Creation and Termination of CC&Rs
Binding neighborhood covenants are created by written documents (e.g., a declaration of covenants). In most cases, they will already be in existence at the time a purchaser takes interest in a parcel of land or house. If they are simple and brief, they may appear in a deed transferring property, but in most cases, a deed will only refer to covenants and incorporate them by reference, e.g., the deed will convey the land from grantor to grantee "subject to all existing CC&Rs or easements of record," (or similar language).
Covenants Running With the Land
Most neighborhood covenants "run with the land." This means that they subject the property itself, and not its current owners, to the conditions or restrictions contained in them. Thus, the liability to perform a covenant, refrain from doing something, and/or take advantage of a covenant passes with the land itself to any subsequent owners.
In order for covenants to run with the land, they must be included in a deed transferring property, and they become part and parcel of the "chain of titles." The covenants remain binding on each successive owner of the property, whether or not the new owner has been advised of them.
In order for a benefit or burden to run with the land, requirements under the Statute of Frauds must be met. However, if any covenants are contained in the deed itself, acceptance of the deed constitutes satisfaction of the Statute of Frauds, as though the purchaser had signed the covenants himself.
Expiration or Termination
Neighborhood covenants may be permanent, expire naturally, or have a declared term of existence. For example, a builder will often initiate covenants running with each lot in a subdivision, that address such restrictions as type of dwelling that can be constructed on a lot (e.g. single family structure only) or setback from street (e.g. minimum of 100 feet).
Once the houses have been built upon the lots, the covenants regarding setback and type of dwelling naturally expire as between the builder and the purchasers of the lots. However, more likely than not, a homeowners' association will adopt the prior covenants to prevent subsequent homeowners from either converting their homes to multiple-family dwellings or building additions to the home that are closer than 100 feet to the street. In such an example, the builder is no longer a party to the covenants, but they nonetheless will be binding among subsequent homeowners represented by the association.
Such a transfer of covenants is most often provided for by the developer in the initial covenants filed with the city or county at the time the subdivision development is approved. An example contained in a declaration of covenants might read something like, "After 50 percent of the total lots in the Subdivision have been sold by the undersigned developer, or after ten (10) years, whichever occurs first, the "Triple Crown Homeowners Association" shall be established as a not-for-profit corporation. The owners of each lot shall collectively own one share in the Homeowners Association. It shall be the duty of The Homeowners Association to enforce these covenants and restrictions, majority rule shall prevail except as otherwise stated herein."
CC&R Terms of Existence
Commonly, CC&Rs have a declared term of existence, after which they expire naturally. The positive side of having covenants with fixed terms of life is that subsequent property owners are not burdened with restrictions that have become arcane, dated, or no longer desirable. For example, in 1950, a homeowners association wanted to preserve the charm of a residential area and created covenants restricting the sale of any properties for use only as single-family homes. But as the area grew, commercial properties surrounded the residential area, making it unattractive to prospective homebuyers.
A well-written covenant with a term life would have contemplated this scenario and limited the restriction to 25 or 30 years, for example. At that time, new owners could voluntarily agree to extend the life of the covenants or adopt new ones. Or, with expired covenants, they could petition local zoning boards to rezone their neighborhood as commercial or multiple-family residential properties, to maximize the return on their investments.
It is also possible that some expired covenants are converted into new zoning laws affecting the residential area, and will therefore be binding on subsequent property owners as well.
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