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EricH13 (Tennessee)
Posts: 13
Posted:
A restriction existed in my Warranty Deed when I purchased my property in 2006. The restriction was never in the Master Declaration, By-Laws, or Charter, until a new Declarant added the restriction to the MDCCR IN 2015. The language of the restriction was changed when added to the MDCCR, however, tightening the restriction, resulting in a equity loss if and when the property is sold.

In my opinion, the Declarant's failure to fulfill its obligations in the Warranty Deed appears to be breach of contract. The language of the Warranty Deed is unambiguous, and reflects the intent of the original Declarant. The Declarant's action may also be bordering on Intentional Interference of Contractual Relations, between Seller and Buyer.

The Declarant's action may also be adverse to Tennessee judicial decisions related to the amendment of the MDCCR, but right now my research is concentrating on the enforcement of the Contract.

The issue is which recorded instrument will take precedence over all others.

Thanks to all who can add some knowledge or experience to this situation.
TimB4 (Tennessee)
Posts: 21,062
Posted:
Eric,

My understanding is that both are considered deed restrictions.
The second developer (who likely also inherited declarant rights) combined both documents and amended them as he likely was authorized to do.
I say likely because most governing documents gives, basically, unrestricted authority to the Declarant. This is done either by controlling the vote through his class of membership within the association or actual written authority to amend the governing documents at will. You will need to read all of your governing documents to be see what your Declarants authority is.

Even if the second developer was unauthorized to combine the two documents, CC&Rs can be more restrictive then State statutes or city ordinances. Therefore, I suspect that they can also be more restrictive then existing deed restrictions.

To find out if your opinions are correct, you will need to consult an attorney. Probably one versed in contract law.

Hope this helps.
EricH13 (Tennessee)
Posts: 13
Posted:
Thank you, TimB4, for your input. This is going to be an interesting one, I think. You are right on with some of your assertions. The Declarant has the same rights as the original developer with authorization to amend the MDCCR and By-Laws. The Declarant owns the private amenities and it also controls the Board of the Association by way of majority rule.

I have not been harmed, yet, as that occurs with the sale of the property. One property owner has been harmed, so we are all concerned. Frankly, I was surprised that it occurred. My feeling was that my property Deed could not be breached, for any reason, unless it was an impossibility for one of the parties to fulfill their obligation.

Tennessee judicial decisions give me some hope, but you never know until it's before a Judge, right?
AugustinD
Posts: 5,144
Posted:
EricH,

The MDCCR is recorded with the county, typically as required by law. The courts consider this as public notice of the terms of the MDCCR. It seems like the MDCCR goes hand-in-hand with the warranty deed. I googled on one-vs-the-other some and tend to think that the MDCCR's rules for amending allow a change to the restriction in the warranty deed. But I could be wrong.

Are you able to speak of what this restriction is and how the amendment to the MDCCR changed it? I elaborating might help.
EricH13 (Tennessee)
Posts: 13
Posted:
Thank you for your response, Augustin. I apologize for my caution in explaining the entire situation. I thought it best to start with, what I think, is the first obstacle in bringing this before a court. The restriction is in my Warranty Deed. I have seen nothing which would lead me to believe the Declarant, or anyone, can amend a Warranty Deed, affecting the agreed upon obligations of Seller and Buyer. I did not purchase the property from the Declarant, but from a previous resident. The original Declarant started adding this restriction, to individual Warranty Deeds, a few years after the development began, so there is an inconsistency in the Deeds among residents, but that is a discussion for a later time. The fact that he added the restriction to the Warranty Deed, rather than placing it in the MDCCR, or doing both, may reflect his realization that it may be a problem.

I can tell you that the restriction is not one I reject in total; it it just the change in process, which will effect a loss of equity to every owner when the property is sold.

