Unilateral Rule-Change Clauses in Leases Are Enforceable When Constrained by Reasonableness and the Implied Covenant of Good Faith

1. Introduction

In Vivos xPoint Investment Group, LLC v. Sindorf, the Supreme Court of South Dakota reversed a circuit court’s grant of summary judgment that had declared a 99-year bunker lease “illusory” because it incorporated community rules that the landlord (Vivos) could unilaterally modify with 30 days’ notice.

Parties and setting. Vivos, a California company, operates a survivalist community near Edgemont, South Dakota, leasing decommissioned military bunkers. Daniel Sindorf leased a bunker for 99 years and paid $35,000 upfront. The lease incorporated “Community Rules and Regulations” (Addendum B) and allowed Vivos to “change or modify” those rules with 30 days’ written notice.

Triggering dispute. After Vivos amended the rules to prohibit “brandish[ing]” firearms (in addition to discharging them), it alleged Sindorf violated the amended rule during a July 2023 altercation. Vivos pursued a forcible detainer action to recover possession; Sindorf sought summary judgment arguing the unilateral-modification clause rendered the rules—and therefore the lease—illusory and void.

Core issues. (1) Whether a lease becomes illusory when it allows the lessor to unilaterally modify incorporated rules; and (2) whether such rules are enforceable in light of contract consideration principles and the implied covenant of good faith and fair dealing.

2. Summary of the Opinion

The Court held the circuit court erred in concluding the 99-year lease was illusory. The lease was supported by valid consideration—Sindorf’s payment in exchange for Vivos’s promise to lease a bunker—and the unilateral rule-modification clause did not negate mutuality because Vivos’s discretion is constrained by reasonableness and the implied covenant of good faith and fair dealing. The Court reversed summary judgment and remanded for further proceedings.

3. Analysis

3.1 Precedents Cited

A. Standards governing summary judgment and appellate review

  • Zochert v. Protective Life Ins., 2018 S.D. 84 (quoting Harvieux v. Progressive N. Ins., 2018 S.D. 52): The Court reiterated de novo review of summary judgment and the lack of deference to the circuit court’s legal conclusions.
  • Paulsen v. McKennan, 2025 S.D. 37 (quoting Karst v. Shur-Co., 2016 S.D. 35): Restated the governing summary judgment standard—no genuine issue of material fact and entitlement to judgment as a matter of law.
  • Coffee Cup Fuel Stops & Convenience Stores, Inc. v. Donnelly, 1999 S.D. 46 (quoting Walther v. KPKA Meadowlands Ltd. P'ship, 1998 S.D. 78): Confirmed the appellate task is to assess whether a genuine issue of material fact exists and whether the law was correctly applied.

B. The limited scope of forcible detainer proceedings

  • Heiser v. Rodway, 247 N.W.2d 65 (S.D. 1976) (citing Raich v. Weisman, 234 N.W. 664 (S.D. 1931)): Emphasized that the “primary concern” in detainer is the immediate right to possession and that the statutory chapter provides a “speedy remedy” focused on possession.
  • VOR, Inc. v. Est. of O'Farrell, 2025 S.D. 2 (quoting LPN Tr. v. Farrar Outdoor Advert., Inc., 1996 S.D. 97): Reinforced that detainer actions are “limited in nature” and should not be burdened by collateral issues unrelated to possession.

C. Contract principles: leases as contracts; consideration; illusory promise doctrine

  • Tri-City Assocs., L.P. v. Belmont, Inc., 2014 S.D. 23: Cited for the proposition that a lease is a contract governed by general contract principles.
  • Nelson v. Est. of Campbell, 2023 S.D. 14 (quoting Harvey v. Reg'l Health Network, Inc., 2018 S.D. 3): The existence of a valid contract is a question of law reviewed de novo.
  • Acklie v. Greater Omaha Packing Co., 944 N.W.2d 297 (Neb. 2020): Used as persuasive authority describing an illusory promise as one leaving the promisor an “unlimited right” to decide performance later or making performance “optional.”
  • Lane v. Wahl, 6 P.3d 621 (Wash. Ct. App. 2000): Persuasive authority rejecting an illusory lease argument where the lessee paid money in exchange for the lessor’s promise to lease—confirming basic rent-for-possession consideration supports enforceability.

D. Implied covenant of good faith and fair dealing; constraint on unilateral discretion

  • Schipporeit v. Khan, 2009 S.D. 96 (quoting Farm Credit Servs. of Am. v. Dougan, 2005 S.D. 94): The implied covenant prohibits a contracting party from preventing or injuring the other party’s right to receive the contract’s agreed benefits—central to the Court’s conclusion that unilateral modification power is constrained.
  • Thousand Island Park Ass'n v. Tucker, 65 N.E. 975 (N.Y. 1903): The Court’s key historical anchor: even where a landlord reserves power to impose new rules “from time to time,” that power is limited to “reasonable” regulations and cannot be used to disturb vested rights (i.e., the benefit of the tenant’s bargain).

