Tuesday, March 1, 2022


              In 2007 a residence was built and sold by US Home Corp to the original purchasers. The Deed contained a provision requiring mediation, and if not resolved, arbitration. Also contained in the Deed were covenants binding successors to the original buyers.

            The covenants were intended to “run with the land,” as stated in the Deed. That Deed was then recorded in the Official records of Lee County, Florida.

            The original purchasers sold the property in 2010 to Shane Hayslip. Shane’s deed states that the property is conveyed subject to all restrictions.

            Shane filed a lawsuit against US Home Corp in 2017, alleging that the stucco was improperly installed when the residence was built. The magistrate granted US Home’s request to compel arbitration. The circuit court entered an Order adopting the magistrate’s report and recommendation.

            Shane challenged the Order. On appeal, a decision was rendered that a valid arbitration agreement exists in the 2007 Deed which was a covenant “running with the land,” and as a consequence the courthouse doors were closed to Shane. The decision of the circuit court was affirmed.

            Shane could arbitrate. But not litigate.

            The district court then certified the issue to the Supreme Court of Florida as one of great importance.

            The Supreme Court found that real estate covenants are divisible into two major classes: (1) those that “run with the land” and bind the heirs and assigns of the original parties; and (2) personal covenants which bind only the original, contracting parties. As for the former, covenants that “run with the land” must “touch[es] and involve[s] the land.”

            Such covenants must “enhance the value of the property or render[s] it more convenient and beneficial to the owner,” as well as affect its occupation and enjoyment.

            At least in Florida, arbitration “affects the occupation and enjoyment of the house as it dictates the means by which [Shane] must seek to rectify building defects.” As well, the arbitration procedure also affects the “mode of enjoyment of the premises.”

            Because the means of dispute resolution is directly linked to the original contract, the Supreme Court concluded that the arbitration provision is binding on future owners. At least in Florida, arbitration covenants contained in a Deed will be enforced even after the property has been bought and sold more than once.

            US Home Corp wins; Shane Hayslip loses. See Hayslip v. US Home Corporation; Florida Supreme Court, Case No. SC19-1371, January 27, 2022: https://www.floridasupremecourt.org/content/download/824950/opinion/sc19-1371.pdf.

            Lessons / Questions / Observations:

1.      Question. What if this arbitration provision was not contained in the Deed but rather an unrecorded contract between the original parties, which stated that the provisions were binding upon the successors and assigns of the parties. Would Shane still be relegated to only arbitration?

2.      Observation. Does this holding make sense to you; do you agree that a recorded arbitration provision “touches and involves the land,” and “enhances the value of the property or renders it more convenient and beneficial to the owner”? Because I’m struggling with this.

3.      Lesson. All of us in the real estate industry read surveys and title commitments closely, particularly when representing commercial buyers and lenders. Large tenants too. Now add to the must-read list an analysis of all deeds in the chain of title, to determine if covenants have been recorded which may not be identified in the title commitment. Such as mandatory arbitration.

                                                                                                     Stuart A. Lautin, Esq.*



* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization

Licensed in the States of Texas and New York


Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.

* Board

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