Homeowner Association's Restrictions are Valid and Enforceable


In January 1996, the California Supreme Court issued a significant decision and established a new rule in connection with enforcement of restrictions against residential real property which will benefit homeowners associations and the owners of properties in common interest developments. The decision is Citizens for Covenant Compliance v. Anderson.

The facts of the case are simple. Mr. and Mrs. Anderson purchased two adjacent lots in separate subdivisions. The developers of the subdivisions had previously recorded declarations of covenants, conditions and restrictions ("CCR's") which limited the uses of the lots to single family residences. None of the deeds in the chain of title to the two lots mentioned the CCR's, although the Andersons' title insurance reports identified the CCR's.

The Andersons wanted to plant and harvest grapes, operate a winery, and keep llamas on their properties. Neighbors objected and filed suit to enforce the CCR's. The trial court found the CCR's to be unenforceable, and the appellate court affirmed.

Why, you may ask, did this dispute arise? How could the Andersons, who purchased real property restricted to residential uses, take the position that they were entitled to operate a vineyard and winery and keep exotic pets?

Covenants That Run With the Land

The answer lies in the fact that the law applicable to this case involved "the ancient doctrines of covenants that run with the land and equitable servitudes," legal doctrines which date back centuries to English common law adopted by this country, and which the Supreme Court observed has caused the law in this area to become "an unspeakable quagmire."

In substance, compliance with these ancient doctrines required that deeds to lots must contain an express statement to the effect that the lot was intended to be conveyed subject to the CCR's; otherwise, the law held that there was no evidence that the purchaser of the lot had agreed to be bound by the provisions of the CCR's recorded by the developer, even though recordation of the CCR's expressed the developer's intention to bind the land.

The failure to include such statements in deeds could cause "byzantine" results. As the Court stated, "is it what anyone intended? Would anyone really intend a subdivision in which the order in which property is sold determines what restrictions are enforceable, where some landowners are not bound by restrictions of record and cannot enforce them against anyone, where some owners can enforce them against some property but not others and not against each other, and where some landowners are bound by the restrictions as against some owners but not against others who would be powerless to enforce them?"

The Court also stated that "this situation dramatically complicates title searches. Instead of simply searching for restrictions of record in order to know exactly what is being purchased, a prospective buyer must search the chain of title of all previously sold property in the tract."

The Supreme Court disagreed with the uncertain state of the law. Since the CCR's were recorded before any of the lots in the subdivisions were sold, all buyers had "constructive" notice of their existence and should be deemed to have agreed to abide by their provisions.

Restrictions are Enforceable if Recorded

Accordingly, the Supreme Court overruled the appellate court and adopted the following rule: If a declaration establishing a common plan for the ownership of property in a subdivision and containing restrictions upon the use of the property as part of the common plan, is recorded before the execution of the contract of sale, describes the property it is to govern, and states that it is to bind all purchasers and their successors, subsequent purchasers who have constructive notice of the recorded declaration are deemed to intend and agree to be bound by, and to accept the benefits of, the common plan; the restrictions, therefore, are not unenforceable merely because they are not additionally cited in a deed or other document at the time of the sale."

Applying the new rule to the Andersons' situation, the Supreme Court held that the omission from the Andersons' deeds of reference to the CCR's did not make them unenforceable. "The CCR's were recorded before any of the parcels were sold, thus providing constructive notice to subsequent purchasers; they state an intent to establish a general plan for the subdivisions binding on all purchasers and their successors; and they describe the property they are to govern." Therefore, the Andersons' property was bound by the CCR's and the neighbors were entitled to enforce them. [See also, Pinnacle Museum Tower Assn. v. Pinnacle Market Development, 55 Cal.4th 223 (2012).]

Summary

This decision is a landmark which will greatly assist property owners in general and homeowners associations in particular. No longer can an owner take the position that because the owner's deed did not expressly refer to the CCR's, they are unenforceable, requiring the enforceability of the restrictions to be litigated. So long as the CCR's are recorded and are disclosed to potential buyers by way of ordinary title searches, the buyer will be deemed to take property which the buyer purchases subject to the provisions of the CCR's.

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© BRIGIT S. BARNES & ASSOCIATES, INC.