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Midsouth Golf, LLC v. Fairfield Harbourside Condominium Ass'n

Court of Appeals of North Carolina
187 N.C. App. 22, 652 S.E.2d 378 (2007)
ELI5:

Rule of Law:

An affirmative covenant to pay money for the use of recreational amenities does not "touch and concern" the land, and is therefore an unenforceable personal covenant against subsequent purchasers, if the property owners possess only a revocable license to use the amenities rather than an easement or other property right in them.


Facts:

  • In 1979, Fairfield Harbour, Inc. (FHI) recorded a Master Declaration for its property development.
  • The Declaration required all property owners to pay an annual "recreational amenities charge" to FHI for the upkeep of amenities like golf courses, marinas, and pools owned by FHI.
  • The Declaration specified that property owners' use and enjoyment of the amenities would be based on terms and conditions set by FHI as a license, not as a permanent easement.
  • FHI later developed time share communities, represented by Defendants, and incorporated the covenant to pay amenity fees into their governing documents.
  • In 1993, FHI sold the recreational amenities to Harbour Recreation Club, Inc. (HRC).
  • In 1999, HRC sold the amenities to the Plaintiff.
  • Plaintiff sells memberships for the use of the recreational amenities to members of the general public who do not own property within Fairfield Harbour.

Procedural Posture:

  • Plaintiff filed an action against Defendants in the trial court on November 4, 2004, seeking to collect amenity fees and over $1.8 million in alleged past due fees.
  • Defendants filed amended answers, asserting as a defense that the covenant to pay fees was a personal covenant not binding on them.
  • Defendants also filed counterclaims against the Plaintiff.
  • Defendants filed motions for partial summary judgment on the grounds that the covenant was personal and unenforceable against them.
  • The trial court entered an order granting Defendants’ motions for partial summary judgment.
  • Plaintiff appealed the trial court's order to the Court of Appeals of North Carolina.

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Issue:

Does an affirmative covenant requiring property owners to pay fees for recreational amenities "touch and concern" the land, and thus run with the land, when the property owners are granted only a revocable license to use the amenities and the amenities are also open to the general public?


Opinions:

Majority - Judge McGee

No, the covenant does not touch and concern the land and is therefore a personal covenant that does not run with the land. For a covenant to be real and run with the land, it must satisfy three elements: intent, touch and concern, and privity of estate. While the parties intended for the covenant to run with the land, it fails the 'touch and concern' requirement. Affirmative covenants, which require an action like paying money, are strictly construed. The court, citing Raintree, found that the payment of a collateral sum of money for the use of facilities not upon or attached to the owners' land does not concern the land to a substantial degree. The dispositive factor, distinguishing this case from others like Neponsit, is that the property owners here hold only a revocable license to use the amenities, not a property right like an easement. An easement would make the amenities appurtenant to the land, but a mere license does not create a sufficient connection for the payment obligation to touch and concern the property. Therefore, the covenant is personal, binding only the original parties, and is not enforceable by Plaintiff against Defendants.



Analysis:

This decision reinforces a strict interpretation of the "touch and concern" doctrine for affirmative covenants in North Carolina. It establishes that the nature of the property owners' right to use common amenities—specifically, whether it is a permanent property right (easement) or a revocable permission (license)—is a critical factor in determining if a fee obligation runs with the land. The ruling provides a clear warning to developers that to ensure the long-term enforceability of amenity fees against subsequent purchasers, they must grant owners a legally binding property interest in those amenities. This holding protects subsequent landowners from being bound by financial obligations that are not directly tied to a benefit legally appurtenant to their land.

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