Leases of two improved properties in Baltimore City included agreements requiring their common lessee to restore the demised premises to certain conditions prior to the termination of the leases. Before the leases had terminated, Baltimore City acquired both properties by “quick-take” condemnation. The Circuit Court for Baltimore City concluded that the lessee’s restoration obligations were not compensable property rights and excluded evidence of the substantial increase in value of the properties attributable to the agreements. Because we shall hold that the restoration obligations were covenants running with the land, and property interests for which compensation must be paid, we shall reverse.
I. Background
For simplicity’s sake, we shall treat appellant, Mercantile-Safe Deposit & Trust Company (Mercantile), as the property owner/lessor. 1 The Mayor and City Council of Baltimore (the City) is appellee. The properties here involved are 202 North Howard Street and 308 West Lexington Street. At one time, these properties existed as separate and distinct parcels, each containing its own improvements. Years ago, however, these properties, along with other lots, were leased to Hochschild, Kohn & Co., Incorporated (Lessee), 2 which combined all of them into a single, large department store complex, removing most, if not all, of the features that had once distinguished the separate properties.
*630 On 20 April 1962 Mercantile and Lessee entered into extensions of two earlier leases covering 202 North Howard Street and 308 West Lexington Street. By the terms of the 1962 documents, each of the earlier leases was extended for an additional period of 16 years, beginning on 1 September 1965 and ending on 31 August 1981. Each new lease contained the following provision:
“7. AND IT IS FURTHER COVENANTED AND AGREED by and between [Mercantile] and Lessee for themselves and their respective heirs, personal representatives, successors and assigns, as follows:
* * * *
“(f) That not less than ninety (90) days prior to the termination of this lease, or any extension thereof, the Lessee shall, at its own expense, ... commence so to restore the premises demised hereunder as to render them capable of occupancy, lease, or sale for mercantile purposes, as a separate and distinct structure by erecting or restoring walls, ... (such walls to be erected and constructed on the boundaries of said lot established by the record title thereof); interior supports, entrance doors, and show windows; floors, stairways, and fire escapes; and plumbing, heating and electrical installations ____ In the event that such restoration is not completed within said period of ninety (90) days, whether such delay is or is not attributable to the fault of the Lessee, the Lessee agrees to make appropriate payment to [Mercantile], such payment to be calculated in the same manner as the rent and additional rent reserved hereunder, and to cover the period from the termination of this lease, to the time when such restoration has been completed____
“Lessee, in making restoration, shall have the right and option of either converting and restoring the existing structure, or constructing a new structure which shall be a building limited in height to three stories____”
In November 1980, some nine months before the expiration of the terms of the extended leases, the City advised *631 Mercantile of its intention to acquire the properties for urban renewal purposes. This advice indicated that “it will be necessary to have all properties acquired and vacated by May 1, 1981.” A similar notice was sent to Lessee.
May 1981 came and went. The City took no action to condemn prior to that date, and Lessee continued to hold the premises. On 12 June Mercantile wrote Lessee, reminding it of its obligations under paragraph 7(f) of the leases. Five days after that, the City filed “quick-take” condemnation suits as to each property. The two actions were consolidated.
In the course of preparing for trial, appraisers for both Mercantile and the City agreed that if the restoration obligations of Lessee were compensable rights, they added materially to the value of the property. There was disagreement, however, as to whether the obligations constituted compensable rights. This issue was presented to the trial court by a motion in limine on behalf of Mercantile and by a motion for separate trial on an issue of law (Md. Rule 2-502) by the City. The court (Hammerman, C.J.) denied Mercantile’s motion and granted the City’s. The effect of this was to exclude from evidence valuation testimony relying on the restoration agreements. Mercantile thereupon stipulated that the value of 202 North Howard Street was $127,300 without consideration of the restoration obligations. As to 308 West Lexington Street, the City’s appraiser testified that its value (ignoring the obligations) was $135,000. Inquisitions were duly entered, and Mercantile appealed to the Court of Special Appeals. We granted certiorari while the appeals were still pending in that court.
II. Covenants running with the land
The principal bone of contention here is whether the restoration obligations were covenants running with the land or, as the City contends and as Chief Judge Hammer-man held, merely personal to Lessee. The parties view determination of the appropriate category as pivotal to the question of compensability. We agree, and, before address *632 ing the compensation dimension of this dispute, proceed directly to that contention.
