Category: Opinion

This simple example compares the decisions of two state Supreme Courts, California and North Carolina, with respect to their holdings on the validity of CC&R amendments.  In the 2004 California case, Villa de Las Palmas[i], the HOA was subject to the state’s association statutes, the Davis-Stirling Act.  In the 2006 North Carolina case, The Ledges HOA[ii], the association was not subject to the state’s Planned Community Act.  Let’s examine the court’s reasoning in these two holdings.  

 Villas de Las Palmas

The questions we confront in this case are whether use restrictions added to a declaration through an amendment and recorded after a homeowner has purchased an individual unit bind such an owner . . .

 We conclude that under the plain and unambiguous language of sections [of the Davis-Stirling Act] 1354, subdivision (a), and 1355, subdivision (b), use restrictions in amended declarations recorded subsequent to a challenging homeowner’s purchase of a condominium unit are binding on that homeowner, are enforceable via injunctive relief under section 1354, subdivision (a), and are entitled to the same judicial deference given use restrictions recorded prior to the homeowner’s purchase.

 Several provisions of the Act allow for the amendment of the declaration. . . .  “Except to the extent that a declaration provides by its express terms that it is not amendable, in whole or in part, a declaration which fails to include provisions permitting its amendment at all times during its existence may be amended at any time.”

 For the following reasons, we conclude that use restrictions added to a declaration by amendment bind not only subsequent purchasers, but current homeowners as well.

 Plainly read, any amendment duly adopted under this subdivision is effective against all homeowners, irrespective of when the owner acquired title to the separate interest or whether the homeowner voted for the amendment.

 The court also made the additional comments on HOA governance and the application of the Restatement of Servitudes.  Note that there is a clear absence of concern for the protection of individual liberties, and, once again as we have seen by the Reporter’s comments in the Restatement of Servitudes[iii], the presumption of an unwavering and full understanding of the HOA legal scheme and the public’s preference for HOAs.

 The declaration is often referred to as the development’s constitution (see Rest.3d Property, Servitudes, § 6.10, com. a, p. 1969)

 To allow a declaration to be amended but limit its applicability to subsequent purchasers would make little sense. A requirement for upholding covenants and restrictions in common interest developments is that they be uniformly applied and burden or benefit all interests evenly. [restrictions must be “uniformly enforced”] [sic]; Rest.3d Property, Servitudes, § 6.10, com. f, p. 200.).  This requirement would be severely undermined if only one segment of the condominium development were bound by the restriction. . . . This would undermine the stability of the community, rather than promote stability as covenants and restrictions are intended to do.

 [The defendant’s position would lead to the conclusion that] unanimous consent would be needed, which would often be unattainable.  The language of section 1355(b), however, makes clear that a simple majority is all that is required before an amendment becomes effective.

 Subjecting owners to use restrictions in amended declarations promotes stability within common interest developments. . . . We further observed that “anyone who buys a unit in a common interest development with knowledge of its owners association’s discretionary power accepts ‘the risk that the power may be used in a way that benefits the commonality but harms the individual.’

The Ledges HOA

Note that the North Carolina court ignores the common law Restatement of Servitudes and looks just to contract law. 

The dispositive question before the Court is to what extent the homeowners’ association may amend a declaration of restrictive covenants.

 We hold that amendments to a declaration of restrictive covenants must be reasonable. Reasonableness may be ascertained from the language of the declaration, deeds, and plats, together with other objective circumstances surrounding the parties’ bargain, including the nature and character of the community.

 Because we determine that the amendment to the declaration . . ., which authorizes broad assessments “for the general purposes of promoting the safety, welfare, recreation, health, common benefit, and enjoyment of the residents of Lots in The Ledges as may be more specifically authorized from time to time by the Board,” is unreasonable, we conclude that the amendment is invalid and unenforceable. [The court is saying that individual, specific amendments is the approach to take, as would be expected under contract law].

 [I]n a community that is not subject to the North Carolina Planned Community Act, the powers of a homeowners’ association are contractual and limited to those powers granted to it by the declaration.  {Obviously, these HOA acts modify contract law for HOAs.  The “why” has never been answered.]

 The Amended Declaration contains substantially different covenants from the originally recorded Declaration . . . .

 The word covenant means a binding agreement or compact benefitting both covenanting parties. . . . A covenant represents a meeting of the minds and results in a relationship that is not subject to overreaching by one party or sweeping subsequent change.

 The existence of definite and certain assessment provisions in a declaration does not imply that subsequent additional assessments were contemplated by the parties, and courts are “‘not inclined’” to read covenants into deeds when the parties have left them out.

 In a community that is not subject to the North Carolina Planned Community Act, the powers of a homeowners’ association are contractual and are limited to those powers granted to it by the declaration.

 Amendment provisions are enforceable; however, such provisions give rise to a serious question about the permissible scope of amendment, which results from a conflict between the legitimate desire of a homeowners’ association to respond to new and unanticipated circumstances and the need to protect minority or dissenting homeowners by preserving the original nature of their bargain.

