In a recent decision from the Utah Supreme Court, the court clarified an up-til-then opaque aspect of property law. The case is Fort Pierce v. Shakespeare, and it involves a question over the interpretation of CC&Rs ("covenants, conditions, and restrictions") in a newly developing industrial park. A property owner applied to the Board for permission to build a cellphone tower in the industrial park. When the Board denied the proposal, the property owner went ahead anyway with the construction of the cell phone tower. When the Board learned of the insubordination, they brought suit.
The district court held that the Board's denial was "unreasonable and arbitrary" and held that "[t]he tower is approved and allowed to remain." In so holding, the district court presumed that restrictive covenants like CC&Rs are disfavored and should be “strictly construed in favor of the free and unrestricted use of property." On direct appeal to the Utah Supreme Court, the court reversed.
The Utah Supreme Court rejected the strict construction of restrictive covenants and held that "restrictive covenants should be construed under the same principles used to interpret contracts." Fort Pierce v. Shakespeare, 2016 UT 28, ¶ 11. Utah property attorneys, municipal law attorneys, and contract lawyers should read this decision carefully to learn of its implications on their practice. Utah law is now unequivocal in this area: CC&Rs are to be interpreted under the same principles as contracts. Other restrictive covenants are also controlled by contract law.
Next time you draft CC&Rs, remember that they are governed by contract law principles.