So, I was trying to limit this discussion to how the court would perceive obligations of a Warranty Deed, that preceded the placing of the restriction in the MDCCR, by almost 10 years. I recognize that the Declarant has many rights, and I have carefully read all governing documents. The amendment to the MDCCR conflicts directly with the Warranty Deed, impacting my obligation to the next owner. I have been unable to find a case that helps to reconcile, with some confidence, which document will take precedence in the courts.

I believe the first resident this has affected may pursue some legal action, so I hope to see how some positive results before I am harmed.
BobD4 (up north)
Posts: 1,002
Posted:
Quote:
Posted By EricH13 on 06/25/2016 9:34 AM
. . . In my opinion, the Declarant's failure to fulfill its obligations in the Warranty Deed appears to be breach of contract. The language of the Warranty Deed is unambiguous, and reflects the intent of the original Declarant. The Declarant's action may also be bordering on Intentional Interference of Contractual Relations, between Seller and Buyer. . . .

Erich H13Tenn :

1- Respectfully, with your lawyer your question might be well served by looking with primacy at the root deed to your predecessor and at whatever body of benefits & burdens came with that root deed.

Maybe its text included subjecting - onto the line of titles that has reached you - some exposure to express or implied revisions . . . even added burdens ? Take a look for example at some discussions here about retroactive amendments attempted by declarants or their assignees. There are several lines of cases.

2- Respectfully I am at a loss to understand how a Declarant/assignee NOT privy to your agreement with the previous owner, could somehow be "in breach" of something privy only to the 2 parties.

If for discussion only, your warranty deed introduced between you and the previous owner 'no term certain leasing for less than a 6 month term'. But no lease restrictions were in the root deed. But a later assignee of the original declarant still has enough residual power to apply a 'no term certain leasing in the community for less than a FULL ONE YEAR term".

Is the question then that your own warranty deed somehow could override what may ( or may not be ) amendable according to your property's root deed ? That you could lease for a minimum term certain of 6 months & ignore the new Declarant ?

If so, could other property owners claim a comparable right to divurge ie Balkanize ?

Anyway good luck with your lawyer.
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By EricH13 on 06/25/2016 9:34 AM
A restriction existed in my Warranty Deed when I purchased my property in 2006. The restriction was never in the Master Declaration, By-Laws, or Charter, until a new Declarant added the restriction to the MDCCR IN 2015. The language of the restriction was changed when added to the MDCCR, however, tightening the restriction, resulting in a equity loss if and when the property is sold.

In my opinion, the Declarant's failure to fulfill its obligations in the Warranty Deed appears to be breach of contract. The language of the Warranty Deed is unambiguous, and reflects the intent of the original Declarant. The Declarant's action may also be bordering on Intentional Interference of Contractual Relations, between Seller and Buyer.

The Declarant's action may also be adverse to Tennessee judicial decisions related to the amendment of the MDCCR, but right now my research is concentrating on the enforcement of the Contract.

The issue is which recorded instrument will take precedence over all others.

Thanks to all who can add some knowledge or experience to this situation.

Considering all of Eric's comments, what Bob said, and googling for {"conflict with the deed"} and similar searches for conflicts with deeds --

1.
It appears that deeds prevail when there is a conflict with proposed changes to City zoning and bylaws.

2.
Eric, it sounds like you are assuming that the Declarant will assert that the revised CC&Rs control. But per 1. above, I think not. It seems to me that it's likely that you are free to sell your property with the current warranty deed restriction (which is more liberal than the change the Declarant imposed). Hence the value of your property has not been damaged. Further, I do not think you have a claim until you go to sell your property.

3.
Does the warranty deed say anything about either the Declaration or the HOA's CC&Rs?

4.
I agree with Eric that the Declarant having changed the warranty deeds for the properties it is selling to include the new, greater restriction is in Eric's favor. Some of the following seems pertinent (though not a Tennessee court): "Quasi estoppel precludes a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken." http://caselaw.findlaw.com/tx-court-of-appeals/1273462.html . A HOA may amend its covenants, change policy, and so on, but only within various limits.