The Court of Special Appeals has recently had occasion to consider the nature of covenants running with the land. In
Gallagher v. Bell,
A. Touch and concern
As we have already noted, this Court has explained that “a covenant to run with the land must extend to the land, so that the thing required to be done will affect the quality, value, or mode of enjoying the estate conveyed, and thus constitute a condition annexed, or appurtenant to it____”
Glenn,
Whether a covenant touches and concerns the land may be considered in terms of the burdens or benefits it imposes. Thus, the test is met if the performance of the covenant will “tend necessarily to enhance [the] value [of the land]
...,” Whalen,
“If the covenantor’s legal interest in land is rendered less valuable by the covenant’s performance, then the burden of the covenant satisfies the requirement that the covenant touch and concern the land. If, on the other hand, the covenantee’s legal interest in land is rendered more valuable by the covenant’s performance, then the benefit of the covenant satisfies the requirement that the covenant touch and concern land.”
Powell, supra, § 673[2], at 60-41. Another author explains:
“Ordinarily, ... a covenant is regarded as touching and concerning the land if it is of value to the covenantee by reason of his occupation of the land or by reason of an easement which he has in the land, or if it is a burden on the covenantor by reason of his occupation of the land.”
3 H. Tiffany, The Law of Real Property, § 854, p. 455 (3d ed. 1939). See also Restatement of Property § 537 (1944).
It will be noted that the “benefit” and “burden” tests are stated in the alternative; if either is met, the covenant may be one running with the land. This analysis may be a complex one when the undertaking is contained in a fee *634 simple conveyance so that the two different tracts of land are involved. It is less difficult where, as here (and as in Spencer’s Case), a lease is involved, and consequently, only a single tract with two different estates in it. See II American Law of Property, supra, § 9.13.
Turning to the Powell/Bigelow formulation, it appears that both aspects of the “touch and concern” test are present here. The requirement of performance of the restoration agreements certainly rendered the covenantor’s (Lessee’s) interest in the land less valuable; that interest was encumbered by an obligation to restore the two properties to something akin to their original conditions, a substantial burden. As to the covenantee (Mercantile), that obligation surely rendered its interest in the land more valuable. The excluded testimony of the appraisers so concluded, and it seems plain enough that Mercantile’s contractual right to get the properties back in restored form, instead of as an undifferentiated part of a vacated department store, enhanced the value of the properties.
The City nevertheless argues that these covenants could not run with the land because they dealt with something not in
esse
— future restoration of the properties. This contention is based on
Spencer’s Case.
The agreement there was to build a brick wall. As our predecessors read that opinion in
Lynn v. Mount Savage Iron Co.,
“1st. That when the covenant extends to a thing in esse, parcel of the demise, the thing to be done by force of the covenant is in a manner annexed and appurtenant to the thing demised, and shall run with the land, and shall bind the assignee, although he be not bound by express words; as if the lessee covenant to repair the houses, this is parcel of the contract, and extends to the supporting of the thing demised; but, because the covenant in that case was in respect of a thing which was not in esse at the time of the demise made, but to be newly built after, and therefore bound only the covenantor, his executors or *635 administrators, and not the assignee, the covenant did not, by the law, annex. 2nd. But if the lessee had covenanted for himself and his assigns, that they would make a new wall upon some part of the thing demised, that forasmuch as it is to be done upon the land demised, that it should bind the assignee; for although the covenant doth extend to a thing to be newly made, yet it is to be made upon the thing demised, and the assignee is to take the benefit of it, and therefore shall bind the assignee by express words [emphasis in original].”
In
Lynn,
the covenant to erect wharves and other improvements clearly referred to things not in
esse
and since it did not purport to bind the covenantor’s assigns, the Court held that it did not run with the land. On similar facts the same result was reached in
Dawson v. Western Md. R. Co.,
On the other hand, in
Whalen,
The Maryland cases, therefore, give critical effect to the presence or absence of language binding successors and assigns. If these words are present, as they are here, the covenant is one running with the land or the functional
*636
equivalent thereof. That is, when the performance of the covenant touches and concerns the land within the meaning of the “benefit or burden” standard, it is deemed one running with the land, even when it deals with something not in
esse,
when the agreement expressly binds successors and assigns. Indeed, this reasoning is entirely consistent with the majority American view that makes no distinction between affirmative and restrictive covenants for the purpose of determining whether a covenant runs with the land. It is well established that an affirmative covenant, which imposes a burden on the covenantor for the performance of some future act, may be a covenant running with the land and an interest in real property.
See Barron v. Whiteside,
In the present case, the restoration agreements are affirmative covenants, for they impose on the covenantor the future obligation to restore the altered premises. That the covenants are to be performed in the future cannot, alone, defeat their characterization as covenants running with the land. The restoration agreements meet the “touch and concern” test; they are to be performed on the very land demised, they relate to the physical condition of that land; they burden the covenantor and benefit the covenantee, and they bind successors and assigns.
