ENVIRONMENTAL TIP #27 - Covenant to Run with Land Runs Out

10/15/2002

Facts

Della Skowbois sold a parcel of contaminated property to Houston Tech & Sons, including in the deed a covenant preventing any subsequent owner from seeking contribution or cost recovery for remediation of contamination on the property and stating that the covenant “shall run with the land and shall bind . . . successors, assigns and all other subsequent owners of the property.”  Houston Tech & Sons turned around and sold the property to Tex S. Lawnkorn who sues Skowbois to pay for remediation of the contamination on his property.  In defense, Skowbois asserts the covenant is binding on Lawnkorn.

Consequences

Skowbois loses.  A covenant runs with the land and binds subsequent owners when it “touches and concerns” the land, relates to a thing in existence or specifically binds the parties and their assigns, is intended by the original parties to run with the land, and when the successor to the “burden” has notice.  The Fifth Circuit, construing Texas law, has held that the covenant at issue did not “touch and concern” the land, but was a continuing contractual agreement agreeing to refrain from seeking remediation or damages.  Because it operated as a cost-shifting mechanism, putting remediation costs forward onto other parties, and did not involve obligations relating to the land itself, the provision did not qualify as a covenant.  The court also rejected the argument that the covenant was enforceable as an equitable servitude, again because it did not “touch and concern” the land.

Lesson

Covenants that only shift costs may not run with the land and bind successor owners.  Other mechanisms for shifting risk should be considered.

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