Arguments please - amending Covenants

Started by TimB4 • 57 replies • 805 views

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TimB4 (Tennessee)
Posts: 21,059

Posted:

I just found out that our board,(and was told it is) based on legal advice, believes that the Covenants can only be amended every 10 years.

I know (believe) this to be incorrect. Unfortunately, if I'm going to disagree with an attorney, I think I need more then saying "that's not what it says."

Please help.

Amendment Language:

Each and every one of the aforesaid covenants, conditions and restrictions shall attach to and run with each and every lot of land, and all titles to, and estates therein, shall be subjected thereto and the same shall be binding upon each and every owner of said lots until July 1, 2021, and shall be extended automatically to apply to each lot for successive periods of 10 years; unless by action of a minimum of Sixty-Seven (67%) per cent of the then owners of lots, it is agreed to change said covenants and restrictions in whole or in part, provided that the instrument evidencing such action or changes must be in writing and shall be duly recorded in the
Register's Office of [name of County], Tennessee. The developer may amend these restrictions unilaterally at any time when he owns over 50 percent of the lots in the subdivision.

NOTE: Developer is no longer in the picture so the last sentence is mute.

ElleN (Idaho)
Posts: 4,420

Posted:

I agree with you.

I also agree that in this instance, either people understand grammar and basic logic, or they do not.

All you can do is ask those believing otherwise (1) what "unless" means and (2) what the significance of the "unless" is in the paragraph you quoted.

TimB4 (Tennessee)
Posts: 21,059

Posted:

I think I'm starting to see the issue. A similar question was asked on an attorneys site. Their response has me thinking that attorneys in this State are reading that the covenants initially run for x years as is. Once that time has run out, the document can be amended.

Not sure I'm reading their response correctly. I'm simply adding some more info.

BillD16 (Texas)
Posts: 971

Posted:

Quote:

Posted By ElleN on 09/24/2023 2:26 PM
I agree with you.

I also agree that in this instance, either people understand grammar and basic logic, or they do not.

All you can do is ask those believing otherwise (1) what "unless" means and (2) what the significance of the "unless" is in the paragraph you quoted.

IANAL, but the only thing I can think to add is to ask where this person got their JD?

Bill

HOA Board ex-President
Austin, Texas USA

“You can’t put too much water in a nuclear reactor”

KerryL1 (California)
Posts: 14,550

Posted:

If you have access to a board member who's influential, or can ask the Board at a Board meeting, I'd request that the attorney highlight or otherwise designate the exact words that show that the Bylaws ONLY may be amended every 10 years.

I think you said you'll run for the Board, where you'd be a real asset based on your longtime board experience. First thing when you're elected is to motion to terminate the agreement (if any) with this attorney.

I'm curious about which law school, too, Bill, but what is "IANAL?" And didn't I see a post from you about a resident in your HOA yelling in your face while you were doing your pool duties? What happened to it?

(Sorry to go off-topic Tim.)

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By TimB4 on 09/24/2023 2:18 PM
I just found out that our board,(and was told it is) based on legal advice, believes that the Covenants can only be amended every 10 years.

I know (believe) this to be incorrect. Unfortunately, if I'm going to disagree with an attorney, I think I need more then saying "that's not what it says."

Please help.

Amendment Language:

Each and every one of the aforesaid covenants, conditions and restrictions shall attach to and run with each and every lot of land, and all titles to, and estates therein, shall be subjected thereto and the same shall be binding upon each and every owner of said lots until July 1, 2021, and shall be extended automatically to apply to each lot for successive periods of 10 years; unless by action of a minimum of Sixty-Seven (67%) per cent of the then owners of lots, it is agreed to change said covenants and restrictions in whole or in part, provided that the instrument evidencing such action or changes must be in writing and shall be duly recorded in the
Register's Office of [name of County], Tennessee. The developer may amend these restrictions unilaterally at any time when he owns over 50 percent of the lots in the subdivision.

NOTE: Developer is no longer in the picture so the last sentence is mute.

1. Attorney is telling the board what it wants to hear - or what the board told the attorney to conclude.
2. Year auto renewals are standard.
3. Amendments at any time with the required member approval percentage is standard.

TerriS6 (California)
Posts: 3,284

Posted:

Correction 10-year auto renewals are standard

ElleN (Idaho)
Posts: 4,420

Posted:

The following site gives answers to this question from attorneys.

https://www.lawyers.com/ask-a-lawyer/trusts-estates/what-does-this-covenant-periods-mean-1642257.html

Some of the attorneys agree with Tim. Some agree with Tim's HOA's Board.

TerriS6 (California)
Posts: 3,284

Posted:

Since developer owning 50% + can amend "at any time," it stands to reason the members can amend at any time.

