Neponsit Property Owners’ Association v. Emigrant Industrial Savings Bank

In the early 1900s, the Neponsit company sold lots in a residential development. The original deeds required all purchasers of property to pay an annual assessment for the Neponsit company for the maintenance of common facilities such as the local beach & sewer system.

The New York lot that Neponsit originally sold with the restrictive covenant for HOA dues ended up into the hands of the Emigrant bank as a result of a foreclosure.

"The plaintiff, as assignee of Neponsit Realty Company, has brought this action to foreclose a lien upon land which the defendant owns." Justia

Neponsit filed a suit in a New York court because the Emigrant bank refused to pay the HOA fees.

Emigrant bank loses at both the trial court & Appellate Division in New York state.

Is a deed's covenant requiring the original grantee to pay money to a 3rd party (HOA) enforceable against successors in interest?

Does the homeowner association (Neponsit; HOA) have a privity of estate with succeeding owners whose covenants refer to the payment of fees?

Emigrant bank argued that the HOA fees applied to the original owner. The bank was in possession of an unoccupied property as a result of a foreclosure on the previous owners. Thus, the bank didn't want to pay the HOA fees.

A covenant requiring payments of money to the HOA is enforceable to the successors in interest.

The HOA (3rd party) has privity of estate with the bank owning the property at the time of the lawsuit.

The covenant in this case "ran with the land."

2nd, the covenant must "touch & concern the land."

3rd, privity of estate must exist with the burned party.

This decision led to the growth of HOA's throughout the country.