TERMINATION AND EQUITABLE DEFENSES

• Jurisdiction: Washington

§ 8.06 TERMINATION AND EQUITABLE DEFENSES

The duration of a covenant can be limited by its written terms. If a covenant does not contain a provision limiting its duration, the covenant generally has "an indefinite life." Thayer v. Thompson, 36 Wn. App. 794, 797, 677 P.2d 787, review denied, 101 Wn.2d 1016 (1984) (citations omitted). While covenants may have an indefinite life, covenants are not necessarily eternal. A covenant can be terminated by conduct of the parties or a change in circumstances. Id.Moreover, even if a covenant remains in effect, a burdened property owner may prevent the enforcement of a covenant through an equitable defense, like laches or acquiescence. This section discusses how covenants can be terminated and how parties can defend against their enforcement. In this section, for sake of convenience, we use the general term "covenants" to refer to both real covenants and equitable servitudes unless we specify otherwise. See § 8.02 for a detailed discussion of these different theories.

[1] Termination

Covenants may be terminated through merger, agreement of the parties, government action, abandonment, or changed conditions. See, e.g., St. Luke's Evangelical Lutheran Church v. Hales, 13 Wn. App. 483, 488, 534 P.2d 1379, review denied, 86 Wn.2d 1003 (1975).

[a] Merger

The doctrine of merger applies to easements, real covenants, and equitable servitudes. The gist of the merger doctrine is that one cannot have a covenant over one's own property. Schlager v. Bellport, 118 Wn. App. 536, 539, 76 P.3d 778 (2003) (citations omitted). If one person becomes the owner of land both benefited and burdened by a covenant, the covenant will be terminated by merger. Id.That said, merger is not mechanical and indiscriminately applied. The doctrine of merger is "disfavored both at law and in equity." Radovich v. Nuzhat, 104 Wn. App. 800, 805, 16 P.3d 687 (2001). Consequently, the courts will not compel a merger of estates where the party in whom the two interests are vested does not intend such a merger to take place, or where it would be inimical to the interests of the party in whom the several estates have united, nor will they recognize a claim of merger where to do so would prejudice the rights of innocent third persons. Id.

Even if a covenant is terminated by merger, it can be revived. See id. at 805-06. A covenant extinguished by merger can be recreated if the owner of the unified property conveys the burdened property to a new owner and expressly subjects the property to the covenant in that conveyance. Id.

Covenants affecting multiple properties can be partially terminated through the doctrine of partial merger. At least one Washington court has recognized this doctrine. Schlager, 118 Wn. App. at 542. In Schlager, the Washington Court of Appeals, Division I, held the benefit of a covenant was extinguished for some of the property benefited by a covenant, but not all of the property benefited by it. Id. at 542. The court determined that the covenant was partially terminated through merger when the owner of the burdened property owned some but not all of the benefited property. Id.The result was that the covenant terminated by merger but only as to the portion of the benefited property owned by the same owner that owned the burdened property. Id.

Practice Tip: Exercise care in applying merger to subdivisions. If one person acquires multiple lots in a subdivision, but not all of the lots, merger may not fully terminate subdivision-wide restrictive covenants. The other lot owners still own lots benefited by the covenants, so the covenants will likely be only partially merged.

[b] Agreement of the Parties

The parties to a covenant can agree to modify or terminate it. See RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES § 7.1 (2000). Parties frequently agree to terminate covenants through a release. A release is the conveyance of the benefit of a covenant from the beneficiary to the burdened owner. Id. at §§ 7.1, 7.3. Because a release is generally a transfer of an interest in land, it requires execution of a written deed. See id.; RCW 64.04.010, RCW 64.04.020.

Practice Tip: Exercise caution when terminating a covenant in a subdivision where rights may arise from a "common plan." See § 8.04[1][a]. A release intended to terminate a restriction may not be effective unless all owners within the "common plan" who are benefited by the restriction sign the release. This can be a burdensome process of signature-gathering that can increase transaction costs, but it is the safest approach.

[c] Government Action

Covenants can be terminated by government action. This concept may arise in the context of (1) condemnation, (2) tax sales, and (3) conflicting zoning ordinances.

