Saturday, May 5, 2012

Privity (Horizontal and Vertical)

The following question was asked by a reader of the blog:

"Can you please explain to me what vertical and horizontal privity is in regards to covenants?? I have read so many horn books on this subject and Bar Bri and am still confused!!!"

Response:

Before discussing how these concepts play out when analyzing covenants, it's important to understand what the differences are between the types of privity.

First, a real covenant is a promise made by one to another either to do something on the land (for example, build a fence), or to refrain from doing something on the land (for example, not to build a multi-family dwelling). Let's assume that X grants land to Y, and within the deed between X and Y there is a covenant by which Y promises to perform an act on that land.

Horizontal privity simply means that at the time that X and Y entered into the covenant (the promise given by Y to X, in the X/Y deed), the two must have shared some interest in the land independent of that covenant. In this case, they did, as X was granting land to Y, so they shared a grantor/grantee relationship, and therefore, there was horizontal privity between them. Other relationships, common on the MBE, that might be entered into which would form a basis for horizontal privity are landlord/tenant, and mortgagor/mortgagee.

Vertical privity, on the other hand, concerns successors in interest, rather than the two original parties. So, let's assume the same facts as above. X is a grantor who grants land to Y, and Y covenants to perform an act on that land. Y then assigns his entire interest in the land to Z. In this case, as stated earlier, X and Y have horizontal privity, and now Y and Z have vertical privity. The key point here is that Z holds the entire durational interest of Y after Y assigned his interest to Z. That is a necessary requirement for vertical privity. Z will be required to perform the act that Y had covenanted to perform.

These concepts stated above will help you in determining whether covenants run with the land. In our situation above, because Y is obligated to perform an act, he has the burden of the covenant, while X has the benefit of the covenant. If X transfers that benefit to another (let's say to W), the benefit of that covenant will transfer to W (so that W can enforce it against Y) regardless as to whether there was horizontal privity between X and Y. Vertical privity between X and W, however, is required for the benefit to run.

On the other hand, for the burden to run to the successor of Y (again let's call the successor W), there had to have been both horizontal privity between X and Y, and vertical privity between Y and W.



19 comments:

  1. Can you explain what you mean by "entire durational interest" required for vertical privity? Thanks!

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  2. Sure. What this means essentially is that you are giving away everything you have, but what you have is measured by the period of possession that was granted to you.

    As an example, assume you are granted a fee simple absolute in Blackacre. A fee simple absolute lasts indefinitely, so if you grant to another a life estate in Blackacre, you would not be granting the entire durational interest, as a life estate does not last indefinitely (it ends at your death).

    If you have a fee simple, you must grant a fee simple.

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  3. Excellent article and laconic analysis, thank you! But what if the burdened party by the covenant grants his successor a life estate in lieu of a fee simple, hence absence of vertical privity, i.e. Y granted Z less than what he possesses. Would X be left with no remedy for the duration of whatever Z possesses the property?

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  4. Between x and z, that's correct. Because there would be no vertical privity, the burden of the covenant would not "run" to z and so there would be no basis for a remedy against z from x. But because only some of y's interest had been transferred to z, y still retained an interest, and x would have a basis for suing y either on the theory that they are still in privity of contract, or on a theory that y has retained a future interest in the property (a reversion in the case of a life estate). So x would not be entirely without a remedy, but the key to remember is that z is not obligated to satisfy the covenant unless all elements have been satisfied including vertical privity b/w y and z (as opposed to the benefit of a covenant running with the land which does not require vertical privity).

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  5. Do u tutor?
    Are you in Los Angeles?

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  6. I tutor students in all states for the MBE and MEE, and state specific NY and Florida......

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  7. Great summation. Thank you for your post.

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  8. Great summation. Thank you for your post.

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  9. I'm studying for HI in Feb 2016. Had to check the internet because the material from Themis isn't clear. Thank you for this.

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  10. This was clear and very helpful, unlike my big bar review course on this topic.

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  11. I've been reading this Barbri outline for 45 minutes with scratch paper, diagrams the whole kit and ka-boodle. Your explanation helped me understand privity in one read-through. THANK YOU!

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  12. Ditto to what was said above. This was the most transparent explanation of this idea I have found (including BB & Kap). thankyouthankyouthankyou

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  13. GREAT STUFF! Additional question though, IF A sells property to B and includes a real covenant restricting the sale of weed then later on A sells his property in its entirety to C. Then B sells his property in its entirety to D. Would the burden of not being able to sell weed run to D? THANKS!

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  14. The key to such questions (especially on an essay) is to just ensure that the requirements for the burden of covenants "running with the land" have been satisfied. The five requirements are intent, notice, touch and concern the land, horizontal privity and vertical privity. You would want to examine the facts specifically in any hypothetical to ensure that the requirements are met, and in your hypo they look to have been satisfied. In which case, yes, D would be burdened!

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