Covenant Clearinghouse Lawsuit: Wins, Losses, and Active Cases

Covenant Clearinghouse, LLC, a Nevada company that acts as trustee for private transfer fee covenants on residential real estate, is the subject of ongoing litigation across several states. The Texas Attorney General sued the company in 2023 over allegedly unenforceable fees, and separate disputes are active in Colorado and North Carolina. The company has lost significant appellate rulings in Texas and the Fifth Circuit, but has also secured favorable judgments in Illinois and New Mexico. Below is where each of the major Covenant Clearinghouse lawsuits stands.

What Covenant Clearinghouse Actually Does

A private transfer fee covenant is a recorded obligation that requires the seller of a home to pay a percentage of the sale price — typically one percent — every time the property changes hands, often for as long as 99 years.¹ Covenant Clearinghouse serves as the trustee: it collects the fees, issues estoppel certificates, keeps the records, and sues owners who refuse to pay.² According to the Federal Trade Commission, its corporate parent, Freehold Capital Partners, splits the one-percent fee evenly with the original developer.³

These covenants have drawn opposition from federal regulators, state legislatures, title insurers, homebuilders, and property owners. The lawsuits below reflect that pressure.

Texas Attorney General v. Covenant Clearinghouse (2023)

The largest active enforcement action against the company was filed in March 2023 by the Texas Attorney General in the 345th District Court of Travis County. The petition alleges Covenant Clearinghouse engaged in a “pattern and practice” of demanding unenforceable transfer fees from property owners, interfering with sales in at least 13 Texas counties, including Collin, Denton, Harris, Bexar, and Travis.⁴

The state’s claim rests on Subchapter G of the Texas Property Code, enacted in 2011, which voids any private transfer fee obligation created after June 17, 2011. Older covenants can survive, but only if the payee filed a formal Notice of Private Transfer Fee Obligation in county records by January 31, 2012, refiled it every three years, and amended it within 30 days of any change in payee identity or address. Missing any of those steps voids the fee.⁵

The Attorney General is asking the court to declare void a 2009 Declaration of Covenant and related notice filings from 2012, 2015, 2018, and 2021; permanently enjoin the company from collecting transfer fees or assigning its rights; and impose civil penalties equal to twice the amount collected under the 2009 declaration, plus $250,000 for the alleged pattern of violations.⁴ Total monetary relief sought falls between $250,000 and $1,000,000, plus attorneys’ fees. The American Land Title Association and the Texas Land Title Association both publicly backed the state’s action.⁶

Rulings the Company Has Lost

Covenant Clearinghouse v. Kush and Krishna (Texas, 2020)

In 2009, a developer called I-45 Thirty recorded a declaration imposing a one-percent transfer fee running until 2110. When Kush and Krishna, LLC sold the property in 2017, it placed $36,000 in escrow rather than pay, arguing that no one had refiled the required notice after the initial January 2012 filing. The Houston-based 14th Court of Appeals agreed. The court read the statutory word “receives” to cover anyone who “is receiving, may receive, or may claim a right to receive” a transfer fee. Because Covenant Clearinghouse claimed the right to collect but failed to refile by the January 2015 deadline, the obligation was void and the $36,000 went to Kush and Krishna.⁷

Covenant Clearinghouse v. Trinity Falls Holdings (Fifth Circuit, 2024)

Two developers, MA BB Owen, L.P. and MA-BBO Five, L.P., had recorded a one-percent transfer fee declaration on properties in Collin County, Texas, in 2009. They kept unilateral authority to terminate the declaration without notifying Covenant Clearinghouse. When they went bankrupt, the bankruptcy court approved a sale to a predecessor of Trinity Falls Holdings, L.P., on the condition that the declaration be terminated. Notice went out only by publication in the Dallas Morning News.⁸

Covenant Clearinghouse challenged the termination in 2021, claiming it was entitled to actual notice as a creditor or party in interest. On December 18, 2024, the Fifth Circuit affirmed the lower courts, holding that because the developers could terminate the declaration at will, the company’s interest in future fees amounted to a “unilateral expectation” rather than a protected property right. Publication notice was enough.⁸

Rulings the Company Has Won

Chicago Title Insurance Co. v. Covenant Clearinghouse (Illinois, 2025)

In April 2025, Covenant Clearinghouse announced a final judgment in its favor in Will County, Illinois. Chicago Title had argued that a transfer fee covenant was unenforceable under the Illinois Transfer Fee Covenant Act and state public policy. Judge Bennett Braun rejected all of the title company’s claims.⁹

New Mexico Summary Judgment (2026)