Thus, they are covenants running with the land if the other elements of such a covenant exist. As we have seen, *637 two of those other elements, privity and the existence of a written agreement, are not at issue here. The remaining element, the intent of the parties, is, however, a disputed issue, the resolution of which depends heavily on the “successors and assigns” language. We now turn to the question of intent.
B. Intent
A covenant that touches and concerns the land may be prevented from running with the land if the parties indicate an intent that it not do so. 3 Tiffany,
supra,
§ 854, p. 461.
See Gnau v. Kinlein,
Did Mercantile and Lessee intend these covenants to run with the land? The nature of the covenant strongly indicates they did. The agreements to restore in these long-term leases would be of little value to Mercantile if they *638 were only personal to Hochschild’s, the original lessee, and not binding on a successor in interest such as Supermarkets General. Moreover, the leases expressly bind the successors and assigns of the parties. That in itself is “strong evidence of the devolutive intent.” Powell, supra, § 673[2], at 60-51. Spencer’s Case supports this view, as do such Maryland decisions as Linthicum, Silver, Whalen, Dawson, and Lynn.
It is true that in
Union Trust Co. v. Rosenburg,
The facts of
Rosenburg
are instructive. There, a mortgage provided that “ ‘the mortgagors, their heirs, successors or assigns, shall have possession of the property, upon paying in the meantime all taxes and assessments,’ and other specified charges, which taxes and assessments and other specified charges ‘the said mortgagors covenant to pay when legally due.’ ”
“[I]t would be an illogical conclusion to hold that it was the intention of the original mortgagors to provide that their heirs, successors, or assigns should come into possession of the property and enjoy the benefit of the emoluments accruing therefrom, without at the same time incurring the obligations incident to its maintenance; or, stated differently, that it was the intention of the mortgagors to assume the whole obligation of the pay *639 ment of taxes and charges, regardless of the passage of title in the mortgaged property to others. It might be added that it would be likewise illogical to conclude a similar intention on the part of the mortgagees, for the obvious reason that the covenant to pay, in itself, is dependent upon the financial responsibility of the covenantor, and that the passing of his title to the successor would correspondingly weaken and in many cases destroy the security of the covenantee, if the covenant did not follow the property.”
Id.
at 416-17,
Rosenburg stands for the proposition that intent to make a covenant run with the land may exist despite the failure to include in it a reference to the covenantor’s assigns. It does not hold that the use of the word “assigns” is not strong and important evidence of such an intent. On the contrary, use of that word is, under the Maryland cases, virtually conclusive evidence of intent that the covenant run with the land, absent specific language to the contrary.
Moreover, the reasoning of Rosenburg is applicable to the covenants before us. It would be illogical to conclude that Lessee, who had the benefit of including the leased properties within its department store complex, did not intend to incur, for itself and its successors, the obligations of the covenants. And it would be equally illogical to conclude that Mercantile, which had leased two improved lots, did not intend the obligation to restore to follow the property, so that restoration would be required at the end of the lease, regardless of who was then the tenant.
Looking to the documents before us, as the Rosenburg court did, and finding no evidence of contrary intent in the record, we hold that the parties intended the restoration agreements to run with the land. Since they meet both the “touch and concern” and the “intent” factors, we hold that these agreements are covenants running with the land.
That conclusion, however, does not end our inquiry, for Article III, § 40, of the Maryland Constitution provides: *640 “The General Assembly shall enact no Law authorizing private property, to be taken for public use, without just compensation____” 3 We must, therefore, determine whether the restoration agreements, being covenants running with the land, are also compensable property in a constitutional sense.
It has been broadly stated that “[t]he constitutional provision is addressed to every sort of interest the citizen may possess.”
United States v. General Motors Corp.,
Thus,
De Lauder
held that an easement for ingress and egress is compensable property. So is a scenic easement,
Hardesty v. State Roads Com’n,
Indeed, the majority rule in the United States is that a restrictive covenant running with the land is a compensable property right for condemnation purposes. Nichols,
The Law of Eminent Domain
§ 6.16 (3d ed. 1985).
And see
II
American Law of Property
§ 9.40 (1952), and
Restatement of Property
§ 566 (1944). Both the majority and minority views are reviewed in
Washington Sub. San. Com’n v. Frankel,
The view that covenants running with the land are indeed property interests is entirely consistent with Maryland decisions. Over one hundred twenty years ago our predecessors explained that a covenant running with the land is one that “must extend to the land, so that the thing required to be done will affect the quality, value, or mode of enjoying the estate conveyed, and thus constitute a condition annexed, or appurtenant to it____”
Glenn v. Canby,
We have no difficulty, therefore, in concluding that a covenant running with the land ordinarily is a compensable property interest in the condemnation context, at least to the extent it adds measurable value to the land to which it is attached. Indeed, the City virtually concedes as much. Both in the trial court and before us, the City said it had “no quarrel” with the holding in
Frankel.