5.
In the event that somehow, the Declarant legally can change the warranty deed's restrictions, Bob's comments and more study suggest to me that Eric's potential claim is against the grantor of the warranty deed (= the seller way back when). The warranty deed is a promise by the grantor that certain covenants, as given in the warranty deed, are valid. If the grantor effectively lied, then the grantee has a claim against the grantor.
EricH13 (Tennessee)
Posts: 13
Posted:
Thank you, BobD4, for your insight. The individual owner, previous to me, held the first Deed to this property, purchasing it from the original developer. No Deed exists previous to that for this property as an entity unto itself. The property was part of a larger, undeveloped tract of land. My Deed mirrors the previous owner's Deed. The restriction is related to an entity that was created by the developer. Whether there were some restrictions on the original developer, I don't have that information.

Your comment about retroactive amendments, I believe, brings up a relevant matter, and TN courts favor property owners in this matter, generally. There is substantial parol evidence in the materials published, at that time, which support the intent and practices of the restriction placed in my Deed. I believe I have the advantage should this be the necessary path to pursue, but my goal is to secure the equity utilizing the least amount of time and money, hence, relying on the unambiguous language of the contract.

Regarding the question of how a Declarant, unattached to an earlier agreement, could be held in breach, there are, at least, a couple of scenarios. TN courts look for specific language in a document, which assigns all Declarant rights and obligations to each successor; that language is in my Deed, fortunately. Absent that language, the courts attempt to ascertain the intent of the original declarant as to whether the restriction is constrained only to the parties in agreement, or whether the restriction "runs with the land." Generally, restrictions involving planned developments are viewed as those that apply to each successive property owner.

I have reviewed hundreds of cases trying to find a similar situation. I then began looking at judicial decisions involving a contract, regardless of the underlying issue. I believe that the language in my Deed reflects obligations on the Seller, Buyer, and Declarant.

Since it will be some time before I am actually harmed, I have time to continue my research. My initial act will be to fully apprise the Declarant of what I believe are mistakes, and present the basis for my claims. His reaction will determine what will be necessary to resolve the matter. The Declarant does not want to be involved in a lawsuit, either, so I hope for positive results.
NpS (Pennsylvania)
Posts: 4,216
Posted:
Not sure if this has been mentioned Eric.

You probably got title insurance on your deed.

If you got a warranty deed from the prior owner, then that owner probably had title insurance also.

You might have a claim against one or both of those insurers when it comes time to sell.

Of course, those insurers won't step in unless and until there is a challenge to your title.

Best of luck.

Sikubali jukumu. Read all posts at your own risk.
NpS (Pennsylvania)
Posts: 4,216
Posted:
CORRECTION:

Quote:
Posted By NpS on 06/27/2016 9:23 AM
Not sure if this has been mentioned Eric.

You probably got title insurance on your deed.

If you got a warranty deed from the prior owner, then that owner probably had title insurance also.

You might have a claim against one or both of those insurers when it comes time to sell.

Of course, those insurers won't step in unless and until there is a challenge to your title. IMO, any post-deed restrictions would be considered a challenge to your title.

Best of luck.


Sikubali jukumu. Read all posts at your own risk.
NpS (Pennsylvania)
Posts: 4,216
Posted:
CORRECTION 2:

Quote:
Posted By NpS on 06/27/2016 9:23 AM
Not sure if this has been mentioned Eric.

You probably got title insurance on your deed.

If you got a warranty deed from the prior owner, then that owner probably had title insurance also.

You might have a claim against one or both of those insurers when it comes time to sell.

Of course, those insurers won't step in unless and until there is a challenge to your title.

IMO, any post-deed restrictions would be considered a challenge to your title. But ... will have to wait til you have a sale to involve insurers.

Best of luck.




Sikubali jukumu. Read all posts at your own risk.
EricH13 (Tennessee)
Posts: 13
Posted:
Thanks, Augustin,

1) I still have no TN case which denotes precedence of Warranty Deed over governing documents.

