UT Appeals Court Finds Covenant Did Not Run with the Land Under Development Agreement

This post was authored by Matthew Loescher, Esq.

In 2003, Suburban Land Reserve, Inc. owned roughly 245 acres of undeveloped real estate on Mapleton’s east bench. Suburban thereafter entered into a development agreement with Mapleton, in which Suburban conveyed approximately 76 acres of the property to Mapleton. In exchange, Mapleton passed an ordinance zoning the remaining approximate 170 acres with a 136-residential-unit maximum density and a TDRR overlay, meaning it was a receiving site for transferable development rights (TDRs). Mapleton also granted 77 TDRs to Suburban. In December 2005, Suburban transferred the Property to another entity Preserve (LDIII’s predecessor in interest). When LDIII sought to develop the Property into 176 residential units, the Mapleton city council approved a modification of the applicable zoning ordinance. Mapleton citizens challenged the zoning change, however, and reversed it through a voter referendum. Following this, LDIII sought a declaratory judgment in the district court, where LDIII lost on summary judgment.

On appeal, the court found that the Original Agreement did not confer zoning rights to LDIII, and the rights enjoyed by Suburban and the Preserve did not run with the land to LDIII. The court noted that for a covenant to run with the land, as opposed to being a personal covenant, four elements must be met: “(1) the covenant must touch and concern the land affected by the covenant, (2) the original parties to the covenant must have expressly or impliedly intended the covenant to run with the land, (3) there must be privity of estate, and (4) the covenant must be in writing.” Here, the second element was unambiguously absent under the plain language of the Original Agreement. Furthermore, Section 10 stated that the rights “shall only run with the land so long as Owner or a company which is affiliated with or under common ownership and control of Owner shall own and be the Owner of the Property” or “only upon the express prior written approval by the City, shall any rights of Owner with respect to the portion of the Property being sold be deemed transferred to the new owner thereof.” Accordingly, this plain language dictated that LDIII meet the affiliated-ownership requirement or the city-approval requirement for the zoning rights to pass contractually. The court therefore affirmed the district court’s ruling that the zoning rights under the Original Agreement did not pass to LDIII.

Even assuming LDIII did not have any rights stemming from the Original Agreement, LDIII argued that the property nevertheless possessed its desired zoning by virtue of the 2017 Mapleton city council decision. Specifically, LDIII contests the validity of that citizen referendum, claiming that it was invalid because the 2017 rezoning was “an individual property zoning decision” and thus not legislative and not subject to a referendum. The court found that site-specific zoning is legislative because it “requires the weighing of broad, competing policy considerations and results in a law of general applicability”, the “chief hallmarks of legislative action.” As such, the court affirmed the district court’s holding that the referendum was valid, and affirmed the district court’s entry of summary judgment in favor of Mapleton.

LD III LLC, Appellant, v. Mapleton City, 2020 WL 1295083 (UT App. 3/19/2020)