ElleN (Idaho)
Posts: 4,420

Posted:

A real estate attorney researched this in 2021. He found courts landing on both sides, but with the caveat that the courts are uniform in the western United States on the point (agreeing with Tim's board) while courts in the Eastern United States agree with Tim's (and my) interpretation. See

https://hsblawfirm.com/Connect/Blog/2021/A-Scottish-Legend-and-Open-Question-SC-Landowners

Excerpt:

The question posed in this article arose when researching exactly when parties to CCRs (either the original landowners or successors to title) can effectively amend these documents. In courts across the country, there have emerged two opposing positions: (1) that the ten-year period is only a placeholder with no discernible import, and any amendment by the landowners is effective immediately upon execution, and (2) that the language restricts amendments to become effective only when the next ten-year interval emerges from the fog. Under the second interpretation, for example, if the parties to CCRs execute an amendment on March 31, 2021, but the next ten-year anniversary of the covenants is January 1, 2030, then the amendment does not become effective until the 2030 anniversary.

The article referenced within the link is attached to this post.

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ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TerriS6 on 09/25/2023 6:53 AM
Since developer owning 50% + can amend "at any time," it stands to reason the members can amend at any time.

Developers typically have many rights that are not the same as the rights of post-developer owners.

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By ElleN on 09/25/2023 7:20 AM

Posted By TerriS6 on 09/25/2023 6:53 AM
Since developer owning 50% + can amend "at any time," it stands to reason the members can amend at any time.

Developers typically have many rights that are not the same as the rights of post-developer owners.

Yes, but starting with "unless", it mentions members and developers together and it mentions members first. That applies contemporaneously.

"Each and every one of the aforesaid covenants, conditions and restrictions shall attach to and run with each and every lot of land, and all titles to, and estates therein, shall be subjected thereto and the same shall be binding upon each and every owner of said lots until July 1, 2021, and shall be extended automatically to apply to each lot for successive periods of 10 years; unless by action of a minimum of Sixty-Seven (67%) per cent of the then owners of lots, it is agreed to change said covenants and restrictions in whole or in part, provided that the instrument evidencing such action or changes must be in writing and shall be duly recorded in the
Register's Office of [name of County], Tennessee. The developer may amend these restrictions unilaterally at any time when he owns over 50 percent of the lots in the subdivision. "

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TerriS6 on 09/25/2023 7:39 AM

Posted By ElleN on 09/25/2023 7:20 AM

Posted By TerriS6 on 09/25/2023 6:53 AM
Since developer owning 50% + can amend "at any time," it stands to reason the members can amend at any time.

Developers typically have many rights that are not the same as the rights of post-developer owners.

I do not understand your logic here.

Regardless, of the courts that have looked at this, it seems Eastern U. S. courts agree with Tim, you and me.

This language is so incredibly common that I think the matter deserves more research. What was the intent of the 10 year periods? The western courts insisted there must be a point to these 10-year periods, and allowing owners to amend at any time rendered the 10-year auto renew periods meaningless. It's a fair point, IMO, even if I still land on the side of the Eastern courts' interpretation.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By ElleN on 09/25/2023 7:46 AM
This language is so incredibly common that I think the matter deserves more research. What was the intent of the 10 year periods?

Might this have something to do with either (1) statutes saying covenants "expire after x years unless the Declaration says otherwise... " or (2) revitalization statutes?

TerriS6 (California)
Posts: 3,284

Posted:

I thought I knew what our Declaration said about this but read it again and it's even more confusing, "shall be automatically extended for successive parts of 10 years, unless". Parts of 10 years? I've read this multiple times and never saw the word "parts."

TerriS6 (California)
Posts: 3,284

Posted:

I read that some states require the CC&Rs expire after so many years so the 10 year renewals are to guarantee they don't expire.

TimB4 (Tennessee)
Posts: 21,059

Posted:

I thank all who have assisted with this.

I believe I found a major loophole in the boards argument.

When we purchased 7 years ago, we were given a copy of the covenants.
In that copy is an amendment.
On that amendment is a statement the 67% of the owners desire to amend the covenants.

As I posted, the initial term ran until 2021.
Based on the boards statement to the members that the covenants can only be amended at the renewal dates - it begs to question if the current amendment the board created (and some of the board members have been there since the beginning) is then valid. The answer, it must be as the board has acted on the verbiage of that amendment.

Because I know it will be asked, the amendment concerned giving the Association enforcement authority as the original covenants only gave it to members.

Again, thanks to all who assisted.
This example is the biggest argument I have with the existing board.

Additionally, I believe that if the members agree to any amendments, they aren't going to go through the hassle to challenging it in the courts.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

"shall be extended automatically to apply to each lot for successive periods of 10 years; unless by action of a minimum of Sixty-Seven (67%) per cent of the then owners of lots...."

Seems simple enough to me.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TimB4 on 09/25/2023 8:24 AM
I believe I found a major loophole in the boards argument.

When we purchased 7 years ago, we were given a copy of the covenants.
In that copy is an amendment.
On that amendment is a statement the 67% of the owners desire to amend the covenants.

As I posted, the initial term ran until 2021.
Based on the boards statement to the members that the covenants can only be amended at the renewal dates - it begs to question if the current amendment the board created (and some of the board members have been there since the beginning) is then valid. The answer, it must be as the board has acted on the verbiage of that amendment.

Because I know it will be asked, the amendment concerned giving the Association enforcement authority as the original covenants only gave it to members.

Again, thanks to all who assisted.
This example is the biggest argument I have with the existing board.