In January 2026, a New Mexico district court denied an opposing party’s motion for summary judgment that sought to invalidate a recorded declaration of covenant. Judge Fitch found the declaration was supported by consideration, touched and concerned the land, did not impose an unreasonable restraint on alienation, and did not violate public policy.¹⁰

Active Cases to Watch

River Canyon v. Covenant Clearinghouse (Colorado)

River Canyon Real Estate Investments, LLC filed suit in September 2025 in Douglas County, Colorado, over 165 homes in the Ravenna Country Club, a gated community in Littleton. River Canyon had originally recorded a one-percent transfer fee declaration in 2009 and later executed a termination. After the termination, Covenant Clearinghouse and Freehold Licensing, LLC allegedly recorded various “Notices of Assessment Obligation,” “Notices of Rescission,” and “Notices to Purchasers” against the properties. River Canyon asked the court to declare those filings spurious under Colorado law.¹¹

Covenant Clearinghouse removed the case to federal court and moved to dismiss; River Canyon moved to remand. In a May 2026 order, Judge Cyrus Y. Chung denied both motions, finding the court had diversity jurisdiction with more than $75,000 in controversy: ten encumbered properties sold in 2025 totaled over $27 million, and the defendants claimed a one-percent lien on those sales. The court ordered further briefing on whether River Canyon’s right to terminate the declaration qualifies as “personal property” under Colorado’s spurious-lien statute.¹¹

Covenant Clearinghouse v. D.R. Horton (North Carolina)

Covenant Clearinghouse filed its own suit in August 2025 in Guilford County, North Carolina, against national homebuilder D.R. Horton. The complaint alleges D.R. Horton failed to pay capital recovery fees required under a recorded declaration that calls for a one-percent payment on each sale of property within a subdivision of single-family homes over 99 years. Recent sales averaged in the mid-$300,000 range.¹²

D.R. Horton tried to move the case to the state’s Business Court as a mandatory complex business case. In September 2025, Chief Business Court Judge Michael L. Robinson ruled the complaint failed to establish the required $1,000,000 threshold, calling projections of the fee over 99 years too speculative. The case was sent back to proceed as a standard civil action.¹²

Who Is Covenant Clearinghouse

The company operates out of Austin, Texas, and is incorporated in Nevada.⁴ Its parent, Freehold Capital Partners, LLC, was the subject of an FTC investigation into potential unfair or deceptive practices in the marketing and licensing of transfer fee covenants; the agency closed the investigation in November 2011 without recommending enforcement, while noting the closure was not a finding that no violation had occurred.³ A related entity, Freehold Licensing, LLC, appears as a co-defendant in the Colorado litigation.¹³ Joe Alderman serves as president.¹⁴

The company has been building out its legal team as its docket grows. In February 2025 it hired Matthew T. Kennedy as General Counsel; Kennedy previously spent over a decade at the Texas Attorney General’s office, most recently as Deputy Chief of the Consumer Protection Division. That same month it retained Allyson Ho of Gibson, Dunn & Crutcher and added litigation attorney Emily Young. In April 2025 it retained Clyde and Co.¹⁵

1
Justia Dockets. River Canyon Real Estate Investments, LLC v. Covenant Clearinghouse, LLC Et Al
2
Virtual Underwriter. Declaration of Covenant Sample Document
3
Federal Trade Commission. FTC Closing Letter Regarding Freehold Capital Partners, LLC
4
Texas Land Title Association. State of Texas Original Petition v. Covenant Clearinghouse
5
FindLaw. Texas Property Code Section 5.203
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ALTA. Texas Sues Covenant Clearinghouse for Violating Private Transfer Fee Law
7
FindLaw. Covenant Clearinghouse, LLC v. Kush and Krishna, LLC
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U.S. Court of Appeals, Fifth Circuit. Covenant Clearinghouse, LLC v. Trinity Falls Holdings, LP
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PR Newswire. Covenant Clearinghouse Successfully Defends Against Chicago Title Company’s Legal Challenge
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PR Newswire. Covenant Clearinghouse LLC Announces Summary Judgment Victory Preserving Recorded Declaration of Covenant
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Casemine. River Canyon Real Estate Investments, LLC v. Covenant Clearinghouse, LLC Et Al
12
North Carolina Courts. Covenant Clearinghouse LLC v. D.R. Horton, Inc., 2025 NCBC Order 69
13
Justia Dockets. River Canyon Real Estate Investments, LLC v. Covenant Clearinghouse, LLC Et Al
14
PR Newswire. Covenant Clearinghouse Successfully Recruits Matthew T. Kennedy From the Texas Office of Attorney General
15
PR Newswire. Covenant Clearinghouse LLC Press Releases