October 22, 2009
Page 1
October 22, 2009
Dear Sir:
You have the following question: Are the deed restrictions that apply to the city’s industrial park
enforceable?
The answer is yes.
Under the facts related to me that are supported by recorded deeds, the city agreed to certain
deed restrictions in the industrial park. Some of those deed restrictions block an industry from
locating in the industrial park.
I have done what I think is exhaustive nationwide research on your question. I find no Tennessee
cases, or cases in other jurisdictions, that support the proposition that the deed restrictions to which
your question applies were illegally established or can be removed on the initiative of the city.
One case, Kaplan v. City of Huntington Woods, 99 N.W.2d 514 (Mich. 1959), held that a city
could not enter into a restrictive covenant agreement with respect to several lots it owned where the
restrictions were not supported by consideration. The “imposition of a restriction is the loss of the
use of valuable property rights....” reasoned the court. [At 517] However, in that case the city
charter contained some restrictions on the sale of city property that the city did not follow when it
entered into the restrictive covenants. In overturning the restrictive covenants, the Court declared
that they reflected either a sale or gift of city property, the former of which required the city to
comply with charter requirements governing the sale of city property, the latter of which was illegal
(as an aid to private enterprise that did not serve a public purpose in that case).
But there are no general law requirements, no city charter requirements, nor even municipal code
requirements, governing the sale of city property by your City. In addition, the Deed of Correction
October 22, 2009
Page 2
executed by the city and the County Committee for Industry, Inc., cites as consideration for the
restrictive covenants “said Government Grant....” which was undoubtedly sufficient consideration to
support the restrictive covenants. Likewise, the restrictive covenants undoubtedly serve a public
purpose.
I understand that restrictive covenants are common for industrial parks. That makes sense,
considering that even industrial parks, and both their present and prospective tenants, want long
term assurance of what kind of industries can (and cannot) be their neighbors in those parks.
Sincerely,
Sidney D. Hemsley
Senior Law Consultant
SDH/