If per chance you mean the board's logical inconsistency (which results in having their cake and eating it too) is the biggest problem you have with the existing board, then I would feel the same. It's a red flag, possibly portending future erratic behavior.

BillD16 (Texas)
Posts: 971

Posted:

Quote:

Posted By ElleN on 09/25/2023 7:19 AM
A real estate attorney researched this in 2021. He found courts landing on both sides, but with the caveat that the courts are uniform in the western United States on the point (agreeing with Tim's board) while courts in the Eastern United States agree with Tim's (and my) interpretation. See

https://hsblawfirm.com/Connect/Blog/2021/A-Scottish-Legend-and-Open-Question-SC-Landowners

Excerpt:

The question posed in this article arose when researching exactly when parties to CCRs (either the original landowners or successors to title) can effectively amend these documents. In courts across the country, there have emerged two opposing positions: (1) that the ten-year period is only a placeholder with no discernible import, and any amendment by the landowners is effective immediately upon execution, and (2) that the language restricts amendments to become effective only when the next ten-year interval emerges from the fog. Under the second interpretation, for example, if the parties to CCRs execute an amendment on March 31, 2021, but the next ten-year anniversary of the covenants is January 1, 2030, then the amendment does not become effective until the 2030 anniversary.

The article referenced within the link is attached to this post.

Wow. I totally did not see that coming. I wish y'all could've seen my eyes bug out when I read

ElleN wrote:
> courts are uniform in the western United States on the point (agreeing with Tim's board)

IANAL{1}, indeed!

I love the Brigadoon reference, though.

The thing that mystifies me is how the Brigadoonite lawyers go with

“f amendments could take effect at any time, there would be no purpose in creating renewal terms of ten years.” and

“[Defendant] does not explain what purpose the specific ten-year duration clause would serve under [a non-Brigadoonite interpretation], and we can think of none.”

Seriously, they can't think of anything? I thought this kind of "evergreen" language (ie, "shall be extended automatically") was commonly used to simply prevent documents from expiring? (I'm not really looking for an answer. I'm just very surprised).

Bill

{1} I Am Not A Lawyer. The other matter I posted about is in the thread "tenant in my face" - I'll update as things happen. Next up: man loses eyeball under computer.

HOA Board ex-President
Austin, Texas USA

“You can’t put too much water in a nuclear reactor”

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By BillD16 on 09/25/2023 10:46 AM
[with reference to
https://hsblawfirm.com/Connect/Blog/2021/A-Scottish-Legend-and-Open-Question-SC-Landowners]
[snippage for brevity]

The thing that mystifies me is how the Brigadoonite lawyers go with

“f amendments could take effect at any time, there would be no purpose in creating renewal terms of ten years.” and

“[Defendant] does not explain what purpose the specific ten-year duration clause would serve under [a non-Brigadoonite interpretation], and we can think of none.”

Seriously, they can't think of anything? I thought this kind of "evergreen" language (ie, "shall be extended automatically") was commonly used to simply prevent documents from expiring? (I'm not really looking for an answer. I'm just very surprised).

I agree.

I read through the ten or so decisions very quickly. I did not get any new insights. Western courts feel the language is not ambiguous and agree with Tim's board. By contrast, Eastern courts (specifically, Alabama and North Carolina) say things like the following:

It is . . . well settled that restrictions on the use of land are not favored in the law, and such restrictions are strictly construed in favor of the free use of such property. . . . "Where the language of the restriction is clear and unambiguous, it will be given its manifest meaning, but its construction will not be extended by implication or include anything not plainly prohibited and all doubts and ambiguities must be resolved against the party seeking enforcement."

(Underlined emphasis is mine.)

TimB4 (Tennessee)
Posts: 21,059

Posted:

One of the reasons I brought this issue to the forum is because there are different thoughts on the issue.

It's good info for everyone.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TimB4 on 09/25/2023 12:41 PM
One of the reasons I brought this issue to the forum is because there are different thoughts on the issue.

It's good info for everyone.

It's darn good info AFAIC. I suspect a lot of HOAs are on the wrong side of the law (for their geographic location) on this.

RyanD5 (Arizona)
Posts: 27

Posted:

IANAL and chiming in late here, but I would even go back to intent, which of course we can only speculate about. But I would suggest that anyone creating CC&Rs would not endeavor to restrict an HOA from changing its bylaws when a super majority desires to and to restrict changes to an arbitrary 10 year cycle.

RyanD5 (Arizona)
Posts: 27

Posted:

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By RyanD5 on 09/25/2023 5:20 PM
IANAL and chiming in late here, but I would even go back to intent, which of course we can only speculate about.

To be clear: The courts say the only "intent" that matters is that which is evident from within the governing documents themselves. If the developer is still available by phone, what the developer says he or she intended is 100% not relevant.

Quote:
Posted By RyanD5 on 09/25/2023 5:20 PM
But I would suggest that anyone creating CC&Rs would not endeavor to restrict an HOA from changing its bylaws when a super majority desires to and to restrict changes to an arbitrary 10 year cycle.
I think the one argument that supports declarants using wording making it difficult to change the covenants is that this helps ensure stability. This is also the reason covenants always (or nearly always) require a super majority of all owners to amend the covenants (as opposed to say a simple majority of a quorum of owners at a Special Meeting).

