Court Rules (Again) that Language on Plat Can Rise to Level of Restrictive Covenant

January 18, 2008 | Roger McEowen

 

Overview

A recent opinion of the Iowa Court of Appeals reaffirms the principle that a restrictive covenant can be created by a plat. The court's opinion is a reminder that care must be taken in the preparation of plat maps, title opinions and when further development of lots contained in subdivisions is anticipated.

The case involved the legal effect of restrictive covenants created via plat map. A covenant is a provision in a deed limiting the use of property and prohibiting certain uses. It is a written promise or restriction on the use of the land. Land developers typically use restrictive covenants when they subdivide property for residential developments. A land developer, after platting the subdivision into lots, blocks and streets, will impose certain limitations on the use of the lots in the development. These may include a provision restricting the number of dwellings allowed per original lot (i.e., no subdivision), or may limit construction to single-family dwellings with no detached outbuildings, or may specify that the dwellings are to be built at least a specified distance from the street and from the side and back lot lines (commonly called a “set back” requirement). There may be a variety of other restrictive covenants that seek to control the way the development looks and is preserved. Typically, these covenants are part of the “source deed” to the property and the approved subdivision plat record and are, therefore, binding on all subsequent owners. That was the precise issue involved in this case – can a use restriction that is set forth in a plat, but not in a deed, rise to the level of a restrictive covenant that binds all subsequent owners of the property to that use restriction?

Facts of the Case

Under the facts of the case, a developer owned real estate that was platted as a housing addition in Bettendorf. At the time the area was being developed, Bettendorf’s planning staff told the primary developer that the city required lots (termed “outlots”) be set aside in the creek area of the addition for use as a stormwater detention area. The dedication of the stormwater management area in the addition was part of the city’s larger regional stormwater detention facility and was consistent with the city’s comprehensive use map. The developer did not resist the city’s requirement of the lots for green space. Indeed, in February of 2003, the developer conveyed outlot A to the city via a warranty deed, for $27,240, which was below the market price of the land. The deed was prepared by the city’s attorney. The general notes on the plat map of the addition included the following:

“ALL OF OUTLOT A IS A SEWER, DRAINAGE AND DETENTION BASIN EASTMENT. OUTLOT A IS DEDICATED TO THE CITY OF BETTENDORF, IOWA, FOR STORMWATER MANAGEMENT PURPOSES. IT SHALL BE USED AS A RECHARGE-INFILTRATION- DETENTION AREA WITH NATIVE VEGETATION MAINTAINED BY THE CITY OF BETTENDORF, IOWA.”

In addition to being consistent with the city’s requirements, the designation of outlot A made the residential housing lots adjacent to outlot A more valuable than other lots in the area. 

Richard and Tracey Curtis purchased lot 21, which backed up to outlot A, in May 2001. At that time, Richard Curtis spoke with head city planner, Mark Brockway, about outlot A. Brockway told Curtis that the green space area would remain in its natural state and the city could not change that designation. In May of 2005, the Curtises contacted Fick about building a larger home on lot 16, which adjoins outlot A. At that time, Tracey Curtis spoke with city planner, Gregory Beck, who assured her outlot A was for water retention only and nothing could be built on it.

Rino Della Vedova owns lot 17, which adjoins outlot A. He purchased the lot from Craig Windmiller of Windmiller Design and Development Company, who also built Della Vedova’s home on the lot. Prior to the purchase, he viewed the plat map of the Twelfth Addition, including the dedication language regarding outlot A. Windmiller also told him that outlot A was to remain green space.

Curtis and Benna Lea Schnell own lot 16, which adjoins outlot A. Benna Lea testified that they paid a premium for the lot because it adjoined outlot A, they built a house that architecturally takes advantage of the green space, and their use and enjoyment of the property would be drastically affected by a house being built on outlot A.

In mid 2005, Windmiller approached the city about buying all or a portion of outlot A because he had a buyer interested in building there. The city determined that outlot A was larger than necessary for stormwater management. The city published a notice regarding the proposed sale in the August 25, 2005 Bettendorf News, but did not otherwise notify any of the surrounding homeowners of the proposed sale. On September 6, 2005, the city sold the eastern portion of outlot A to Windmiller, who owned a contiguous lot, for the same amount the city had purchased it for from the developer. Windmiller subsequently requested the land be re-platted as part of a lot in Fieldstone Pointe Second Addition, intending to build a single family residence on the land. The city approved the re-platting.

