A North Carolina court has issued a ruling in a property dispute between Covenant Clearinghouse LLC and D.R. Horton, Inc. The case centers around the validity of a Declaration of Covenant related to a real estate development in Guilford County. The court's decision affects the rights of property owners involved in this dispute and clarifies the enforceability of certain property covenants.
The court ruled on June 19, 2026, in the case Covenant Clearinghouse LLC v. D.R. Horton, Inc., docket number 25-CVS-18285. The ruling came after D.R. Horton filed a motion to dismiss the case, which Covenant Clearinghouse initiated in August 2025.
Background
Covenant Clearinghouse LLC is a Nevada limited liability company acting as a trustee for several beneficiaries related to a property in Guilford County, North Carolina. D.R. Horton, a Delaware corporation, is a well-known real estate developer. The dispute arose over a Declaration of Covenant recorded in 2010, which established a capital recovery fee of 1% on property sales for 99 years to help developers recoup costs.
The Declaration was originally established by John W. Johnson, Jr. and Billie Johnson, who later recorded a Termination of the Declaration in 2012. Covenant Clearinghouse claims that the Termination was invalid and that D.R. Horton failed to pay the required capital recovery fees when it began developing the property in 2021. D.R. Horton contends that the Declaration is void under North Carolina law.
The Ruling
The court granted in part and denied in part D.R. Horton’s motion to dismiss. Judge Matthew T. Houston ruled that Covenant Clearinghouse had sufficiently demonstrated an actual controversy regarding the validity of the Declaration and the effectiveness of the Termination. The court stated, "Plaintiff adequately states claims for declaratory relief" and noted that the parties had opposing views on the Declaration's validity.
However, the court also addressed D.R. Horton's arguments regarding the enforceability of the Declaration under North Carolina law. The ruling indicated that while some of D.R. Horton's claims could potentially be valid, the court could not dismiss Covenant Clearinghouse's claims outright at this stage. The court emphasized that the validity of the Termination is a key issue that requires further examination.
Impact
This ruling is significant as it allows Covenant Clearinghouse to continue its legal battle to enforce the Declaration and collect the capital recovery fees from D.R. Horton. The decision also sets a precedent regarding how similar property covenants may be interpreted under North Carolina law, especially in light of the state's statutes concerning transfer fee covenants.
The ruling may influence other property developers and homeowners in North Carolina, particularly those involved in similar disputes over property declarations and covenants. It highlights the importance of adhering to legal formalities when executing documents related to property rights.
What's Next
The case will proceed to further litigation, where the court will examine the merits of the claims made by both parties. D.R. Horton may still appeal certain aspects of the ruling, but details regarding any potential appeals were not available in the court filing.