RyanD5 (Arizona)
Posts: 27

Posted:

I understand that intent is largely irrelevant unless documented (and it almost never is).
I would argue that the super majority provides the stability and that any Declarant who's not naïve as to the need of some limited flexibility for a governing board to make changes once in a decade would further hamstring a governing body to a 10 year restriction on changes. The super majority provision doesn't need any reinforcement.

An interesting topic and debate though as I can see both sides.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By RyanD5 on 09/26/2023 7:28 AM
I understand that intent is largely irrelevant unless documented (and it almost never is).

?

The courts often identify "intent" using other verbiage in the governing documents.

MarkS42 (North Carolina)
Posts: 70

Posted:

Quote:

Posted By TimB4 on 09/25/2023 8:24 AM
I thank all who have assisted with this.

I believe I found a major loophole in the boards argument.

When we purchased 7 years ago, we were given a copy of the covenants.
In that copy is an amendment.
On that amendment is a statement the 67% of the owners desire to amend the covenants.

As I posted, the initial term ran until 2021.
Based on the boards statement to the members that the covenants can only be amended at the renewal dates - it begs to question if the current amendment the board created (and some of the board members have been there since the beginning) is then valid. The answer, it must be as the board has acted on the verbiage of that amendment.

Because I know it will be asked, the amendment concerned giving the Association enforcement authority as the original covenants only gave it to members.

Again, thanks to all who assisted.
This example is the biggest argument I have with the existing board.

Additionally, I believe that if the members agree to any amendments, they aren't going to go through the hassle to challenging it in the courts.

TimB4 always seems to me to be a good board member and always provides sage advice. I also see both sides of this issue. I guess my philosophy when in doubt get out. It seems that people on this forum are more aggressive when it comes to legal matters. It only takes one passionate owner to challenge an amendment in court to make it a real headache and possibly cost the homeowners. If a treasurer wanted to be more aggressive with investments, it is a clearly against their fiduciary duties. Why is it not the same with legal matters? I would wait the ten years and get rid of the developer's run on sentence, whether east coast or west coast. Maybe I am too chicken s*** for the job. I would like to hear different perspectives.

TerriS6 (California)
Posts: 3,284

Posted:

https://clarksimsonmiller.com/do-ccrs-expire/#:~:text=Why%20Do%20CC%26Rs%20Expire%3F,to%20have%20an%20expiration%20date.

JoeN6 (Virginia)
Posts: 94

Posted:

The developers rights and privileges to amend at any time most likely arise from the following situation:

Developer buys land and divides into lots , creates cc&rs to give purchasers an idea that they are buying something , and investment is protectid .
A year goes by and he hasn’t sold any , he asks a prospective purchaser, what’s wrong with my properties why aren’t you buying ? “ well ,I like the location and everything , but , your restrictions prohibits having more then one horse , I have three .” “ no problem I’ll change the cc&rs” says the developer . Now he has at least one property sold and one house went up , giving folks an idea that there something there because hey there’s one buyer . I’ve looked at lots of covenants . Some appear to be just written to sell properties.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TerriS6 on 09/27/2023 6:20 AM
https://clarksimsonmiller.com/do-ccrs-expire/

Fantastic contribution, AFAIC. Highlights from this Tennessee HOA management company's article:

... [C]ovenants don’t always last forever. In fact, it’s entirely possible for CC&Rs to expire. There are two ways this can happen. The first is when state law says they expire. For instance, in Florida, covenants that are more than 30 years old expire and essentially become unenforceable.

The second way CCRs expire is when the association’s governing documents say they expire. If a CC&Rs expiration clause is written within the declaration, then the covenants will expire. For example, if your declaration says that covenants have a lifespan of 20 years, then they will no longer be enforceable past that point.

If neither state laws nor the association’s declaration says anything about an expiration, then the covenants will persist until the homeowners choose to terminate them.
...

In the past, real estate attorneys wrote expiration dates into CC&Rs because of the rule against perpetuities. This rule basically required covenants to have an expiration date. The rule, though, is old and outdated. This is why you will normally find expiration clauses in the declarations of older communities. Newer associations tend to have built-in renewal clauses or no expiration dates at all.
...
Many lawyers nowadays craft CC&Rs to include an automatic renewal that would kick in periodically. This is also known as extending the term of declaration. In doing so, homeowners associations can operate without worrying about their covenants becoming unenforceable. Additionally, it covers the HOA should a court rule in the future that CC&Rs must still include termination dates.

If your association’s CC&Rs don’t contain a provision for automatic renewal, consider making an amendment.

RyanD5 (Arizona)
Posts: 27

Posted:

Note that the reason for the renewal clause discussed in the most recent posts is not to restrict when amendments and changes can be made, but to address a concern about perpetuities.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By RyanD5 on 09/27/2023 7:41 AM
Note that the reason for the renewal clause discussed in the most recent posts is not to restrict when amendments and changes can be made

So said courts in Alabama and North Carolina.

