Some residential real estate deeds include provisions that limit or dictate what can be done with the property, often known as restrictive covenants. In a recent case (Mass. Land Ct. Jan. 25, 2017), the Massachusetts Land Court considered whether an option to repurchase land, styled as a restrictive covenant, could be exercised after a substantial period of time.
The plaintiff in the case was a subdivision developer that had sold several lots to residential purchasers, including the defendants, for the purpose of building homes on the lots. The plaintiff recorded a Declaration of Restrictive Covenants that applied to all of the subdivision lots, which contained a provision that allowed the plaintiff to repurchase any lot at the original sale price if home construction had not commenced within a year of the purchase.
In 2005, the defendants’ parents purchased a subdivision lot from the plaintiff, and a year passed without any construction. They subsequently conveyed the lot to the defendants, who also failed to build on the lot. In 2015, the plaintiff demanded that the defendants re-convey the property to the plaintiff, pursuant to the covenant contained in the Declaration. The plaintiff filed an action with the Land Court, claiming its right to exercise an option to re-purchase the lot as a result of the defendants’ failure to commence construction within a year after their purchase of the property.
The first issue for the Land Court was to determine whether the provision was truly a restrictive covenant, or whether it was more properly characterized as an option to purchase. A restrictive covenant concerns the use of land or construction thereon. In Massachusetts, a restrictive covenant is subject to statutory limitations that do not apply to purchase options, and it may be rendered unenforceable if it is no longer of substantial benefit, if changes in the neighborhood reduce the likelihood of it accomplishing its original purpose, or due to the periodic conduct of its holders, among other reasons.
The Land Court explained that the nature of the obligations imposed, rather than the title in the deed, determines whether the provision may be considered a restriction or an option. In this case, since the provision at issue did not dictate the manner in which the land may be used but instead provided a remedy triggered by the failure to comply with the one-year build restriction, the court viewed the provision as an option. Pursuant to the Uniform Statutory Rule Against Perpetuities, an option becomes invalid if it is not exercised within 30 years after its creation. Accordingly, since the plaintiff demanded its right to exercise the option within 30 years, the court held that it was entitled to re-purchase the subdivision lot from the defendants.
The Massachusetts law firm of Pulgini & Norton provides legal guidance in all aspects of residential real estate. Our experienced attorneys can assist individuals with home inspections and closings, purchase and sale agreements, refinancing, building permit applications, and many other property-related transactions. Schedule your appointment with one of our dedicated real estate lawyers by calling (781) 843-2200 or completing our online contact form.
More Blog Posts:
Massachusetts Appeals Court Holds Plaintiff’s Adjacent Lots Merged with Common Ownership in Zoning Case, Massachusetts Real Estate Lawyer Blog, published July 26, 2016
Massachusetts Homeowners Win Breach of Contract Claim Against Corporation in Property Dispute, Massachusetts Real Estate Lawyer Blog, published September 5, 2016