North Carolina Court Keeps Covenant Clearinghouse Lawsuit Against D.R. Horton Alive

The court’s ruling centers on two critical interpretations of real-property law. First, the judge determined that the North Carolina Transfer Fee Covenant Act, known as Chapter 39A, does not apply to the declaration in question because it was recorded prior to the statute’s July 1, 2010, effective date. By rejecting the applicability of this act, the court stripped away a primary defense used by D.R. Horton to argue for the document's invalidity.

Furthermore, the court scrutinized the procedural legitimacy of the 2012 termination. While D.R. Horton maintained that the declaration was extinguished, the court found merit in the argument that the termination failed to meet the requirement of being made under oath. The judge clarified that a notarized acknowledgment is not automatically synonymous with a sworn statement, allowing Covenant Clearinghouse to press its claim that the termination process was flawed. While the litigation must now incorporate additional interested parties, the court’s refusal to dismiss the case at the pleading stage signals that the merits of the agreement’s enforceability will be resolved in court.