But five other states' courts (in Oklahoma, New Mexico, Arizona, Utah and Colorado) said otherwise.

MarkS42 (North Carolina)
Posts: 70

Posted:

At the end of the initial one (1) year term of the Monthly Pest Service Contract and the Seasonal Pest Service Contract,
these Contracts shall renew automatically for successive additional one (1) year terms unless written notice of intent to terminate such Contract is
received from the Customer at least sixty (60) days prior to the termination of the then-current Contract term. Contracts which automatically renew
shall have the same terms and conditions as reflected in the original Contract unless Company provides Customer with written notice of any change
to the terms and conditions thereof, which changes the Company reserves the right to make in its sole discretion.

For our Pest control contract I can terminate the contract after 1 year but I am still on the hook another year of service if late with the written notice.

RyanD5 (Arizona)
Posts: 27

Posted:

Quote:

Posted By MarkS42 on 09/27/2023 8:13 AM
At the end of the initial one (1) year term of the Monthly Pest Service Contract and the Seasonal Pest Service Contract,
these Contracts shall renew automatically for successive additional one (1) year terms unless written notice of intent to terminate such Contract is
received from the Customer at least sixty (60) days prior to the termination of the then-current Contract term. Contracts which automatically renew
shall have the same terms and conditions as reflected in the original Contract unless Company provides Customer with written notice of any change
to the terms and conditions thereof, which changes the Company reserves the right to make in its sole discretion.

For our Pest control contract I can terminate the contract after 1 year but I am still on the hook another year of service if late with the written notice.

It's apples and oranges. You and the company could still decide to mutually cancel or modify the contract at any time. They probably wouldn't ever want to but for example if you became abusive to their employees they might agree to let you out of your contract. Also, if you wanted to upgrade your contract with additional services I'm sure they'd be more than happy to modify the contract in that way.

Quote:
Posted By ElleN

So said courts in Alabama and North Carolina.

But five other states' courts (in Oklahoma, New Mexico, Arizona, Utah and Colorado) said otherwise.

Yes, and courts make mistakes and get things wrong too, or it was ineffectively argued.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JoeN6 on 09/27/2023 6:34 AM
[Slight editing of punctuation by ElleN, so I can process the writing quickly in the future.] The developers rights and privileges to amend at any time most likely arise from the following situation:

Developer buys land and divides into lots, creates cc&rs to give purchasers an idea that they are buying something, and investment is protected. A year goes by and he hasn’t sold any. He asks a prospective purchaser: What’s wrong with my properties? Why aren’t you buying? “Well ,I like the location and everything, but, your restrictions prohibit having more than one horse. I have three.” “No problem. I’ll change the cc&rs,” says the developer. Now he has at least one property sold and one house went up, giving folks an idea that there something there because hey there’s one buyer. I’ve looked at lots of covenants. Some appear to be just written to sell properties.

I think you put it well. As far as I am concerned, as one explores the two different conclusions at which courts in the East and West have arrived, your point is something to bear in mind.

For anyone wanting to explore the reasoning of the Western courts, here are links to the decisions:

In re Wallace’s Fourth Southmoor Addition to City of Enid, 874 P.2d 818, 821 (Okla. Ct. App. 1994).
https://law.justia.com/cases/oklahoma/court-of-appeals-civil/1994/20124.html

Scholten v. Blackhawk Partners, 909 P.2d 393, 396 (Ariz. Ct. App. 1995).
https://casetext.com/case/scholten-v-blackhawk-partners

Swenson v. Erickson, 998 P.2d 807, 815 (Utah 2000).
https://casetext.com/case/swenson-v-erickson-1

Mauldin v. Panella, 17 P.3d 837, 839 (Colo. Ct. App. 2000).
https://casetext.com/case/mauldin-v-panella

Heltman v. Catanach, 229 P.3d 1239, 1242 (N.M. Ct. App. 2009).
https://law.justia.com/cases/new-mexico/court-of-appeals/2009/f580-f6d1-11307.html

I am interested on this both because it's a thread here but also because I am communicating with someone in a western state on this very same topic. Call this someone, "Jake." Jake's HOA (like many other HOAs) has a clause like the one TimB4 quoted above. Jake's HOA just had a vote to amend (to limit rentals in particular, quite strict ways). According to the board, the proposed amendment passed. But if the five western states' decisions hold in Jake's state, then the timing is off, and the amendment is not legally valid.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By RyanD5 on 09/27/2023 8:24 AM

Yes, and courts make mistakes and get things wrong too, or it was ineffectively argued.

You seem to be saying that HOAs and their attorneys should ignore case law.

AFAIC: Attorneys read the case law so that they may give useful advice to clients. If TimB4's HOA were in Colorado, then the correct advice IMO would be that, were the HOA to pass, by vote, a proposed amendment in 2023 or 2024 (among other dates), then per Colorado common law (meaning case law, in particular the 2000 court of appeals decision Mauldin v. Panella) the proposed amendment would be invalid. The attorney should advise to wait until 2031 to pass an amendment, with the amendment stating that it goes into effect on July 1, 2031.

I am not having any of your "anything is possible" advice. Associations need to make choices based on the best available information.

