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ENFORCEMENT OF PRIVATE LAND USE REGULATIONS:

POINT-COUNTER POINT

COMMUNITY ASSOCIATION'S VIEWPOINT

Chapter 25.1

Presented for the 22

Advanced Real Estate Law Course

June 30, 2000 in Austin, Texas

July 14, 2000 in Fort Worth, Texas

W. AUSTIN BARSALOU

Barsalou & Sebesta, P.C.

270 First City Tower

1001 Fannin Street

Houston, Texas 77002

(713) 652-5044

(713) 650-8745 (fax)

abarsalou@barsalou.com

TABLE OF CONTENTS

I. Introduction

A. Scope of Article.

B. Definitions.

C. Background.

II. Enforcement Policy

A. Initial Attorney Demand

B. Dealing with Homeowners

C. Filing Suit.

III. Enforcement of Restrictions in Court

A. Choice of Courts

1.

2.

3.

B. Choice of Remedy

1.

2.

C. Prima Facie Case

1.

2.

3.

D. Defenses

1.

2.

3.

4.

5.

6.

E. Evidence

1.

2.

3.

4.

F. Contempt.

G. Rules of Construction

1. The Historical Rule.

2. The "Liberal Construction" Statute.

3. Attempting to Resolve the Conflict.

H. Lis Pendens.

I. Suits Against Tenants.

J. Attorney's Fees.

K. Civil Penalties.

L. Declaratory Judgments.

M. Enforcement of Deed Restrictions by Municipalities.

N. Jury or Bench Trial.

O. Problem Areas

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

III. Conclusion

Enforcement of Private Land Use Regulations: Point-Counter Point

The Community Association's Viewpoint

I. Introduction

A. Scope of Article. This article is limited to the regulation of real property through private restrictions, focusing on enforcement by community associations.

B. Definitions. A community association might also be referred to as a homeowners association ("HOA"), a property owners association ("POA") ⁽¹⁾ a common interest development ("CID") ⁽²⁾, a common-interest community ("CIC") or a planned unit developments ("PUD").

A common-interest community is defined in Restatement Third, Property (Servitudes) as follows:

§ 1.8 Common-Interest Community Defined

A "common-interest community" is a real-estate development or neighborhood in which individually owned lots or units are burdened by a servitude that imposes an obligation that cannot be avoided by nonuse or withdrawal

(1) to pay for the use of, or contribute to the maintenance of, property held or enjoyed in common by the individual owners, or

(2) to pay dues or assessments to an association that provides services or facilities to the common property or to the individually owned property, or that enforces other servitudes burdening the property in the development or neighborhood. ⁽³⁾

A property owners association is defined in Section 202.001(2), Texas Property Code, as follows:

"Property owners' association"

C. Background. Deed restrictions are servitudes and servitudes have been a part of the law since Roman times. Again quoting Restatement Third, Property (Servitudes):

Rights of way appear in the Twelve Tables of Rome, and later Roman law recognized a variety of servitudes including rights to dig and burn lime, pasture cattle, draw and transport water, encroach on a neighbor's airspace, and rights to light, view, and support. A running covenant entitling a land owner to the services of a religious house to sing in the manor chapel appears in an English Year Book case of 1368. The privity and touch-or-concern doctrines of real covenants law derive from Spencer's Case decided in 1583. The 1834 decision in Keppel v. Bailey (2 MV&K 517, 39 Eng. Rep. 1042) led to the split of covenants enforceable at law and those in equity. Medieval English law recognized servitudes of various sorts but categorized them as 'incorporeal hereditaments." The easements and profits categories emerged in the 19

These old methods of controlling land use have received significantly increased legal attention as people have moved into planned unit developments by the millions. According to the Community Associations Institute

[a]n estimated 42 Million Americans now live within community associations. There are 205,000 community associations in the United States - in 1965 there were only 500. Approximately 50% of all new homes built in major metropolitan areas fall within community associations. ⁽⁶⁾

Deed restrictions are an "efficient and effective method of creating and maintaining planned community developments." ⁽⁷⁾ Restrictions are designed to protect property values and preserve the quality of life within the neighborhood. Restrictions are

based on the assumption that many of us live in close quarters, that we will give up some of our discretion to obtain limitations on the loud noise and bad taste of our neighbors, and that we are willing to pay for private governance because we cannot afford to obtain these amenities - snow-shoveling, swimming pool, roadside planting - individually. ⁽⁸⁾

II. Enforcement Policy

The Association should enact, by a resolution of its board of directors, an enforcement policy which includes a statement of policy and a set of standard procedures.

