Creation and Termination of CC&Rs

Neighborhood covenants are rules that govern property use. They are created by a written document called a Declaration of Covenants, Conditions, and Restrictions (CC&Rs). In most cases, CC&Rs exist when a purchaser buys an interest in a parcel of land or other real property. If they are simple and brief, they may appear in the deed for the property.

In most cases, a deed will only refer to covenants generally. A deed from a seller (grantor) to a buyer (grantee) will state a legal description. In that description, deed restrictions may state that a property is subject to all existing CC&Rs of record.

What Is a Covenant?

A covenant or real covenant is an agreement made pursuant to a deed or one's property occupancy. The parties to a covenant have privity, meaning they both subscribe to it directly.

A covenant is not an encumbrance or an easement. An encumbrance is a claim or debt against a property, and an easement is a right of way. By contrast, a covenant is a common rule that property owners must follow. Covenants can be restrictive if they don't conflict with local, federal, or state law. Covenants help to regulate common interest developments by:

• Creating uniform building rules that owners and tenants must follow
• Regulating aesthetics, use of building facilities, and common areas
• Helping to maintain or increase property values by encouraging responsibility and order

Examples of covenants include rules for landscaping, building colors, and trash cleanup.

Covenants That Run With the Land

Most neighborhood covenants run with the land. This means the property itself, and not its current owner per se, is subject to the conditions or restrictions in the CC&Rs.

The liability of a covenant passes with the land to any subsequent owners. Accordingly, it must "touch and concern" the land. Covenants must be included in a deed transferring property to run with the land. Subsequently, they become part and parcel of the chain of titles. The covenants remain binding (enforceable) on each successive owner of the property. This is true whether or not the new owner is aware of them.

For a benefit or burden to run with the land, the Statute of Frauds requirements must be met. This usually means the benefit or burden must be in writing. If a deed contains any covenants, acceptance constitutes satisfaction of the Statute of Frauds. With such a deed, it's as though the purchaser itself has signed onto the covenants.

Expiration or Termination

Covenants may be permanent, expire naturally, or have a declared period of time. For example, a builder will often initiate covenants running with each lot in a subdivision. These covenants will usually address restrictions like the type of dwelling allowed on a lot, such as:

• Single-family structure exclusivity requirements
• The type of landscaping allowed in the yard

Once the houses are on the lots, the covenants naturally expire between the builder and the purchasers of the lots. However, a homeowners' association may adopt the prior covenants to prevent subsequent homeowners from either:

• Converting their homes to multiple-family dwellings
• 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. Nonetheless, the covenants are binding among subsequent homeowners represented by the association.

The developer most often provides for such a transfer of covenants. The initial covenants filed with the recorded plat when the subdivision development is approved contain the transfer. An example contained in a declaration of covenants might read something like:

After 50% 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 naturally expire. There is a positive side to having covenants with fixed terms of life. Subsequent property owners are not burdened with restrictive covenants that are no longer desirable.

For example, in 1950, a homeowners association wanted to preserve the charm of a residential area and created covenants restricting the use of any properties to single-family homes. But as the area grew, commercial properties surrounded the residential area. This made it unattractive to prospective homebuyers.

A well-written covenant with a term life would have contemplated this scenario. It could have limited the restriction to 25 or 30 years. 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 to convert some expired covenants into new land use and zoning ordinances affecting the residential area. For example, this could allow for the conversion of single-family homes into condominiums.

Get Legal Help With the Creation or Termination of CC&Rs

You may be wrestling with writing CC&Rs and unsure if you're doing it correctly. Or you may be subject to CC&Rs and feel they aren't legally enforceable under local laws. Whatever your situation, consider meeting with a real estate attorney near you.