TerriS6 (California)
Posts: 3,284

Posted:

The effective period of a Declaration is completely separate from its content. If it could be amended once every 10 years, it would all have to happen on one day, the meetings, the draft amendment, the notices, the revisions, the election alone takes several months. For a court to say amendments only once in 10 years is ridiculous.

MarkS42 (North Carolina)
Posts: 70

Posted:

Quote:

Posted By ElleN on 09/27/2023 8:31 AM

For anyone wanting to explore the reasoning of the Western courts, here are links to the decisions:

In re Wallace’s Fourth Southmoor Addition to City of Enid, 874 P.2d 818, 821 (Okla. Ct. App. 1994).
https://law.justia.com/cases/oklahoma/court-of-appeals-civil/1994/20124.html

The Wallace’s Fourth Southmoor Addition to City of Enid makes a very strong case. Tim's CCR suffers the same fate. It is not clear when the amendments voted by owners take effect. The CCR specifically specifies when the developer can make changes.
"The developer may amend these restrictions unilaterally at any time when he owns over 50 percent of the lots in the subdivision.

Especially for a rental amendment you would want a 100% unanimous decision before the 10 year period. Rental restrictions are hard enough to put in place.

TerriS6 (California)
Posts: 3,284

Posted:

In CA an amendment takes effect at recording.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Observation about the 10-year-period and having to wait until the next "window" for amendments to the CC&Rs to take effect:

I'm assuming the 10-year requirement has some basis in protecting the homeowners' rights. Forcing the owners to wait until the next open window for an amendment to take effect can protect the interests of a minority at the expense of the majority who wanted to living under the amended provisions. How does this protect the majority's rights? And this reading becomes even more nonsensical when you take into account that some CC&Rs are poorly written or unworkable and need to be amended. Forcing communities to live with mistakes, even temporarily, doesn't serve anyone's needs.

(I'd be happy to hear that there is a clear and consistent rationale behind the 10-year waiting period, but I'm not hopeful.)

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By CathyA3 on 09/27/2023 11:31 AM
Observation about the 10-year-period and having to wait until the next "window" for amendments to the CC&Rs to take effect:

I'm assuming the 10-year requirement has some basis in protecting the homeowners' rights. Forcing the owners to wait until the next open window for an amendment to take effect can protect the interests of a minority at the expense of the majority who wanted to living under the amended provisions. How does this protect the majority's rights? And this reading becomes even more nonsensical when you take into account that some CC&Rs are poorly written or unworkable and need to be amended. Forcing communities to live with mistakes, even temporarily, doesn't serve anyone's needs.

(I'd be happy to hear that there is a clear and consistent rationale behind the 10-year waiting period, but I'm not hopeful.)

I think part of the problem here is that this forum has seen enormous traffic on the subject of amending. Time and again, all the current regulars here seem to be under the impression that amendments may be done at any time. The regulars attest that the real problem is getting the vote on proposed amendments done legally and with the required super majority of all owners.

After reading the five court decisions linked above, along with many of the citations within the decisions, I now think people here (including myself) have been operating and promoting a myth -- an urban legend even.

I believe the purpose of ten-year renewal periods is, simply and in one word, stability. Covenants are supposed to be hard to change. I think all the regulars here might admit that this is why the super majority (instead of a mere simple majority) requirement exists. I think this is why a super majority of all owners is required, and not a super majority of a mere quorum at a special meeting.

CathyA3 suggests that not allowing a super majority to amend at any time oppresses a super majority of owners. She is taking the position that "majority rules" is a sound principle of governance. I say: No,not always. A majority should not be able to take away certain fundamental, "inalienable" rights. Where each of us draws the line on whether a right is fundamental/inalienable is perhaps the bigger question.

What is far more salient in my view is this: Owners bought their property with eyes wide open. Clauses like the one quoted in the first post here are ubiquitous. (I may post more on the reasons, per the case law and authorities, behind this ubiquity in a subsequent post.) If a buyer does not like these terms (the covenants), then she or he should go buy somewhere else. If a buyer does like the terms (the covenants, including the covenant on amending), then he or she will find some solace in knowing the terms are not easy to change.

Caveat: The courts do seem consistent in saying that if 100% of owners want to amend or even terminate, the case law supports their doing so.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By ElleN on 09/28/2023 6:12 AM
... snip ...

CathyA3 suggests that not allowing a super majority to amend at any time oppresses a super majority of owners. She is taking the position that "majority rules" is a sound principle of governance. I say: No,not always. A majority should not be able to take away certain fundamental, "inalienable" rights. Where each of us draws the line on whether a right is fundamental/inalienable is perhaps the bigger question. .... snip ....

I think that there isn't a hard and fast line, or shouldn't be. It depends on why the homeowners want to amend.

For example, we amended our parking restriction because it was poorly written and couldn't be reasonably enforced the way it was. Our board had the option of not enforcing at all, enforcing what they thought the restriction was intended to say but didn't, or try to enforce it exactly as written (which wasn't possible since a couple of the sentences were contradictory and a group of residents were not addressed at all). This was our lawyer's opinion, by the way.