A normal enforcement procedure would include one or two initial letters pointing out the violation and reminding homeowners of the deed restrictions. The board or deed restriction committee may choose to speak to the homeowners and try to cure the violation by agreement without legal involvement. However, sometimes homeowners can be very hostile to any suggestion that anyone else can tell them what to do with their property.

Association volunteers should use discretion in attempting to work out a solution directly with the homeowner. No final agreement should be made without the full consent of the board of directors. Additionally, the Association's attorney should be consulted if the Association intends to compromise with the homeowner and accept anything less than full compliance with the restrictions.

A. Initial Attorney Demand

If the violation remains unresolved, the file would be referred to the Association's attorney. The attorney should send out one or two letters clearly presenting the Association's position and advising the homeowner that the Association will be forced to file suit against them if the violation is not immediately cured. An example of a standard deed restriction demand letter is attached to this paper. See Appendix 1, Initial Demand Letter.

B. Dealing with Homeowners

Normally the attorney is given the difficult task of not only persuading or forcing a recalcitrant homeowner into curing the violation of the restrictions, but also collecting the Association's legal fees. As noted below, the Association has a right to its reasonable attorney's fees incurred in enforcing the deed restrictions.

In fact, Chapter 204.010(a)(11), Texas Property Code, gives Associations in Harris County (or any other county with a population of 2.8 million or more) ⁽⁹⁾, the right - after notice and an opportunity "to be heard" to

collect reimbursement of actual attorney's fees and other reasonable costs incurred by the property owners' association relating to violations of the subdivision's restrictions or the property owners' association's bylaws and rules.... ⁽¹⁰⁾

A reasonable interpretation of this section would suggest that a notice included in the attorney's demand letter is sufficient. The letter should state that the homeowner is being charged for the Association's legal fees in the enforcement of the restrictions and that the board will hear the homeowner if he or she chooses to address the board on the subject.

To further the Association's efforts in collecting these attorney's fees, the next subparagraph, Section 204.010(a)(12), states the Association may

charge costs to an owner's assessment account and collect the costs in any manner provided in the restrictions for the collection of assessments.... ⁽¹¹⁾

It is not clear whether the association has the right to foreclose on a homestead to collect attorney's fees for deed restriction enforcement.

C. Filing Suit. In most cases, if the homeowner refuses to comply with the deed restrictions, the Association should file suit.

III. Enforcement of Restrictions in Court

A. Choice of Courts

1.

There are several drawbacks with the JP courts. First, the JP does not have the jurisdiction to issue injunctions requiring the cure of the violation of a restrictive covenant. ⁽¹⁴⁾ This means that a homeowner may be subjected to fines, but may still keep the violation intact. Second, the JP court process is more unpredictable than a court where a record is made and procedural rules are more assiduously followed.

2.

3.

B. Choice of Remedy

1. Temporary Restraining Order.

Temporary restraining orders are more difficult to obtain and most judges expect to see a true emergency to issue a TRO. Additionally, it is usually more expensive and time-consuming for both the Association and its counsel. The lawyer for the Association must drop everything else, prepare the pleadings and the witnesses and go to the courthouse without having a scheduled hearing date or time.

Although the courts will try to accommodate an unscheduled emergency hearing, this could mean sitting at the courthouse all day just waiting to be heard.

2.

There are several advantages to having a preliminary hearing. First, having a temporary injunction hearing forces the homeowner to immediately deal with the lawsuit and appear at the hearing or risk a temporary injunction being granted.

Second, if the injunction is granted the homeowner will usually begin to negotiate to end the lawsuit.

Finally, the Association gets two bites of the apple. If the injunction is granted, there probably will be a settlement. If it is not granted, the homeowner's defenses were revealed at the temporary injunction hearing and the Association had a good rehearsal of the trial.

Currently, many lawyers file suit with an application for a permanent injunction without seeking a temporary injunction. The chief drawback to a temporary injunction hearing is the legal fees required to present the Association's case.

