As part of the Hurricane Katrina repairs, the federal government used eminent domain to demolish 14 townhome units, and paid "just compensation" to the unit owners. The townhome association demanded compensation for loss of assessment revenue. The Fifth Circuit Court of Appeals ruled that no compensation is required because, "...the right to collect assessments is a real covenant that functions like a contract and...is not 'directly connected with the physical substance of the land.'" The court notes that the majority view requires compensation for lost assessment revenue when units are taken, but then goes on to adopt the minority view. Why? Private covenants might unduly burden government's ability to exercise the power of eminent domain, and this intriguing language: "Another theory is that real covenants
are akin to contracts; that no contract of private persons can make acts done in
the proper exercise of governmental powers, and not directly encroaching upon
private property, a taking; and that “contracts purporting to do this are void, as
against public policy.” United States v. Certain Lands (In re Newlin), 112 F. 622,
aff’d, 153 F. 876 (C.C.R.I. 1907)."