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No Getting Around "No-Build"
by Ron Davis

A prime piece of undeveloped land in Peachtree City, GA, has to sit idle for many more years before its owner can proceed with plans to build a shopping center there.

Thatís because a previous owner of the land imposed a 20-year "no-build" restriction on the property, and Georgiaís courts have upheld that restriction as legal and enforceable.

The property at issue was previously part of a 70-acre commercial site in Peachtree City known as the Kedron Village Shopping Center. Its owner decided to sell certain undeveloped portions of the 70 acres, but in doing so did not want to disturb Kedron Village tenants.

One of those tenants is Kroger Co., which operates a supermarket at the center under a long-term lease. So in selling the unused portions of the shopping center property, the owner included the following provision as part of the sales agreement:

"At such time as Kroger shall no longer have a legal or equitable interest in the shopping center property, the [restrictions of this agreement] shall become null and void and of no further force and effect."

The buyer knew of the no-build restriction, but apparently believed that it was legally unenforceable. He learned how wrong he was when he sued to have the restriction removed.

A Georgia court ruled that the 20-year no-build restriction is a binding agreement "running with the land." The buyer appealed that decision, arguing that the no-build restriction is "ambiguous" and "arbitrary" and, further, that only Kroger can enforce any such agreement.

A Georgia appellate court also ruled that the no-build restriction is legally binding, explaining, "When all documents involved are reviewed, they do not reveal any ambiguity. They indicate that the property is subject to the restriction.... Also, the express terms of the agreement belie the contention that only Kroger can enforce the 20-year no-build restriction. Even assuming that all of the use restrictions set forth in the agreement had been inserted therein at Krogerís request or insistence, that fact does not alter the terms of the agreement." (Sofran v. Peachtree City Holdings, 550 S.E.2d 429 [Ga.App. 2001])

Decision: June 2001
Published: September 2001



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