E. Preservation/waiver on appeal

  • LP6 Claimants, LLC v. S.D. Dep't of Tourism & State Dev., 2020 S.D. 38 (citing Cain v. Fortis Ins., 2005 S.D. 39): Supported the Court’s refusal to consider Sindorf’s new habitability theory raised for the first time on appeal.

3.2 Legal Reasoning

  1. Re-centering the proceeding on possession. The Court noted the mismatch between Sindorf’s “void lease” theory and a detainer action’s focus on the immediate right to possession (Heiser v. Rodway). If the lease were void, Sindorf’s own possessory claim would be undermined. Although the Court did not decide the case on that incongruity, it framed the context: detainer is not designed to adjudicate broad collateral disputes.
  2. Valid consideration existed independent of the rules clause. Applying basic contract doctrine and statutory elements (including SDCL 53-1-2(4) and SDCL 53-6-1), the Court held the lease was supported by straightforward exchange: Sindorf’s $35,000 payment for Vivos’s promise to lease the bunker. Because consideration existed, the lease was not an “illusory contract” as defined by Black’s Law Dictionary.
  3. Unilateral modification did not equal “unlimited discretion.” The Court drew an important distinction: a promise can become illusory where one party can unilaterally modify terms to relieve itself of performance, destroying mutuality. But here, Vivos’s power to modify community rules was:
    • expressly agreed to in writing;
    • procedurally limited by a 30-day written notice requirement; and
    • substantively constrained by reasonableness and good faith.
    This moved the clause outside the category of unfettered discretion that would negate enforceability.
  4. The implied covenant supplies enforceable limits. Relying on Schipporeit v. Khan and Farm Credit Servs. of Am. v. Dougan, the Court held the lease carried an implied covenant of good faith and fair dealing. Therefore, any rule changes must be “reasonable, made in good faith, enforced in a non-discriminatory manner,” and not adopted to deprive tenants of the benefit of the lease or to evade the lessor’s obligations.
  5. Historical and doctrinal support for “reasonable rules only.” The Court adopted the traditional landlord-tenant principle, exemplified by Thousand Island Park Ass'n v. Tucker, that a lease requiring compliance with future landlord rules reserves power to make reasonable rules—not arbitrary ones—and cannot disturb vested rights (i.e., core lease benefits).
  6. Rejecting a “circular” attack on good faith. Sindorf argued the implied covenant cannot apply because the contract was illusory and therefore not a contract at all. The Court rejected this as circular because it presupposed the very conclusion under review and improperly short-circuited standard contract analysis.

3.3 Impact

  • Clarifies enforceability of community-rule frameworks in long-term leases. Leases incorporating “rules and regulations” with a unilateral amendment mechanism are not automatically suspect in South Dakota; they remain enforceable where notice is provided and modifications are cabined by reasonableness and good faith.
  • Limits landlord overreach without invalidating governance systems. The decision preserves the practical need for evolving community standards (safety, weapons policies, shared amenities) while signaling that landlords cannot weaponize rulemaking to discriminate, retaliate, or strip tenants of the lease’s core benefits.
  • Shapes litigation strategy in detainer actions. While the Court did not resolve the “void lease/possession” inconsistency, the opinion cautions against using broad contract-invalidity theories in a procedurally narrow detainer forum, especially when the tenant’s own possessory claim depends on the lease.
  • Provides a workable standard for future disputes. The Court effectively supplies a test: post-execution rule changes are enforceable if reasonable, adopted in good faith, applied equally, and not designed to evade landlord obligations or deprive tenants of the lease’s benefits (with the URLTA factors cited as informative, though not adopted).

4. Complex Concepts Simplified

Forcible detainer
A fast, possession-focused court process to decide who has the immediate right to occupy property. It is not meant to decide broader “collateral” disputes unless they bear directly on possession.
Consideration
The “exchange” that makes a contract binding—each side gives or promises something of value (here: prepaid rent for a leasehold interest).
Illusory promise / illusory contract
A purported promise that does not actually bind the promisor—often because the promisor can choose whether to perform at all or can change obligations at will in a way that eliminates real commitment. An illusory promise cannot serve as consideration.
Unilateral modification clause
A contract term allowing one side to change certain rules after signing. Such clauses are not automatically invalid; they become problematic when the power is effectively unlimited and used to defeat the other party’s bargained-for benefits.
Implied covenant of good faith and fair dealing
A background legal duty that exists in every contract: neither party may act to destroy or injure the other party’s right to receive the agreement’s benefits. It functions as a legal “boundary” on discretionary powers, including rulemaking.

5. Conclusion

Vivos xPoint Investment Group, LLC v. Sindorf establishes that a lease is not rendered illusory merely because it incorporates community rules that the landlord may amend with notice. The key is that the lease’s core bargain is supported by consideration and the landlord’s amendment authority is constrained by reasonableness and the implied covenant of good faith and fair dealing. The decision strengthens contractual stability for rule-governed residential or community-style developments while preserving tenant protections against arbitrary, discriminatory, or bad-faith rule changes.