 The supreme court takes note of the lower appellate court’s reasoning,

[T]hat the plain language of the Declaration is sufficient to support any amendment thereto made by a majority vote of Association members, noting “the declaration provides, ‘that any portion of the restrictive covenants may be released, changed, modified or amended by majority vote of the then property owners within this Subdivision.’

 But provided its opposing views,

Respondents contend that the Declaration of Restrictive Covenants expressly permits the homeowners’ association to amend the covenants; thus, any amendment that is adopted in accordance with association bylaws and is neither illegal nor against public policy is valid and enforceable, regardless of its breadth or subject matter. We hold that a provision authorizing a homeowners’ association to amend a declaration of covenants does not permit amendments of unlimited scope; rather, every amendment must be reasonable in light of the contracting parties’ original intent.

 “The law will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the covenant agreement permitted a majority to make changes in existing covenants.”

 This Court will not permit the Association to use the Declaration’s amendment provision as a vehicle for imposing a new and different set of covenants, thereby substituting a new obligation for the original bargain of the covenanting parties.

 Questions

Which court supports the New America of HOA-land?   Which court supports the constitutional protections of individual rights and freedoms?  Which court relied on those special and separate laws for homeowners associations?

^[ii] Armstrong v. Ledges Homeowners Ass’n, Inc., 633 S.E.2d 78 (N.C. 2006).

[iii] From the Forward: “Professor Susan French [Reporter (chief editor/contributor) for this Restatement] begins with the assumption . . . that we are willing to pay for private government because we believe it is more efficient than [public] government  . . . . Therefore this Restatement is enabling toward private government, so long as there is full disclosure . . . .”

Given the current dismal state of affairs with our economy, and the increasing rate of HOA/condo foreclosures, I have been doing a lot of serious pondering (ahem!) on this major threat to the survival of HOA-land.   I think I hit upon the only real solution to the HOA foreclosure problem, taking a cue from the federal government bailout of the mortgage industry, banks, and GM.  I am not proposing another government bailout.  Oh no!

 Instead, I’m proposing a private corporation bailout.  You know, like the Bank of America bailout of Merrill Lynch, etc.   But, the major obstacle to this plan was, WHO?  I thought and thought of candidates.  In these dire circumstances it had to be a “true believer”,  a corporation that had faith in HOA-land, and one that would fight tooth and nail to preserve HOA-land from collapse.  Only one stood out, loudly and clearly:   Community Associations Institute (CAI).  But, would they?

 I pondered a little more, just a little more, and the answer was an obvious, thunderous, “Yes they would!”   Isn’t CAI promoting the adoption of UCIOA, that national top-down imposition of separate laws for HOA-landers? Doesn’t it already have  cadres lobbying to protect HOAs against constitutional encroachments in every state? I recently explained how this national organization, once an educational organization, reformed themselves into a business trade organization in order to be able to lobby state legislatures in order to protect HOA-land.

 In short, CAI has been setting itself up as the national private authority, a sort of Board of National HOA Governors, on local community governance through the adoption of uniform planned community acts that perpetuate the current anti-American HOA governments. In effect, the super, privatized agency to replace the US Constitutional system of government. (Part II, The Foundations of HOAs).

 It is not far-fetched that CAI, with all its political influence, would jump at the chance to bailout HOAs.  And, in exchange for its financial assistance, there is the standard, business quid pro quo:  control of the industry by controlling the individual HOA boards of directors.  Yes, unlike banks, CAI does have people in place to manage and oversee CAI’s interests, like any other takeover corporation.  The $$$$?  That’s easy to come by.  All CAI has to do is to strengthen its binding agreements with the lenders and FHA, Fannie May and Freddie Mac. No problem here!  Isn’t this the modus operandi currently behind PUD statements and the 20 – 30 year restrictions on terminating an HOA?  As investors would say, It’s a done deal!

 I think this is a win-win solution.  Everyone would be happy.  As for lack of constitutional protections and secessionist philosophy, c’mon, get with it!  Nobody cares about that, especially the politicians.  Trust me.  It would be a done deal.

Would someone please let CAI know — quickly.

This Goldwater Institute Policy Brief on the lack of knowledge of basics civics by Arizona students illustrates one of the factors that have permitted the establishment of the New America of HOA-lands. (Learn more about the New America here).

 I’ve repeatedly made reference to the “conspiracy of silence” and the “unspoken alliance” that are responsible for the lack of information on the downside of living in homeowners associations, and on the exchange of civil rights and freedoms for property values. These students will be living, for the increasingly most part, in a private government regime with no constitutional protections. “What you don’t know can’t hurt you” seems to be the approach of pro-HOA supporters that include, aside from the national lobbying organization, CAI, legislators, judges, attorneys, and elected officials who seem to be unaware of this basic understanding of American government.

 Learn more about the second form of local government that exists across the country, the corporate, authoritarian regime that denies the Bill of Rights under the suspect constructive notice “contracts”, which have been upheld by the courts as a legitimate surrender of one’s civil liberties. Visit: American governments: HOAs under servitudes & Public government under the Constitution. And, shorter and more to the point about the role and function of public government, visit: Government is defined by a “social contract”; HOAs by the new social contract, the CC&Rs.