The restriction was wrong from the get-go, so you could argue that people should have known when they bought their homes. But we all know that they don't, for a variety of reasons. I also think that "they should have known" can be used as a rationale for not addressing a problem. Not often, of course, but it is a possibility, so I'm wary of taking a hard line.

At any rate, in cases like our parking restriction, it makes no sense to force a community to live with a restriction that doesn't work for them. Rules should serve the needs of the community - a community doesn't exist for the well being of a rule.

I recognize that there can be good reasons to force homeowners to slow their role. The big one is that many of them don't understand HOAs or how they work, and they may want to make changes that cause problems down the road. (A competent attorney should protect against this, but there are no guarantees.) On the other hand, many never learn and you always have an influx of mew and clueless owners. So that's not entirely persuasive.

I suspect - but have no way of proving - that 10-year limitations on amending CC&Rs have their origins in protecting the property rights of a small and specific group of the well-healed and connected (because politicians) who don't want the rabble to ruin things for them before they've made their nut.

On the other hand, on my list of Things to Be Outraged Over, this is pretty far down the list....

TimB4 (Tennessee)
Posts: 21,059

Posted:

I have determined, because I also need to work on the bylaws, that I will ask the board to approve an attorney to rewrite that section to:

1) Continue the covenants (as that is certainly the intent), renewing every 10 years.

2) Language to allow the membership, with 67% approval, to amend the covenants at anytime and have them be in effect once recorded and published to the membership.

3) Draft the amendment so it goes into effect at the next renewal period.

This way:
1) The covenants are preserved in perpetuity.
2) The covenants, after the next renewal, can then be amended at anytime the membership desires.
3) Arguments of when the covenants can they be amended become mute.

ElleN (Idaho)
Posts: 4,420

Posted:

Observations:

-- Over some two centuries it appears the law has not favored land restrictions lasting forever. I suppose this reflects societal desires concerning freedom of land use.

-- On the other hand, the courts have observed many times that restrictive covenants are used to ensure stability and continuity. From a much quoted decision: "Historically, restrictive covenants have been used to assure uniformity of development and use of a residential area to give the owners of lots within such an area some degree of environmental stability. To permit individual lots within an area to be relieved of the burden of such covenants, in the absence of a clear expression in the instrument so providing, would destroy the right to rely on restrictive covenants which has traditionally been upheld by our law of real property." From another decision: "This would undermine the stability of the community, rather than promote stability as covenants and restrictions are intended to do." To see other cases that speak of this, google on {"stability" "covenants"} site:https://law.justia.com/cases/.

-- I believe automatic renewal covenants (like the one quoted in the first post of this thread) have been used going back to at least the early 1900s. Such covenants are an attempt to satisfy competing interests: Yes, society wants people to be able to use land they own pretty much the way they want. But society also wants neighbor Q to be able to count on neighbors X, Y and Z using the land a certain way, so as to protect the value of neighbor Q's land (and X, Y and Z's land as well, of course). The "rules" here are a part of the social contract.

-- About the wording of 10-year (or 20-year or x-year) renewal period covenants, the 2009 New Mexico Heltman court observed:
Defendant contends that the covenant is unambiguous and that the language providing that after January 1, 1965, the covenants "shall be automatically extended for successive periods of ten years unless by a vote of the majority of the then[-]owners of the lots it is agreed to change the said covenants in whole or in part," means that after January 1, 1965, a majority of owners could agree to modify the covenants at any time. We disagree. While we recognize that Defendant's proposed interpretation has some logical force, since the covenant provides that the ten-year extensions will remain in place unless the majority chooses to modify them, to interpret the language as Defendant proposes would render meaningless the portion clearly providing that extensions of the covenant would be for ten-year periods. Defendant effectively asks this Court to interpret the language as if it simply reads that the covenants "shall be automatically extended unless by a vote of the majority of the then[-]owners of the lots it is agreed to change the said covenants in whole or in part." He does not explain what purpose the specific ten-year duration clause would serve under such an interpretation, and we can think of none. Therefore, we do not find this provision to be as clear as Defendant asserts. Nevertheless, we conclude that this is not a case in which the rule of construction favoring the unencumbered use of property should apply. This Court "will not construe a deed restriction so as to create an illogical, unnatural, or strained construction," and "[w]e will give words in a deed restriction their ordinary and intended meaning." Id. Applying these rules of construction, we decline to adopt a reading of this provision that eliminates the ten-year period for extensions that is plainly specified in the covenant.

-- About the rule against perpetuities (as mentioned in the Simson HOA managers article), from the 1995 Arizona Scholten decision:
Defendants have suggested three other possible purposes for the ten-year extension provision, none of which we find persuasive. First, without providing support, they argue that the ten-year renewal periods were included to avoid running afoul of the rule against perpetuities. We reject this argument, though, because the rule against perpetuities does not apply to restrictive covenants. See 7 Thompson on Real Property § 3162 at 121 (1962) ("Restrictive covenants, though unlimited as to time, are not void as transgressing the doctrine of perpetuity . . . . Restrictions are not estates in land, or even an equitable interest in land.").

