Brief Fact Summary.
Plaintiff purchased property in Defendant’s subdivision prior to other homeowners amending a covenant that required all property owners to pay yearly dues of $50 to Defendant and gave Defendant permission to put a lien on any homeowner’s property who failed to do so. Plaintiff refused to pay dues. Defendant threatened to put a lien on Plaintiff’s property for failure to pay the dues. Plaintiff sued Defendant. The district court upheld the amendment but the court of appeals reversed, holding that the terms “change or modify” did not allow for the addition of an entirely new covenant because of the principle that any ambiguities in covenant language should be resolved in favor of free and unrestricted use of property. Defendant appealed.
Synopsis of Rule of Law.
A restrictive covenant can be changed to impose wholly new obligations and be enforced as modified if the covenant is clear and reasonable.
Evergreen Highlands Association (Defendant) is a homeowners association, which holds title and maintains a park area in the subdivision. There were protective covenants concerning the park, however, Defendant’s members did not have to pay fees or dues to Defendant. The covenants contained a modification clause that allowed the covenant to be waived, changed, or modified if approved by seventy-five percent of the owners. In 1995, the covenant was properly amended to require all owners to be members of and to pay annual dues of $50 to Defendant, and to permit Defendant to place liens on those properties failed to pays. Robert West (Plaintiff) purchased his lot before the amendment and refused to pay dues. Defendant threatened to record a lien of Plaintiff’s property.
Whether a restrictive covenant may be changed to impose wholly new obligations and be enforced as modified.
Yes. The court of appeals’ decision is reversed and directed to remand the case for calculation of damages. A restrictive covenant can be changed to impose wholly new obligations and be enforced as modified if the covenant is clear and reasonable.
Courts must construe covenants as written if clear on its face or as a whole based on their purpose. Ambiguities will be resolved to favor the free and unrestricted use of property. The plain meaning of the phrase “change or modify” permits the covenant to be changed by addition, subtraction, or modification. Moreover, the proper procedures were followed to amend the covenant, Plaintiff had notice of the covenant’s amendment clause, and the annual fee of $50 is not unreasonable, and proper maintenance of the park surely enhances the value of Plaintiff’s property.