Restrictive Covenants on Real Property

In addition to restrictions contained in municipal zoning regulations, landowners, including developers, sometimes place restrictions on the manner in which real property may be used or improved for future owners of the real property.  These restrictions, called “restrictive covenants,” often become relevant when an individual or entity is considering purchasing or selling the property to which these restrictive covenants apply.  A common question is whether the restrictive covenants are enforceable and by whom.

The Wisconsin Court of Appeals recently issued a decision in Buehrens v. Schave, No. 2019AP1649, 2020 WL 5933505 (Ct. App. Oct. 7, 2020), in which it interpreted restrictive covenants in a residential subdivision.  The Court first explained the principles of Wisconsin law applicable to restrictive covenants.  More specifically, public policy in Wisconsin “favors the free and unrestricted use of property.”  As such, “restrictions contained in deeds and in zoning ordinances must be strictly construed to favor unencumbered and free use of property.”  Thus, in order for a restrictive covenant, limiting the use of property, to be enforceable, it “must be expressed in clear, unambiguous, and peremptory terms.”

In interpreting the meaning of restrictive covenants, a Court must look to the words actually used as opposed to one’s subjective intent.  If the intent of the restrictive covenants is clear, based upon the words used, a Court will generally enforce them. If the words are not defined or are ambiguous, however, a Court must apply their ordinary meaning, which can be supplied through dictionary definitions.

In this case, the Court was tasked with interpreting the meaning of the term “garage.”  The restrictive covenant at issue stated, “In addition to the residence, the only other building to be allowed on said premises shall be a garage.”  There were no express limitations regarding the size or structure of the garage.  The defendants in the case, the Schaves, constructed a large metal building, described by the plaintiffs as a “pole barn.”  The plaintiffs, various neighbors of the Schaves, contended that the “pole barn” was not a garage and was therefore prohibited by the restrictive covenants.

The Court sided with the Schaves.  More specifically, the Court determined that the term “garage” was not defined within the restrictive covenants and, as such, turned to its dictionary definition.  It found that the ordinary meaning of a “garage” is that “the building must be used to store vehicles.”  In addition, the Court considered the entirety of the restrictive covenants to determine whether the overall purpose was to prohibit large structures.  Other covenants in the same document provided that trailers and boats must be parked inside the garage, which led the Court to conclude that large garages are permitted.  Another covenant addressed the minimum square footage for homes, but there was no similar size restriction applicable to garages.  The Court noted that the drafters of the covenants could have placed restrictions on the size and structure of the garage (as they did for homes), but failed to do so. 

The Court further reasoned that it must look to the purpose of a restrictive covenant to determine the proper scope.  It explained that the purpose of a garage is to “store vehicles” of varying size and type.  As such, the purpose of a garage is not clearly limited to a particular size or structure.  Thus, the Court sided with the Schaves and dismissed their neighbors’ complaint.

In this case, a group of neighbors attempted to enforce the restrictive covenants attached to their properties.  In other situations, developers retain rights related to enforcement of restrictive covenants until a development is completed.  Once completed, the right to enforce restrictive covenants may pass to a neighborhood association, if one exists, or, as in this case, one or more neighbors may attempt to enforce the restrictive covenants.  In general, the applicable municipality will not enforce private restrictions.

This case is instructive for individuals and entities who are involved in or may become involved in a real property transaction.  For instance, an individual or entity seeking to purchase property for the purpose of development or improvement should closely review any applicable restrictive covenants to gain a better understanding of what restrictions apply.  Also, in some instances, it may be the case that a restrictive covenant, as written, is unenforceable.  In addition, an individual or entity seeking to sell or develop property may wish to impose certain restrictive covenants with the goal of increasing or maintaining property values and consistency within the area which can in return affect the overall marketability of such real property now or into the future.  If that is the case, the restrictive covenants should be carefully drafted in light of Wisconsin law that disfavors restrictions on property.