Horizontal and Vertical Privity of Estate
contract benefits are not traditionally transferable, privity of estate is
necessary to assign benefits and burdens of covenants to future purchasers.
There are two types of privity of estate: horizontal and vertical. Horizontal
privity of estate refers to the original grantor and grantee of the promise.
Where A and B own Whiteacre and Blackacre,
respectively, and A promises not to build a factory on Blackacre
in return for a payment by B, no privity of estate is formed. Instead, this is
only privity of contract. If the jurisdiction requires horizontal privity of
estate for real covenants to run, future purchasers of Whiteacre
would not be bound by A’s promise. However, if A’s
promise was found in a conveyance from B to A of Whiteacre,
horizontal privity of estate would be present. If the jurisdiction does not
require horizontal privity of estate, privity of contract is sufficient to allow
a covenant to run.
Regarding vertical privity of estate, all jurisdictions require it allow a covenant to run with the land. My question here is whether a covenant has to be in the deed to future purchasers for the covenant to run. Is it sufficient that A and B created an enforceable covenant, or does the covenant need to be asserted by A when he sells Whiteacre to C?
Karjala Response 3-30-05