Coeur d’Alene, Idaho, October 3, 2017. If you own residential or commercial land, you’ve probably seen Covenants, Conditions, and Restrictions (“CC&Rs”). Many landowners encounter CC&Rs when they purchase a home in a planned neighborhood overseen by a homeowner’s association (“HOA”). There are hundreds of HOAs in Kootenai County alone. Therefore, homebuyers should know both what CC&Rs do in general and what specific CC&Rs apply to land they are considering.
CC&Rs are triggered by a developer’s subdivision plan after a developer buys land that he/she plans to subdivide. Before selling the subdivided lots, the developer will usually have CC&Rs prepared, because most cities and counties require them. Those CC&Rs will contain a legal description of the property to which they apply. The CC&Rs are then filed at the Recorder’s Office of the county where the property is located. That way, future lot buyers will have legal notice of the CC&Rs before they buy.
Developers prepare CC&Rs for many reasons. A primary reason is to promote the marketability of subdivided lots. CC&Rs can promote marketability by detailing how services like utilities, maintenance, and repair will be provided. For example, CC&Rs in Idaho will most likely state how snow removal will be done in the winter. Additionally, CC&Rs typically detail how common areas (such as parking lots, green spaces, etc.) will be maintained. Such provisions help assure potential buyers that the subdivision will remain in good condition and working order.
Residential CC&Rs will state a time period (e.g., ten years, or until all lots are sold) in which the developer will control the subdivision. During that time, usually only the developer can change the CC&Rs. But when the period of developer control ends, power to enforce or change the CC&Rs typically goes to the homeowners. Enforcement is most often handled by the homeowners’ elected voluntary HOA Board. Changes to the CC&Rs usually require the vote of a certain percentage of homeowners. In most cases, that vote must happen at a meeting with a minimum percentage of homeowners present.
CC&Rs restricting what people can do on their property has led to many disputes between property owners and associations. Therefore, some background on how Idaho courts interpret and apply CC&Rs will be helpful here.
Restrictive covenants on the use of property are generally enforceable. But because they restrict a person’s usual right to use his/her land for all lawful purposes, restrictive covenants “are not to be construed to extend by implication any restriction not clearly expressed in the covenants.” Brown v. Perkins, 129 Idaho 189, 192, 923 P.2d 434, 437 (1996). Any doubt must be “resolved in favor of the free use of land.” Id. As a result, “restrictions that are not clearly expressed will be resolved in favor of the free use of land.” Id.
Courts interpreting restrictive covenants are to “apply generally the same rules of construction as are applied to any contract or covenant.” Id. Contract interpretation begins with the language of the contract. Albee v. Judy, 136 Idaho 226, 230, 31 P.3d 248, 252 (2001). If contract terms are clear and unambiguous, the meaning of the contract is a question of law. Brown, 129 Idaho at 192, 923 P.2d at 437. But where contract terms are ambiguous, the contract’s meaning is a question of fact. Id. A restrictive covenant is ambiguous when it is capable of more than one reasonable interpretation on a given issue. Id.
To determine whether restrictive covenants are ambiguous, a court must determine whether the provisions are reasonably susceptible to conflicting interpretations. Id. at 193, 923 P.2d at 438. In interpreting any contract or restrictive covenant provisions, the entire agreement must be viewed as a whole. Id., citing St. Clair v. Krueger, 115 Idaho 702, 705, 769 P.2d 579, 582 (1989).
In other words, Idaho courts will enforce a restrictive covenant only if the restriction is unambiguous and clearly expressed. If the court rules a restrictive covenant can be reasonably interpreted in more than one way, it will not enforce that covenant.
CC&Rs will often establish a process the association must follow in handling violations by property owners. The first step may be a fine. See Idaho Code section 55-115(2). If not cured by the homeowner, the fine frequently becomes an automatic lien against the lot owned by the person(s) in violation of the CC&Rs. A Notice of Lien may then be filed at the county Recorder’s Office. If the fine is not paid in the time period required by the CC&Rs, the association may be able to foreclose on the lien.
Further, if the property owner does not comply with the CC&Rs, the association may file suit asking the court to order the owner’s compliance. Such an order is considered an “equitable” remedy, because it requires someone to take or refrain from taking some action. Black’s Law Dictionary 1485 (10th ed. 2014).
Because CC&Rs permit equitable remedies, they are enforced according to principles of equity. “Equity” can be defined as “[t]he body of principles constituting what is fair and right[.]” Id. at 656. Therefore, associations should ensure CC&Rs are enforced in a fair, evenhanded way. Otherwise, a property owner may have equity-based defenses to an association’s attempt to enforce CC&Rs. For example, if an association pursues one or two property owners for an alleged violation but not other owners doing the same thing, the property owners may have an equitable defense that the association has waived its enforcement right against them by allowing the violation by other owners.
Overall, CC&Rs can aid the marketability of property by providing ground rules for maintenance and use. But CC&Rs that are unclear—or unevenly enforced—can lead to legal trouble for property owners and associations. Anyone buying a property is well advised to have any applicable CC&Rs reviewed to determine how they might affect the buyer’s plans to use the property. Further, association Boards of Directors should have their CC&Rs reviewed to determine if any potential trouble spots exist. By doing such due diligence as early as possible, associations and land owners can minimize the potential for costly disputes later.
Note: This post is not legal advice, and should not be relied upon as such. Different sets of facts will likely lead to different legal conclusions. If you need assistance with real property matters, call Macomber Law, PLLC at 866-511-1500 for a forty-five minute, no charge consultation to see if we can help
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