2) The Declarant has already acted against another resident, and the cause can only be attributed to the amended MDCCR, so I have to assume he is prepared to defend his action by his right to amend.

How he convinced the title company that he was due certain funds from the transaction is a mystery. Agree with the rest of #2 comments.

3) Yes, "this property is subject to all easements, restrictions, and covenants OF RECORD, including but not limited to Declaration of Covenants, Conditions, and Restrictions OF RECORD in ... ."

The emphases "OF RECORD" are mine.

4) I have found a good TN case as it relates to the MDCCR: Mendelson v Bornblum. It addresses such things as the impermissability of retroactive covenants and harsher or tighter restrictions. This path may be my strongest case, but also requires, I think, more time and money, which is why I am concentrating on the contract. TN judicial decisions really seem to appreciate the simple language of a contract.

5) If you have already read my reply to Bob, by now, you already know my Warranty Deed contains the language that passes on all the rights and obligations to his successor. The only difference is the name of the Declarant.
EricH13 (Tennessee)
Posts: 13
Posted:
Thanks, NpS, I just talked with my mortgager, this morning, who mentioned the Title company should have questioned the conflict between the Warranty Deed and the Declarant's demand for the money, for the transaction that occurred recently. I agree with you that this presents another viable option. I wonder how the Declarant convinced the Title company that he was due the money!
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By EricH13 on 06/27/2016 11:29 AM

3) Yes, "this property is subject to all easements, restrictions, and covenants OF RECORD, including but not limited to Declaration of Covenants, Conditions, and Restrictions OF RECORD in ... ."

The emphases "OF RECORD" are mine.

Does the Declaration of Covenants include an amendment procedure? If so, I think this is problematic for your argument.
EricH13 (Tennessee)
Posts: 13
Posted:
The Declarent certainly has the power to amend the MDCCR AND By-Laws, unilaterally, which made me curious as to why the original developer decided not to attempt to add it to the MDCCR. Maybe he was aware that TN courts had ruled on the impermissibility of attempts to amend the MDCCR with new or tighter restrictions.

In Conn v Powell, the court said:

"Generally, 'the date when title is transferred is the critical point after which amendments can not be enforced against the purchaser.'"

A principle of American law that TN courts have cited is 26 C.J.S. DEEDS 168 (1956):

" ... (A) provision that any of the restrictions imposed may be modified or amended DOES NOT AUTHORIZE ANY NEW OR ADDITIONAL RESTRICTIONS TO BE IMPOSED, BUT ONLY AUTHORIZES EXISTING RESTRICTIONS TO BE MADE LESS HARSH."

I think he was also constrained by the following section in the MDCCR:

"The owners of the _____ _____ shall have the right, from time to time in their sole and absolute discretion and without notice, to amend or waive the terms and conditions of use of their respective _____ _____, including, without limitation, eligibility for and duration of use rights, categories of use and extent of use privileges, and number of users, and shall also have the right to reserve use rights and to terminate use rights altogether, SUBJECT TO THE TERMS OF ANY WRITTEN AGREEMENTS."

The county recording of the MDCCR preceded the placement of the restriction in the Deed by four years. Maybe the developer did not contemplate that the restriction was necessary, and this is just a timing issue. Maybe the placing of the restriction in the Deed seemed more practical than attempting to account for which CCR's applied to which owners dependent on purchase dates.

And fortunately, the By-Laws state:

Any conflicts shall be resolved in accordance with Tennessee law, the Charter, the By-Laws and the Declarations, IN THAT ORDER OF PRIORITY.

JohnC46 (South Carolina)
Posts: 14,265
Posted:
Eric

My overview/read is that you bought a home in an HOA under Declarant control from an original buyer who had bought from the Declarant. Thus you had a "set" of Covenants. Notice the still under Declarant statement as I believe that might be the issue.

The Declarant then changed the Covenants as is usually in their power and you are questioning which "set" of Deed Restrictions apply to you.

Have I summed this up properly?

