City of Bowie v. MIE, Properties, Inc.
922 A.2d 509, 2007 Md. LEXIS 260, 398 Md. 657 (2007)
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Rule of Law:
A restrictive covenant on real property is invalidated due to changed circumstances only when the challenging party proves that after a reasonable period of time, a radical change in the character of the neighborhood or other conditions has occurred that completely frustrates the covenant's original purpose.
Facts:
- In 1985, the owners of a 466-acre property, Carley Capital Group and the University of Maryland Foundation, Inc. ('the Developers'), entered into an Annexation Agreement with the City of Bowie.
- The Agreement stated the Developers' intention to create a 'science and technology, research and office park' on the property.
- In December 1985, the Developers executed a Declaration of Covenants, recorded in the land records, which limited the property's use to 14 specific categories related to technology, research, office, and ancillary uses.
- Around 1999, the University of Maryland Foundation withdrew from the project, and Carley Capital Group filed for bankruptcy.
- Around 2000, MIE, Inc. acquired the remaining undeveloped portions of the property subject to the Covenants.
- MIE began developing 'flex-space' buildings and, in 2001, leased a portion of a building to C & C Dance Studio.
- The City of Bowie contended that a dance studio was not a permitted use under the Covenants and initiated legal action.
Procedural Posture:
- On October 24, 2002, the City of Bowie filed a complaint in the Circuit Court for Prince George’s County against MIE, seeking a declaratory judgment and a permanent injunction.
- MIE filed a counterclaim seeking a declaration that the Covenants were invalid and unenforceable.
- Following a bench trial, the Circuit Court found the Covenants were valid and enforceable and issued an injunction against MIE permitting the dance studio's use of the property.
- MIE, as appellant, appealed the decision to the Court of Special Appeals of Maryland, an intermediate appellate court.
- The Court of Special Appeals vacated the trial court's judgment, holding that the trial court applied the wrong legal standard and remanded for reconsideration under a 'reasonable probability' test.
- The City of Bowie, as petitioner, sought and was granted a writ of certiorari from the Court of Appeals of Maryland, the state's highest court, to review the legal standard.
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Issue:
Is a restrictive covenant on real property invalidated due to changed circumstances only when a party demonstrates a radical change in the neighborhood or other conditions that completely frustrates the covenant's original purpose?
Opinions:
Majority - Harrell, J.
Yes. A restrictive covenant on real property is invalidated due to changed circumstances only when a party demonstrates a radical change in the neighborhood or other conditions that completely frustrates the covenant's original purpose. The court rejected the 'reasonable probability' standard applied by the intermediate appellate court, which was improperly borrowed from eminent domain law. Applying that standard to covenants would be untenable, as it would empower a covenantor to unilaterally defeat a covenant simply by refusing to abide by its terms, thereby making its purpose appear unachievable. The proper standard, long established in Maryland jurisprudence, is the 'changed circumstances' test, which requires the party challenging the covenant to prove a 'radical change in the neighborhood causing the restrictions to outlive their usefulness.' This test is objective, focusing on factors outside the property owner's control. Here, the Covenants' purpose—to develop a research park—was not frustrated by the withdrawal of the University of Maryland, as its involvement was an 'intention,' not a mandatory condition. After nearly two decades, no radical change in the neighborhood had occurred to render the Covenants' purpose obsolete. Therefore, the Covenants remain valid and enforceable.
Analysis:
This decision solidifies the legal standard in Maryland for invalidating restrictive covenants, establishing a high bar for challengers. By explicitly rejecting the 'reasonable probability' test from eminent domain law, the court prevents property owners from engineering a covenant's demise through their own inaction or non-compliance. The ruling reinforces the durability of restrictive covenants, providing legal certainty for municipalities, developers, and community associations that rely on them for long-term land use planning and control. Future challenges to covenants in Maryland will require clear and convincing evidence of a truly 'radical' change that makes the covenant's original purpose wholly unachievable.
