Whitinsville Plaza v. Kosteas

Brief Fact Summary. A parcel of land was sold with the restriction that it could not be used for a discount store. The deed said the restriction ran with the land.

Synopsis of Rule of Law. Reasonable covenants to compete may be considered to run with the land when they serve a purpose of facilitating orderly and harmonious development for commercial use.

Facts. Charles Kosteas (Defendant) sells a parcel A to trustees of the 122 Trust (Trust). The deed had numerous restrictions, including one that restricted Defendant from using the abutting land for a discount store that would compete with the discount store Trust intended to build. Defendant was allowed to build a drug store on his retained land. The deed states that the restrictions are covenants running with the land. Trust conveys parcel A to Whitinsville Plaza (Plaintiff). The deed to Plaintiff expressly made Plaza subject to, and gave it the benefit of, the restrictions in Defendant’s deed. Defendant leases its abutting land to CVS for use as a discount department store and pharmacy. Plaintiff sues to enjoin Defendant and CVS from operating a discount store.

Issue. Does a non-competition clause in a deed that puts restrictions on the grantor touch and concern the land?

Held. Yes.
Massachusetts has been practically alone in its position that covenants not to compete do not run with the land. This rule is in need of change. Reasonable anticompetitive covenants are enforceable in most states.
It would be unfair not to enforce the anti-competition clause because Plaintiff was probably paid extra money in return for the restrictions and the restriction was one of the reasons Trust bought the land in the first place.
Reasonable covenants to compete may be considered to run with the land when they serve a purpose of facilitating orderly and harmonious development for commercial use.
An enforceable covenant will be one which is consistent with a reasonable overall purpose to develop real estate for commercial use.

Discussion. In a commercial lease, reasonable anticompetitive covenants are enforceable by and against successors to the original parties.