EricH13 (Tennessee)
Posts: 13
Posted:
Well, John, your first sentence is accurate.

And, actually, your second sentence is accurate; there is a question of which set of CCR's apply to me. But, what I really would like to know, first, is whether the court will recognize a breach of my Warranty Deed, by Declarent, upon the sale of my property.

My 2006 Warranty Deed contains one Restriction. It was not in the CCR's until the new Declarant added it in 2015, changing some of the language, impacting the equity negatively when the property is sold.

So, in effect, I have a restriction in my Warranty Deed I am legally obligated to fulfill, and I would think ALL parties are still equally obligated.

Now I have a conflicting obligation in the CCR's, due to the change of language.

Which document will rule in TN courts, is the question.

Thank you for your response.

BobD4 (up north)
Posts: 1,002
Posted:
Quote:
Posted By EricH13 : The issue is which recorded instrument will take precedence over all others. . . . The Declarent certainly has the power to amend the MDCCR AND By-Laws, unilaterally . . . In Conn v Powell, the court said: . . . So, in effect, I have a restriction in my Warranty Deed I am legally obligated to fulfill, and I would think ALL parties are still equally obligated. Now I have a conflicting obligation in the CCR's, due to the change of language.
. . I still have no TN case which denotes precedence of Warranty Deed over governing documents. . . .

1 -Respectfully I think EricH13 TENN - if I am able to grasp enough of his scenario - will have a tough time without some Tennessee judicial outcomes.

Those needed outcomes would seem to have to support that the date & text content of a Warranty Deed is able to somehow 'crystallize' or 'solidify' or 'freeze-frame' or prioritize whatever sort of (MD)CCR changes that could be imposed on the particular deeded property going ahead.

And of course an outcome that - onto the particular private property - such cannot increase the burdens or restriction at the date of such 'freeze-framing'.

Respectfully such an analysis would seem to lead a potential hodge podge of lot-varying scopes for restrictions. I could be wrong.

2 EricH13 cites from third last para of Mendelson v Bornblum 2005 Tennessee Appeal Court
http://law.justia.com/cases/tennessee/court-of-appeals/2005/w2004-02549-coa-r3-cv.html was cited by NPS Penn at another Tennessee topic http://www.tncourts.gov/sites/default/files/OPINIONS/TCA/PDF/053/MendelsonLarryNOPN.pdf

The rest of the extract is " . . . However, where a buyer of land has notice that the property is covered by restrictive covenants and that other lot owners may amend those covenants, the buyer may be bound by amendments made subsequent to the acquisition of title. Id. (citing 26 C.J.S. Deeds §§ 167(3), 168, 169 (1956)). ..."

3 - One irony is that there may be few if any American states which apply England's Positive Covenant Rule which actually allows a Buyer - under one special circumstance - to escape future 'affirmative obligations' like re-transfer fees, common expenses or obligations that require labour and/or bucks to perform. This is a chain breaker.

My jurisdiction does follow that 1885 precedent which - unless EXPRESSLY transferred in the transfer document between Buyer & Seller - kills the Buyer's obligation to perform those parts of the CCRs. ie the Deed trumps the CCRs as they address major CCR burdens. (The untransferred obligations remain with the Seller who quickly skips town long before the HOA can even be aware . . . )

Anyway good luck Eric with what looks like an interesting but complex issue.
EricH13 (Tennessee)
Posts: 13
Posted:
Thanks, Bob, for your insight. You introduced some nuances that escaped me. I hope that I can prevail on the issue of contract. Absent that, it will likely be a long, drawn-out ordeal. I hope to add to this thread as events occur. Best to you, Bob.
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By BobD4 on 06/27/2016 8:33 PM

2 EricH13 cites from third last para of Mendelson v Bornblum 2005 Tennessee Appeal Court
http://law.justia.com/cases/tennessee/court-of-appeals/2005/w2004-02549-coa-r3-cv.html was cited by NPS Penn at another Tennessee topic http://www.tncourts.gov/sites/default/files/OPINIONS/TCA/PDF/053/MendelsonLarryNOPN.pdf

The rest of the extract is " . . . However, where a buyer of land has notice that the property is covered by restrictive covenants and that other lot owners may amend those covenants, the buyer may be bound by amendments made subsequent to the acquisition of title. Id. (citing 26 C.J.S. Deeds §§ 167(3), 168, 169 (1956)). ..."

