Brief Fact Summary. A neighborhood was under a restrictive covenant, which could be amended by three-fourths of the property owners in the subdivision at any time. The Defendant contracted with and proposed to build an assisted living center for the mentally impaired on one of the lots. The Plaintiffs amended the restrictive covenant to prohibit the use of the lots in the neighborhood from being used for a state-licensed group residential facility.
Synopsis of Rule of Law. An amended deed restriction does not apply to a lot owner who has, prior to the amendment, committed himself to a certain land use which the amendment seeks to prohibit, providing that: 1) there was justified reliance by the lot owner on the existing restriction (had no prior notice of a change); and 2) the lot owner will be prejudiced if the amendment applies.
Issue. Does the amended deed restriction prohibiting the use of subdivision property for a state-licensed group residential facility apply to Defendant?
Held. No. Affirmed.
Generally, a land use covenant containing restrictions such as reciprocal negative easements may include a clause giving the grantees or lot owners the power to modify or amend the restrictions such that the amendment applies to all lot owners. Although the court has not been faced with a case where, like this one, the restriction as amended is more restrictive than the original. However, the court held that there is no requirement that the amendment be less restrictive.
The lot owners, even with knowledge that the restrictive covenant can be amended, must be able to rely on the restrictions at the time the lot owner embarks on a new course of action. The subsequent amendments to the deed restrictions should not be able to frustrate an action already begun. The Plaintiffs are estopped from arguing that the restrictions as amended are valid.
An amended deed restriction does not apply to a lot owner who has, prior to the amendment, committed himself to a certain land use which the amendment seeks to prohibit, providing that: (1) there was justified reliance by the lot owner on the existing restriction (had no prior notice of a change), and (2) the lot owner will be prejudiced if the amendment applies.
The amendment in the case at bar is unenforceable on public policy grounds. The established public policy of the state is to promote and encourage the development of residential facilities for the mentally impaired.
Dissent. The dissent provided three main arguments:
The dissent would hold that the amendment took place after the Defendant acquired the property and was thus non-retroactive.
The Defendants suffered no prejudice in the enforcement of the amendment.
The court was wrong to declare the amendment unenforceable as against public policy.
Discussion. In this case the court sidestepped the issue of constitutionality. This case, if the amendment was enforced, could have been a Fourteenth Amendment issue, in which the Plaintiffs’ seek the state court to enforce a discriminatory restrictive covenant. The state court, if it issued an injunction against the Defendant, would, by its action, satisfy the state-action requirement for a claim under the Fourteenth Amendment.