Use of commercial real estate in Minnesota may be governed by a zoning laws, law use ordinances and other legal restrictions that restrict the use of the property. Through contract, however, the seller of the real estate can control its use, even after the property is sold.
Real estate transactions include contracts executed by the seller and purchaser. Contracts may contain restrictive covenants that may limit the property’s use. When a covenant is part of this contract, it can govern how the contract is interpreted and how the property may be used. In other words, courts find that these restrictions are enforceable when they are contained in the contract and run with the land.
Restrictive covenants remain in effect if the restriction continues to benefit the seller. Courts in Minnesota have ruled that conditions may change to defeat the restriction on the use of the property. The change must practically destroy the restriction’s use and purpose.
In one case, the United States Court of Appeals upheld a restrictive covenant upon a gas station and convenience store that purchased the property from BP Products North America. The restrictive covenant prohibited the sale of any non-BP petroleum products on the property and was part of the real estate contract.
The restriction was upheld even though BP sold all of its properties, gave up its leases and stopped operating retail operations in the Minnesota county where the gas station was located. Nonetheless, the real estate contract contained the intent that the gas station could only sell BP products for 10 years.
This type of restriction can change under other circumstances where its underlying purpose changed. For example, a restriction on selling food and liquor was eliminated because it was intended to stop competition with a restaurant on an adjoining property and that property was sold.
Parties engaged in commercial real estate transactions should seek prompt legal assistance to assure that real estate contracts reflect their business goals and do not restrict commercial activity. Legal advice can benefit a purchaser in these deals.
Source: FindLaw.com, “Eastling v. BP Products, North America, No. 08-3661 (8th Cir. 2009),” accessed on April 20, 2015