What constitutes building area under restrictive covenants? UDAK Properties v. Canyon Creek Explained

In UDAK Properties v. Canyon Creek, the Utah Court of Appeals addressed a critical question about interpreting restrictive covenants: when a covenant references “Building Area,” does it mean the maximum allowable development or the actual constructed space?

Background and Facts

A 1999 declaration governing a Spanish Fork shopping center defined “Responsible Owner” as an owner of parcels with at least 40,000 square feet of combined Building Area. UDAK Properties owned five parcels that could be developed into a combined 42,945 square feet under the covenant’s terms, but the actual buildings constructed totaled only 35,808 square feet. Canyon Creek Commercial Center disputed UDAK’s status as a Responsible Owner, arguing the definition required actual rather than allowable floor area.

Key Legal Issues

The primary issue was whether the restrictive covenant was ambiguous regarding the meaning of “Building Area.” The district court initially found ambiguity and conducted a bench trial, but the Court of Appeals reviewed the contract interpretation question for correctness without deference to the trial court’s ambiguity finding.

Court’s Analysis and Holding

The Court of Appeals concluded the declaration was unambiguous. The court noted that the covenant separately defined “Building” as structures to be constructed within “Building Areas,” indicating these terms had distinct meanings. Crucially, the Responsible Owner provision distinguished between owners and lessees: lessees needed “a Building constructed thereon” of 40,000 square feet, while owners needed parcels “with a combined Building Area” of that size. This distinction demonstrated that Building Area referred to maximum allowable development, not actual construction.

Practice Implications

This decision emphasizes the importance of precise drafting in restrictive covenants. When covenants use different defined terms, courts will give each term distinct meaning rather than treating them as synonymous. The ruling also demonstrates that development-based ownership rights typically reference maximum allowable development to avoid penalizing owners who construct smaller buildings than permitted. For practitioners, this case reinforces that contract interpretation begins with the plain language of defined terms, and courts will harmonize provisions to give effect to all contractual language.