumstances that defeated the essential purpose of [the] Restrictions . . . .” Slip Op. at 4. “Accordingly, the circuit court correctly determined that the appellants [Wells] could not enforce these restrictive covenants.” Id.
While unpublished and featuring unique facts, the Wells case stands for, at least, two things. First, it is a reminder that the specific language of covenants will always be strictly construed. Second, it shows that a “change in circumstances” defense to enforcement of restrictive covenants does not have to be a cumulative change over many years – it can be a single act, like the sale of Lot 2 in this case.
If you have any questions regarding this opinion on restrictive covenants in Virginia, or title and real property issues in general, please contact Jim Windsor at (757) 873-6308 or email@example.com, or Clark Belote at (757) 624-3109 or firstname.lastname@example.org.
1 As restrictive covenants are disfavored, they “will not be aided or extended by implication.” Wetlands Am. Trust, Inc. v. White Cloud 9 Ventures, L.P., 291 Va. 153, 163 (2016). (quoting Stevenson v. Spivey, 132 Va. 115, 119 (1922)). A restrictive covenant is unenforceable when “conditions . . . have changed so substantially that the essential purpose of the covenant is defeated.” Barner v. Chappell, 266 Va. 277, 285 (2003). “The determination of the degree of change necessary to have this effect is inherently a fact-specific analysis in each case.” Chesterfield Meadows Shopping Ctr. Assocs., L.P. v. Smith, 264 Va. 350, 356 (2002).
Slip Op. at 3.
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