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November 21, 2018

Covenants VS Conditions

A covenant is a promise to do something (as in a covenant of quiet enjoyment in a deed), whereas a condition is a contingency that must be met, otherwise a particular property right could be gained or lost.

Covenant

A covenant is an agreement or promise between two or more parties in which they pledge to perform (or not perform) specified acts on a property; or a written agreement that specifies certain uses or nonuses of the property. Covenants are found in real estate documents such as leases, mortgages, contracts for deed and deeds. Damages may be claimed for breach of a covenant.

Covenants found in warranty deeds (general and special) are promises made by the grantor, binding both the grantor and the grantor’s heirs and assigns, warranting that the title is of a certain character and that if the title should be found to be not of that character, the grantor or heirs will compensate the grantee for any loss suffered. In many areas, covenants are implied by use of certain language in a deed, such as “convey and warrant,” “warrant generally” or “warrant specially.”

Covenants are unconditional promises contained in contracts, the breach of which would entitle a person to damages. Conditions, on the other hand, are contingencies, qualifications or occurrences upon which an estate or property right (like a fee simple) would be gained or lost. Covenants are indicated by words such as promise, undertake, agree; conditions are indicated by words such as if, when, unless and provided. Because conditions are limitations only and do not create obligations, failure of the condition to occur will not entitle either party to damages against the other party.

Conditions

Conditions may be either precedent or subsequent. A condition precedent must happen or be performed before a right or estate is gained; a condition subsequent causes a right to be lost or an estate to be terminated upon its occurrence.

For example, a lease may contain covenants to repair, pay taxes and assessments or pay rent. If the tenant breaches a covenant, the landlord may sue the tenant for damages. If the lease contains a certain condition and the tenant breaches the condition, then his or her leasehold interest will be terminated. Thus, a commercial lease often contains a condition in a defeasance clause that the tenant will forfeit his or her lease upon the tenant’s being declared bankrupt or upon illegal use of the premises.

Promises may be both conditions and covenants. For example, the concurrent conditions found in contracts for sale are also covenants. The delivery of the deed by the seller and the payment of the purchase price by the buyer are concurrent conditions; also, they are covenants. Thus, the buyer could sue the defaulting seller for damages only after the buyer met the condition of tendering performance (by placing the purchase money into escrow).

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