The full paragraph from the Mendelson v. Bornblum court opinion, with both Eric's and Bob's quotations seems to me to favor Eric's claim:

~~~From Mendelson v. Bornblum~~~
Finally, we turn to the May 6, 2003 Amendments and their purported repeal and rescission
of the Lot 5 Amendment. The Tennessee Supreme Court has stated that “no set of covenants should
be given any general retroactive effect.” E. Sevier County Util. Dist. v. Wachovia Bank & Trust Co.,570 S.W.2d 850, 853 (Tenn. 1978); see also Land Developers, Inc. v. Maxwell, 537 S.W.2d 904, 913 (Tenn. 1976); Graham v. Edmondson, No. 01A01-9809-CH-00482, 1999 WL 476466, at *4 (Tenn.
Ct. App. July 12, 1999). Generally, “the date when title [is] transferred [is] the critical point after which amendments [can] not be enforced against the purchaser.” Conn v. Powell, 1984 WL 588785,at *3 (Tenn. Ct. App. Nov. 5, 1984). However, where a buyer of land has notice that the property is covered by restrictive covenants and that other lot owners may amend those covenants, the buyer may be bound by amendments made subsequent to the acquisition of title. Id. (citing 26 C.J.S. Deeds §§ 167(3), 168, 169 (1956)). Notwithstanding that principle, “a provision that any of the restrictions imposed may be modified or amended does not authorize any new or additional
restrictions to be imposed, but only authorizes existing restrictions to be made less harsh.” Id.
(quoting 26 C.J.S. Deeds § 168 (1956)).
~~~

C.J.S. is the acronym for Corpus Juris Secundum, an encyclopedia of law (thanks, wikipedia).

To me, the Mendelson opinion is consistent with the notion embraced (with much citation) by the courts that when a conflict or ambiguity arises within HOA legal documents, then the conflict will be resolved in favor of liberties and the enjoyment of property. Also, naturally, ambiguities do arise from time to time in governing documents and contracts. From general reading on how this plays out with HOA documents ad HOA Declarants, I understand the ambiguity is resolved against the writer of the governing document or contract. Eric presents us with a 2006 warranty deed that has an explicit restriction on a certain matter, and then a clause within the warranty deed that says certain covenants apply and may be amended. The Declarant now in 2015 is saying, "We changed our mind. Under the terms of the warranty deed, we can amend the covenants. We hereby amend the covenants to remove the original, explicit warranty deed restriction and make this restriction harsher." This seems to me to be baloney. The Declarant wants to have its cake and eat it too. I do not think a court will accept the Declarant's argument. I recall other court cases where I live where a Declarant tried to run roughshod over HOA members, using ambiguous covenant provisions, truly written in an effort to give the Declarant thorough control of the grounds with the covenants be damned, with the provisions saying things like, "the rule is xyz unless the Declarant changes its mind." My recollection is the courts told the Declarant to stuff it. Ambiguous phrasing may not be used to the advantage of the writer of the contract.
EricH13 (Tennessee)
Posts: 13
Posted:
Thanks, Augustin. Everything that I find in the judicial decisions seems to support my position. Now, what does the Declarant have up his sleeve, a technicality of sorts? I wish that I knew, but the courts do seem to favor the property owner's right to enjoyment rather than the Declarant's right to restrict. I will update in the future.
EricH13 (Tennessee)
Posts: 13
Posted:
Met with Declarant recently; he seemed interested in looking into the legal questions. Providing him with relevant Tennessee judicial determinations, this week.

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