-- About other reasons for the 10-year extension periods, again from the 1995 Arizona Scholten decision:

Next, again without support, defendants contend that the subject language is designed to avoid any conceivable conflict with state statutes that specify a maximum term for restrictive covenants affecting real property. This argument must also be rejected because, while some states have statutes that place a maximum limit on the duration of restrictive covenants, Arizona does not.

Last, defendants argue that, when the duration of the restrictive covenants is not explicitly stated in the document itself, courts will often construe the duration to be limited to a "reasonable time." Compare 5 R. Powell, Law of Real Property § 678 at 60-126 (1991) (stating "some courts" have taken this approach) with G. Pindar, American Real Estate Law § 19-196 (1976) (stating there is "widespread recognition" of this doctrine). The purpose of the "reasonable time" rule is to allow a court to act when burdensome restrictions have outlived their usefulness. See Pindar § 19-196. Thus, defendants contend the ten-year renewal language might have been included to prevent the courts from providing their own view of what is a reasonable time.

Defendants, however, have not provided, and we have not found, any case in Arizona that has applied this "reasonable time" rule. Instead, Arizona courts have merely applied the general rule that the duration of the restrictive covenant is to be determined by the intent of the parties. Shalimar, 142 Ariz. at 46, 688 P.2d at 692. Moreover, if the subject property owners are free to alter the restrictions, there is no danger that the restrictions might outlive their usefulness, and therefore no need for a court to limit the application of the covenants to only a "reasonable time."

Defendants, however, have not provided, and we have not found, any case in Arizona that has applied this "reasonable time" rule. Instead, Arizona courts have merely applied the general rule that the duration of the restrictive covenant is to be determined by the intent of the parties. Shalimar, 142 Ariz. at 46, 688 P.2d at 692. Moreover, if the subject property owners are free to alter the restrictions, there is no danger that the restrictions might outlive their usefulness, and therefore no need for a court to limit the application of the covenants to only a "reasonable time."

-- The 1987 Alabama Hill decision ruled that amendments could be made at any time. The 1995 Arizona Scholten decision said this about the Alabama Hill decision:

In Hill, however, the Alabama court found the duration clause ambiguous as to when an amendment becomes effective and, therefore, applied the rule of strict construction favoring the free use of land. 505 So.2d at 386. Unfortunately, the court did not address the argument that such construction rendered meaningless the provision for ten-year extension periods. Nor did the court offer any insight into what purpose the extension period might serve under its interpretation. Perhaps, had the Alabama court considered this argument and given meaning to the ten-year extension period, it would not have interpreted the provision as it did. In any event, we do not find Hill persuasive.

ElleN (Idaho)
Posts: 4,420

Posted:

CathyA3 (and other condominium owners): Do your covenants have an automatic extension clause like the one TimB4 quoted?

I am thinking the covenant in the first post above is largely about land-owning neighbors being able to rely on the covenants ensuring stability in the use of land.

My former condominium has no such automatic renewal yada clause.

My former HOA (some 2000 single family homes on their own lots) does have such an automatic renewal clause.

ElleN (Idaho)
Posts: 4,420

Posted:

I too am at the point where I think doing this in particular, for the next set of proposed amendments, seems the best protection against challenges down the road:

Quote:
Posted By TimB4 on 09/28/2023 7:40 AM
3) Draft the amendment so it goes into effect at the next renewal period.

I bear in mind the possible (likely?) invalidity of the HOA amendment created mid-term several years ago. This (likely invalid?) amendment) allows the HOA (and not just any owner) to enforce the coveants. Oy.

You are a brave soul to re-enter the fray. I hope it is not as bad as I am picturing.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By CathyA3 on 09/28/2023 7:29 AM
Posted By ElleN on 09/28/2023 6:12 AM
... snip ...

CathyA3 suggests that not allowing a super majority to amend at any time oppresses a super majority of owners. She is taking the position that "majority rules" is a sound principle of governance. I say: No,not always. A majority should not be able to take away certain fundamental, "inalienable" rights. Where each of us draws the line on whether a right is fundamental/inalienable is perhaps the bigger question. .... snip ....

I hear you. But I also think that this does not involve a restriction in the use of one's own unit. It's a restriction about use of common area or limited common area, no?

Historically in the courts, I think the distinction has been important.

RyanD5 (Arizona)
Posts: 27

Posted:

Having read the clause many times I have flip-flopped on its interpretation. The conclusion here really is that it is poorly worded because multiple interpretations are valid, just like the phrase "You'd be lucky to get him to work for you."

As IANAL, I don't know courts go about handling language with multiple valid interpretations (which I presume is a fairly common cause of disputes), but I would like to think that the proper way to rule on this would be to err on the side of freedom and the less restrictive interpretation. After all, if a stricter implementation is desired in this case, a super majority can vote (at any time!) to tweak the wording to ensure that changes can only be made once every 10 years. I can't imagine such a proposal passing in 99% of HOAs.

What surprises me here is the discussion about stability. Maybe there are rare exceptions but I don't think it is common at all to have HOA CC&Rs that are "unstable" because super majorities frequently vote to make changes. In the 25 years of being a member of multiple HOAs, I think I've seen one amendment made and passed and it took a lot of effort.

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