[i] Condemnation

While the Restatement view has not yet been expressly adopted in Washington, courts generally hold that a governmental authority may extinguish the burden of a covenant if it is inconsistent with the government's intended public use of the land. See RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES § 7.8 (2000). This raises an obvious question that is beyond the scope of this chapter, which is whether the owners of the benefited land are entitled to just compensation and, if so, in what amount. If all lot owners benefited by an extinguished covenant are entitled to compensation based upon the depreciation of their land, eminent domain could become extremely costly for the government, especially in cases involving land in a large subdivision. For more discussion, see RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES § 7.8 (2000); see also Merceri v. Jones, No. 78876-1-I, 12 Wn. App. 2d 1044, 2020 Wash. App. LEXIS 570 at *7 (Wash. Ct. App. Mar. 9, 2020) (unpublished) (offer from the Washington State Department of Transportation to pay $375,120 in "just compensation to the extent the value of" the benefited land was affected by WSDOT's use of the burdened land inconsistent with covenants and by loss of the benefited owner's right to enforce the covenants).

[ii] Tax Sales

Under Washington law, a tax sale will not terminate a covenant. Title acquired at a tax sale is subject to easements and covenants of record. RCW 36.35.290; Clippinger v. Birge, 14 Wn. App. 976, 547 P.2d 871 (1976); City of Olympia v. Palzer, 107 Wn.2d 225, 229-30, 728 P.2d 135 (1986); Lake Arrowhead Cmty. Club, Inc. v. Looney, 112 Wn.2d 288, 294, 770 P.2d 1046 (1989). Accordingly, covenant holders are not entitled to receive notice of a tax sale because their interests are unaffected by the sale. In re King County, 117 Wn.2d 77, 91-92, 811 P.2d 945 (1991).

[iii] Zoning

If a government authority enacts a zoning ordinance directly conflicting with a covenant, the covenant is unlikely to be terminated. But the zoning ordinance may be strong evidence of changed conditions, which may result in the termination of the covenant. See § 8.06[1][e]. The question of whether changes to zoning ordinances may "override the constitutional contractual rights of parties to a covenant" has not been directly answered in Washington. Mains Farm Homeowners Ass'n v. Worthington, 64 Wn. App. 171, 180, 824 P.2d 495, aff'd, 121 Wn.2d 810 (1993); Hagemann v. Worth, 56 Wn. App. 85, 92, 782 P.2d 1072 (1989). The courts stated that private covenants cannot be the basis for denial of a zoning variance, although they can be the basis for a separate action to enjoin the use of land. Mains Farm, 64 Wn. App. at 180; Martel v. City of Vancouver, 35 Wn. App. 250, 257, 666 P.2d 916 (1983), superseded in part by statute, RCW 7.16.120(5), as recognized in Freeburg v. City of Seattle, 71 Wn. App. 367, 859 P.2d 610 (1993). The implication in Washington appears to be that if the covenant is otherwise enforceable, it will not be terminated by a zoning ordinance or variance even if the covenant is directly conflicting. This is consistent with the view of the Restatement, providing that a change in zoning alone does not justify modification or termination of a covenant unless the zoning makes it impossible to use the property for any purpose allowed under the covenants. RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES § 7.10 (2000). That said, zoning changes in a neighborhood can be used as a factor to determine whether there has been a "change of conditions" or an "abandonment" of the covenant. St. Luke's, 13 Wn. App. at 486; see § 8.06[1][d]-[e]; see also 17 Stoebuck & Weaver, WASHINGTON PRACTICE: REAL ESTATE § 3.8 (2d ed. 2004 & Supp. 2022).

[d] Abandonment

When a "common plan" has broken down due to substantial and unenforced prior violations of the restrictions, the covenants may be terminated by abandonment. See, e.g., White v. Wilhelm, 34 Wn. App. 763, 769, 665 P.2d 407, review denied, 100 Wn.2d 1025 (1983); St. Luke's, 13 Wn. App. at 486. Unlike changed conditions, discussed in § 8.06[1][e], abandonment is a "voluntary, unilateral act on the part of the servitude beneficiary." RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES § 7.4 (2000).

When determining whether a covenant was abandoned in the context of a subdivision, a court will engage in an evaluation similar to a "common plan" analysis. See § 8.04[2]. A few violations are insufficient to constitute an abandonment of a covenant; the plan must have been "habitually and substantially violated" to create the impression it was abandoned. Mt. Baker Park Club, Inc. v. Colcock, 45 Wn.2d 467, 471, 275 P.2d 733 (1954); Hagemann v. Worth, 56 Wn. App. 85, 89, 782 P.2d 1072 (1989). The prior violations must have effectuated a material change in the neighborhood or "have so eroded the general plan as to make enforcement useless and inequitable." Mountain Park Homeowners Ass'n v. Tydings, 125 Wn.2d 337, 342, 883 P.2d 1383 (1994).

When a declaration of covenants, conditions, and restrictions for a subdivision contains an unambiguous severability clause, violations of separate and independent covenants cannot be the basis of a claim of abandonment. Id. at 344...