At times, where a developer seeks to obtain an easement from a landowner for the construction of infrastructure or improvements on or adjacent to the landowner’s property, the landowner may request additional consideration to compensate it for the perceived “nuisance” that such infrastructure or improvements may cause. Where a developer contemplates compensating a landowner for the potential creation of a future nuisance, the related and important issue arises of obtaining a release of future damages that, if sued for, would otherwise overlap with the agreed-upon consideration. A developer does not want to pay consideration to compensate a landowner for the developer’s ability to infringe on certain of the landowner’s property rights, just to have the landowner turn around and sue the developer for a nuisance claim based on the infringement – such would undermine the very purpose of the initial agreement. This issue can be resolved by having the landowner enter into a covenant not to sue, which can be party-specific, but can also be recorded in order to bind future landowners. However, a developer must bear in mind that there can be adverse consequences to making these documents – which amount to nuisance settlement agreements – of public record.
In Pennsylvania, in exchange for the consideration paid, the developer should require the landowner to enter into an agreement containing a covenant not to sue. This prevents the landowner from “double recovery” – whereby the consideration to infringe on the landowner’s future rights would then be followed by a recovery of damages based in a suit for those very same issues.
Covenants not to sue, which are often embodied in a party-specific contract, can also be made enforceable against future owners of the land by recording the document containing the covenant not to sue. One of the seminal Pennsylvania cases on this issue is Caplan v. Pittsburgh, 375 Pa. 268 (1953). There, the landowner, Caplan, sued the City of Pittsburgh for damages he claimed he was entitled to by virtue of the City condemning a portion of his land for street widening purposes.
The Supreme Court of Pennsylvania held that the prior owner, Caplan’s father, had waived these very damages for all subsequent owners of this property, by virtue of a covenant not to sue contained in Caplan’s father’s vesting deed. Specifically, the deed stated “THE GRANTEE, or his successors in title hereby covenant and agree that if, at any time in the future, the City of Pittsburgh by proper action condemns for street widening purposes for public use the following part of the above described real estate, no claim for damages will be filed or expected by the above grantee or his successors in title.”
The Court held that this language constituted a present release of all future damages by Caplan’s father, for any damages related to a taking for street widening, which was supported by valuable consideration. By duly recording the instrument, all future title holders were subject to the covenant. The claims sued upon by Caplan were “effectively extinguished, no longer existed” and as a result, judgment in favor of the City was appropriate.
Thus, where a developer provides consideration to a landowner in order to permit nuisance or otherwise actionable use of the landowner’s property, that developer should have the landowner execute an agreement that would be considered a sufficiently broad and clear covenant not to sue, such that a court would without difficulty be able to ascertain the future rights with respect to which the landowner is barred from suing for damages.
While in many instances this sort of covenant-not-to-sue agreement may be most useful if duly recorded, in order to bind future landowners and not just the contracting party, developers should also consider the consequences of placing these agreements of record. If a developer seeking to gain certain rights from a particular landowner intends to have similar, recurring needs in several different locations, recording the covenant not to sue may: (1) build a nuisance case against the developer by implicitly acknowledging that its operations will indeed infringe on landowners’ rights; or (2) arm other landowners with information to leverage for themselves a similar settlement payment, even in cases where those landowners might not have otherwise attempted to extract such a payment. The greater the number of such agreements sought from landowners, the more problematic it may become for the developer if they are placed of record.