In this 2014 Wyoming Supreme Court case, a homeowners association attempted to amend restrictive covenants in a subdivision.
What was the homeowner's association trying to do?
A subdivision in Wyoming was founded in 1970. The founder recorded 11 separate written covenants for each plat or "phase" of the development. The restrictions and definitions in each phase are similar but not identical in all 11 sets of covenants. All contain provisions that the covenants may be amended "by a written agreement executed by 70% of the record owners".
The homeowners association mounted an effort to amend the 11 sets of covenants into a single uniform set applicable to the entire subdivision. The owners were surveyed about potential changes to the covenants, with a document to sign indicating "approve" or "not approved" but the form did not require that the signatures were acknowledged or notarized--only a signature.
Only 60% of the owners in Plats 1 and 2 approved of the amendments, and 63% of the owners in Plat 3 approved. For the rest of the owners, 73% of the lot owners approved. The homeowners association considered that the amendments had been approved because 70% of the lot owners of record through the entire subdivision had voted to approve. The Association attempted to record the signed document approving the amendment, but the county clerk refused to record the document.
The defendants asserted that the 11 sets of covenants had to be amended separately, and that the votes could not be aggregated.
What does the court base changing covenants on?
Restrictive covenants are contractual in nature and are interpreted according to contract law. The court seeks to determine the intention of the parties, especially the grantor. Intention of the parties is determined from the entire agreement. In this case, the language is the same in each of the 11 documents and state that amendments must "receive the approval of 70% of the record owners". Because it obtained the approval of 73% of the owners in the aggregate, the Association claims the covenants were properly amended. The Plaintiffs state that the 11 sets of covenants create 11 separate phases, and that the votes of the owners must be counted separately for each phase.
All 11 sets of covenants provide the homeowners association with the power to maintain, administer and enforce the covenants. According to the homeowners association, each successive phase brought the Plat or phases within the jurisdiction of the homeowners association and so all the Plats have become additions falling under the definition of property.
However, according to the Plaintiffs, annexation is how additional property is brought within the jurisdiction of the Association.
The court said that the amendments had to be approved by at least 70% of the owners in Plats 1, 2 and 3.
The rationale for that finding is that property owners are bound by restrictive covenants if they took the property with notice of those covenants. Notice means recording in the county records. In this case Plats 1 and 2 had recorded covenants in August, 1970. Plat 3 had recorded covenants in March 1971. But there was no document of record providing notice to owners in Plat 3 that they were also bound by the covenants applicable to Plats 1 and 2. In the recorded documents for those Plats, there is nothing of record to provide the owners with notice that amendments could be effected as attempted by the Association, which was by the approval of 70% of the owners of the entire subdivision.
The homeowner's association believed that because the covenants contained an annexation provision, additional property could be added to the 70% provision merely by bringing it within the jurisdiction of the homeowner's association.
However, the court found that each set of covenants remains applicable to each plat listed, and approval by 70% of the lot owners in Plats 1, 2 and 3 were also required to amend the covenants.
What documentation is required?
The homeowners association submitted the signed approvals of the lot owners to the county clerk for recording and the county clerk refused to record the signature pages. Wyoming statutes 34-1-102 defines a conveyance to include every instrument in writing by which real estate is created, or by which the title to any real estate may be affected in law or in equity. Amendment to existing covenants fits the definition of a conveyance. Wyoming law requires conveyances to be acknowledged by the party executing it before any notarial officer. County clerks in Wyoming are required to record all conveyances left with it for that purpose.
Were the covenants applicable to all of the property in the subdivision?
Even if the county clerk had accepted and recorded the copies of the forms signed by the owners, those documents still would not validly amend the covenants. From the beginning, the the homeowners association made it clear that its intent was to establish a single set of covenants applicable to all property in the subdivision. However, because fewer than 70% of the lot owners in Plats 1, 2 and 3 approved of the amendments, the homeowners association's efforts failed. No matter what document the homeowners association filed with the county clerk, and even if the clerk had accepted the document, the amendments were still invalid.
Who has standing to be in the case?
A litigant has standing when he has a personal stake in the outcome of the case. In this case, some of the covenants cover more than one plat. The Plaintiffs owned lots in six of the twenty-one plats. On this basis, the plaintiffs have standing to challenge the amendments as they apply to a total of eleven of twenty-one plats. The plaintiffs also have standing to challenge the amendments as a whole because they specifically challenged the amendments as a single, unified set of covenants applicable to the entire subdivision and their ownership of property in the subdivision gave them standing to do that.
What is the take away?
Ask your counsel to review each plat and each set of covenants. Determine which plat "runs with" or applies to your property. Know what the requirements are to record a document and what your documents state regarding amendment.
If you would like review of your homeowners association covenants, please contact me for a free consultation at 307.200.1914.