In the fall of 2005, Windmiller regraded the eastern portion of outlot A, causing the native vegetation to be removed from the property. It was at this time that the appellees discovered the eastern portion of outlot A had been sold. On November 16, 2005, the developer, Curtis, Della Vedova, and Schnell sued for temporary and permanent injunction against Windmiller. On March 2, 2006, they amended the petition to include the City of Bettendorf. Following a December 5-6, 2006 trial, the court issued an order enjoining Windmiller and the city from using any portion of outlot A for any purpose other than as a recharge-infiltration-detention area with native vegetation. Windmiller and the city appealed.

The Court of Appeals opinion

On appeal, the city and Windmiller argued that the note on the plat map did not create a covenant or use restriction running with the land – pointing out that Iowa law requires that a strict test should be applied in construing agreements (other than those where the purpose of the restriction is plain and obvious) that restrict the free use of property. However, the court noted that while it may have been previously unclear whether a plat map could create a covenant or use restriction running with the land, the Iowa Supreme Court, in 2007, (Gray v. Osborn 739 N.W.2d 855 (Iowa 2007) held that a plat map alone can provide the necessary language to bind successive owners of real estate to restrictions or limitations on its use. As such, because the plat clearly denoted an intention to create an easement, and the purchasers had notice, the plat established an easement that ran with the land and bound successive owners. Here, the city bought outlot A at below market value for the dual purpose of providing a drainage basin and green space. The purposes were clearly noted on the plat. Because the plat map clearly denoted an intention to create use restrictions and Windmiller had notice of the restrictions, the plat established the use restrictions, which survive the city’s ownership and are applicable to Windmiller. In addition, because the language on the plat established use restrictions, the court held that evidence regarding the plaintiffs’ discussions with city employees was irrelevant to the outcome of the case.

The court also held that the city’s sale of the portion of outlot A complied with Iowa law and that the land restriction applied to the portion of outlot A that was sold. Once the city determined it did not need the portion of outlot A, it was empowered to sell it. But,the city could not sell the land free of the restrictions contained in the plat. So, the trial court’s injunction was affirmed – that prohibiting Windmiller and the city from using any portion of outlot A for any purpose other than as a recharge-infiltration-detention area with native vegetation.

Implications of the decision

The court's opinion is not surprising-they ruled the same way in 1982 (Maddow v. Katzman, 332 N.W.2d 342 (1982) and in 2006 (Newport v. Dulin, No. 6-669/05-1233, 2006 Iowa App. LEXIS 1148 (Iowa Ct. App. Nov. 30, 2006). So the real question is not whether a restrictive covenant can be created by language in a plat - it can. The real question concerns the scope of the court's ruling. If the court’s ruling is broadly interpreted to mean that nothing in a plat can be changed to the detriment of any other owner of property described in the plat, such an interpretation could mean that a platted lot could not be divided without the consent of the other owners of lots denoted in the plat. But, that may be too broad of a reading of the court’s opinion. The case involved a plat containing a stormwater detention area, so it is arguable that the area was intended for the benefit of all owners of lots described in the plat. Indeed, the court did state that the use restriction of the stormwater detention area made the abutting lots more valuable. But, were all lots in the plat really the intended beneficiaries of the use restriction? 

Based solely on contract interpretation, the plat specifically stated that the city would maintain the open space. The city accepted that obligation upon its approval of the plat. If the court’s opinion is limited to easements and restrictions that specifically require city maintenance, or are specifically set forth in the plat such that the intent of the original party can be determined, then the court’s opinion is squarely on point with a long line of caselaw from across the country, including Iowa.

In any event, lawyers handling real estate transactions should show easements on the plat drawing and by separate instrument. It is probably not a good idea to place notes on plats. In Iowa, such notes could rise to the level of a land use restriction or restrictive covenant. Clearly, any notes of the plat drawing should be limited to engineering or survey matters. Likewise, when preparing a title opinion, lawyers should examine the plat map itself if it is published in the abstract. If it is not, it may be a wise practice to disclaim with respect to restrictions of use that may or may not be noted on the plat. Middle Road Developers, L.C., et al. v. Windmiller Design and Development Co.No. 7-953/07-0425 (Iowa CtApp. Jan16, 2008).