By Catrina C. Waltz, James L. Windsor, Real Estate Claims & Title Insurance Solutions

This morning, June 6, 2024, the Supreme Court of Virginia issued an important decision concerning the construction and modification of restrictive covenants. In Todd J. Westrick et al. v. Dorcon Group, LLC, available here, the Court strictly construed the language of a restrictive covenant to hold that the plain meaning of the term “modified” does not permit the addition of a new restrictive covenant to an excepted lot.

Berkeley Chase subdivision was created by a “Deed of Subdivision and Imposition of Restrictive Covenants and Road Agreement” in 1981 (the “Deed”). The Deed imposed restrictive covenants on the lots within Berkeley Chase. In particular, the Deed imposed a residential‑use covenant on all lots within the subdivision except lots 5, 21, 22, and 23. Further, the Deed provided that the excepted lots may be used for non-residential purposes as approved by Loudoun County Zoning and Subdivision Ordinances. The Deed also provided that its “restrictions may be excepted, modified, or vacated in whole or in part at any time upon an affirmative vote of the owners of twenty-three (23) lots in said subdivision” (emphasis added).

Lot 5 of Berkley Chase consists of 40 acres and contains historic homes and agricultural buildings. Dorcon Group, LLC (“Dorcon”) purchased Lot 5 on March 4, 2020, intending to open a commercial bed and breakfast and event venue on the property. Following Dorcon’s purchase, relying on their authority to “modify” the Deed, 25 Berkeley Chase lot owners recorded an amended Deed that added a new Paragraph 21. Paragraph 21 included a new restrictive covenant that, subject to a few exceptions, prohibited “[c]ommercial activities on any lot.” It expressly prohibited operating a wedding venue.

After learning of the amendment, Dorcon filed a complaint in the Circuit Court of Loudoun County, seeking declaratory and injunctive relief. The circuit court ruled in favor of the appellants, holding that the new amendment and restrictions were valid because “modify” in the Deed permitted the appellants to change the restrictive covenants. However, the Court of Appeals reversed the circuit court’s decision by applying a narrower interpretation of “modify” to hold that the appellants could not add new restrictions to Lot 5.

The Supreme Court of Virginia affirmed the Court of Appeal’s decision. In analyzing the issue exclusively under the common law of restrictive covenants, the Court noted that restrictive covenants are not favored and should be strictly construed. Further, the Court explained that while restrictive covenants should be ascribed their plain language when they are clear and unambiguous, restrictive covenants must be construed most strictly against the grantor and the person seeking to enforce them.

While the circuit court and the Court of Appeals only focused on the meaning of the term “modify,” the Court emphasized that all of the language of the pertinent provisions in the Deed must be examined. Significantly, the Court explained that, while the provision allowed for modification of “restrictions,” it did not address the modification of exceptions set forth in other provisions in the Deed. Lot 5 was expressly excepted from the original restriction that prohibits commercial activities. Thus, the challenged amendment was an attempt to modify the exception regarding Lot 5, not to modify an existing restriction on Lot 5.

Further, the Court agreed with the Court of Appeals’ definition of “modify,” looking to Black’s Law Dictionary to apply the term most strictly construed against the appellants. The Court thus held that “modify” could not permit such a broad amendment of the restrictive covenants as to add entirely new restrictions to Lot 5.

In conclusion, while recognizing that a restrictive covenant may include a provision establishing a mechanism to modify or terminate the restriction, the Berkley Chase Deed provision authorizing certain modifications did not permit the appellants to “essentially terminate” the exceptions set forth in a different paragraph of the Deed through the imposition of an entirely new restriction on Lot 5.

If you have any questions regarding this significant opinion addressing restrictive covenants, title issues, or questions regarding Virginia real property law in general, please contact Jim Windsor at (757) 873.6308 or jlwindsor@kaufcan.com, or Catrina Waltz at (804) 771.5744 or ccwaltz@kaufcan.com.

The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.