E. 124; City’s Brief at 12. That holding was that a restrictive covenant was a compensable property interest.
III. The City’s Remaining Contentions
The City advances two other reasons to support its view that Mercantile should not be compensated for the enhanced value of the properties produced by the covenants. The first is that it did not condemn the leasehold interest; hence it did not acquire the covenants. Those covenants were mere contractual expectations, the loss of which constituted non-compensable consequential damages. The second is that because the restoration covenants were in default, Mercantile cannot recover for their loss.
A. No taking
The City posits that “[i]t is settled law that in the absence of specific statutory mandate, compensation under the Fifth Amendment may be recovered only for property taken and not for incidental or consequential losses, the rationale being that the sovereign need only pay for what it actually takes rather than for all that the owner has lost.”
R.J. Widen Co. v. United States,
*643
We need not discuss the circumstances under which what may be termed “consequential” damages are recoverable in a condemnation case,
Brannon v. State Roads Commission,
In
Widen
the taking of real estate and water rights caused a tannery to lose future profits and business expectations. Those profits and expectations had not, of course, been appropriated by the government and no compensation for them was allowed.
Omnia Commercial Co. v. United States,
Long Island Water Supply Co. v. Brooklyn,
Omnia
points out that “[i]f ... a contract or other property is
taken
for public use, the Government is liable____”
The restoration covenants, thus, were not mere future business expectations. They were interests in the property itself. When the City condemned the property, and with it the covenants, Mercantile became entitled to compensation for any value they added to the land.
*645 B. Default
As we noted early on, the leases before us were to expire on 31 August 1981. The restoration covenants required Lessee to commence restoration at least 90 days prior to termination. On 12 June, within that period, Mercantile reminded Lessee of its restoration obligation. But when the City filed its condemnation proceedings on 17 June, nothing had been done in that regard. The City succeeded in convincing the trial judge that because of this the covenants were in “default” and thus not compensable.
Just how this “default” should produce that result is somewhat mysterious, since the City cites no authority to support its conclusion to this effect. We are left to wonder whether it relies on some notion of waiver or estoppel, or whether it thinks that the Lessee’s possible breach of the covenants (possibly acquiesced in by Mercantile) would have precluded Mercantile from enforcing them, had the condemnation not intervened. The judge below made no factual findings on any of those matters, nor does the record contain evidence that would have permitted him to do so.
It may be, as the trial judge hypothesized, that a potential buyer of the land would have been concerned about the value of the covenants because of this “default.” The trial judge felt “it’s highly speculative and was highly speculative on June 17 just what this contractual right really amounted to and how much it could have been worth____” But all of that goes to the question of valuation. And the factors present here would not seem to be more “speculative” than the probability that property might be used for subdivision at a reasonable time in the future, or that imminent zoning changes might affect the value of land. Fact-finders were permitted to consider such aspects of value in
Lustine v. State Roads Comm,.,
We hold that the evidence was insufficient as a matter of law to support the trial judge’s conclusion that the cove *646 nants were in default, and the resulting exclusion of valuation evidence on the basis of the asserted default was error.
IV. Summary
The restoration covenants are covenants running with the land. As such, they are property interests in the land itself. When the City condemned the land it took the property interests represented by the covenants. To the extent the covenants enhanced the value of the land, they are compensable. The trial court erred when it excluded evidence of that enhanced value.
JUDGMENTS REVERSED. CASES REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY APPELLEE.
Notes
. Mercantile had certain interests in the properties as trustee. There were other owners as well, and they also tire appellants here. Mercantile, it seems, managed the properties for all of the owners.
. By the time the City decided to acquire the properties, the lessee was Hochschild’s successor in interest, Supermarkets General Corporation. We include that corporation within the designation “Lessee.”
. The fifth amendment to the United States Constitution similarly prohibits the taking of “private property for public use, without just compensation.” The fifth amendment protection is applicable to the states through the fourteenth amendment,
Chicago, Burlington & Quincy R’d v. Chicago,
. That, in the present case, the restoration agreements are affirmative covenants running with the land, imposing on the covenantor the burden to restore the altered premises, is of no consequence to our conclusion. The restoration agreements represent property in a constitutional sense for which there must be just compensation.
See Adaman Mutual Water Co. v. United States,