For generations, people have long debated: Is a taco a sandwich? In a recent decision, a judge in Fort Wayne, Indiana, stepped in and ruled that a taco is, in fact, a sandwich. While this particular case attracted much media attention as a zoning dispute, this seemingly trivial determination actually arises from a complex legal dispute involving restrictive covenants. This article explores the nature of restrictive covenants and their application, using this case as a focal point.
Let’s unwrap this legal burrito.
Restrictive covenants
A restrictive covenant is a condition of a contract that limits the activities of one party. These covenants prevail in real estate and commercial leases and serve to maintain certain standards or restrictions on the use of the property. For example, homeowners may be required to keep their improvements painted a specific color or only use certain materials to maintain the aesthetics of the neighborhood. Businesses may also face restrictions on the type of signage permitted or be forced to insert certain terms into all commercial leases, such as minimum lease durations, to ensure stability and predictability.
Restrictive covenants can apply to any type of property, but are particularly common in shopping centers or shopping arcades. In these contexts, major tenants or property owners seek to avoid direct competition by imposing restrictions and allowing non-competing companies to occupy other spaces. These agreements bind those who have knowledge of them, and whether the conduct constitutes a breach of the agreement depends on the specific wording and the circumstances of each case.
Although enforceable, restrictive covenants are often considered unfavorable because they can inhibit the free marketing of land. Courts usually interpret these agreements as narrowly as possible to balance the intention of the parties with the principle of free use of land. Remedies for violating a restrictive covenant may include monetary damages or injunctive relief. Monetary damages may be calculated based on the difference in market value or the anticipated loss of sales due to the breach. Injunctive relief, which requires a party to cease certain actions, is available for express agreements, but is subject to strict conditions.
Quintana v. Fort Wayne Plan Commission
The recent case Quintana v. The Fort Wayne Plan Commission provides a practical example of restrictive covenants in action. In this case, a developer sought to rezone a commercial development from single-family (R1) to limited commercial (C2). To obtain approval from a nearby association, the developer accepted private agreements enforceable by the association. These agreements specified that the development could house a sandwich bar-style restaurant whose primary business is selling ‘made-to-order’ or ‘subway-style’ sandwiches (e.g. ‘Subway’ or ‘Jimmy John’s’), excluding traditional quick-service sandwiches. food (e.g. ‘McDonald’s’, ‘Arby’s’, ‘Wendy’s’). No outdoor seating, drive-thru service or alcohol sales were permitted.
The developer ultimately decided to lease the space to a Mexican restaurant chain he owned. Although the association agreed, they sought to modify the agreement to explicitly allow the restaurant. The Plan Commission, however, refused, stating that they approve general uses, not specific business plans. The Plan Commission further determined that the Mexican restaurant was not permitted under existing restrictions. The judge agreed that the Plan Commission did not need to consider the amendment, but ultimately ruled that the amendment was unnecessary and determined that the Mexican restaurant’s made-to-order tacos and burritos fell within the agreement’s description of sandwiches.
Learned lessons
This case highlights several vital principles when drafting restrictive covenants. First of all, it is essential to draft clear and unambiguous clauses. Ambiguity in restrictive covenants can lead to judicial interpretation, often resulting in the strictest possible interpretation of the covenant. Judges will consider the intent of the parties at the time the contract was formed, based primarily on the language of the agreement. If the language is ambiguous, courts will examine extrinsic evidence and interpret ambiguity against the party benefiting from the restriction. This approach can lead to inconsistent rulings across jurisdictions; A Massachusetts court, for example, ruled that tacos are not sandwiches.
Associations that enter into restrictive covenants should ensure that such covenants are recorded in a declaration or similar agreement to effectively bind all parties. Landlords should also ensure that restrictive covenants are included in their leases and actively enforced. Tenants concerned about competitors may consider conducting a title search to identify applicable restrictions before signing a lease. Alternatively, tenants can try to negotiate lease clauses that ensure the intended use is permitted. While landlords may resist such broad clauses, negotiations can at least clarify whether the landlord has granted other tenants conflicting restrictive covenants.
Conclusion
The question of whether a taco is a sandwich may seem trivial, but it underscores the importance of precise language in restrictive covenants. Regardless of jurisdiction, a well-drafted restrictive covenant should clearly reflect the parties’ intent. In real estate law, precision and clarity are paramount. Here, the developer owned other Mexican restaurants, so if this style was even a possible intended use, the restrictive covenant could have been drafted with unambiguous language that would have expressly permitted it. Therefore, it is imperative that drafters meticulously articulate their restrictions to avoid unintended legal consequences. Warning: Editor beware: Be deliberate and precise in your writing to avoid unforeseen complications.
(See source.)
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