A temporary injunction hearing is typically held before the answer date in the case, so the Association's counsel does not know whether the homeowner will appear pro se

Collecting the Association's legal fees is always a stumbling block in settlement discussions and the higher the fees are, the more difficult it is to settle the case.

Consequently, it is many times more useful to skip the temporary injunction hearing and proceed with the case through discovery.

Of course, there are many exceptions to this approach. The most obvious is where the violation creates an extreme eyesore, a safety or health hazard or for whatever reason has the entire subdivision in an uproar.

C. Prima Facie Case

1.

2.

In addition, to warrant the issuance of a temporary injunction, a plaintiff must show a probable right of recovery. ⁽²¹⁾

3.

The status quo

D. Defenses

1.

In

Laches, in legal significance, is not mere delay but delay that works a disadvantage to another. So long as parties are in the same condition, it matters little whether one presses a right promptly or slowly, within the limits allowed by law; but when knowing his rights, he takes no steps to enforce them until the condition of the other party has, in good faith, become so changed that he cannot be restored to his former state, if the right be then enforced, delay becomes inequitable, and operates as estoppel against the assertion of the right. ⁽²⁷⁾

Many defendants seem to believe that delay alone is the essence of a laches defense. However, the passing of time in and of itself does not raise the presumption of laches. The delay must be unreasonable and must work an injury to another person. ⁽²⁸⁾

2.

The case law directs trial courts to consider waiver only if the "average man" would reasonably conclude that the restriction was abandoned and no longer being enforced. ⁽³¹⁾

The existing violations of the restrictions must be "so great as to lead the mind of the 'average man' to reasonably conclude that the restriction in question has been abandoned and its enforcement waived." ⁽³²⁾

The court should consider "the number, nature, and severity of the then existing violations, any prior acts of enforcement of the restriction, and whether it is still possible to realize to a substantial degree the benefits intended through the covenant." ⁽³³⁾

However, the extent of existing violations can have a disproportionate impact on the court's analysis. In

3.

In

4.

5.

6.

E. Evidence

1.

The deed shows that the defendant owns the property and the deed restrictions show that there is a general plan of development, that the defendant's property is subject to the restrictions and that the deed restrictions were filed prior to the time the defendant purchased the subject property.

"An instrument that is properly recorded in the proper county is notice to all persons of the existence of the instrument." ⁽⁴³⁾ A purchaser of land is charged with notice of the existence, contents and legal effects of all instruments in a chain of title. ⁽⁴⁴⁾ It should also be possible to show actual notice of the restrictions through a cross examination of the defendant based on the closing documents from the purchase of the property.

2.

3.

4.

F. Contempt. When drafting a temporary restraining order

I

G. Rules of Construction

1.

Covenants restricting the free use of land are not favored by the courts, but when they are confined to a lawful purpose and are clearly worded, they will be enforced. All doubts must be resolved in favor of the free and unrestricted use of the premises, and the restrictive clause must be construed strictly against the party seeking to enforce it. ⁽⁵⁰⁾

2.

3.

The dissent characterizes the adoption of Tex. Prop. Code Ann. 202.003(a)...(providing for a restrictive covenant to be liberally construed to give effect to its purposes and intent) as a reversal of these long-held principles for interpreting deed restrictions.... We disagree. We are unable to discern a conflict between liberally construing a restrictive covenant to give effect to its purpose, and construing a restrictive covenant either to favor the free and unrestricted use of land or to strictly construe it against the party seeking to enforce it. ⁽⁵²⁾

In

Restrictive covenants are subject to the general rules of contract construction.

Mere disagreement over the interpretation of a provision does not make it ambiguous. See

In

While the Property Code requires liberal construction of a restrictive covenant's language to ascertain its purpose and intent, Texas common law, prior to the enactment of this section of the Property Code, called for restrictive covenants to be construed in favor of the free and unrestricted use of the premises and against the party seeking to enforce the covenants. See

H. Lis Pendens. The Association might consider filing a

I. Suits Against Tenants. Tenants are also subject to restrictive covenants because they are in privity with the property owner and take the leasehold with constructive notice of, and subject to, the restrictions. ⁽⁶⁰⁾

J. Attorney's Fees. If it prevails in its lawsuit to enforce the restrictions, the Association is entitled to its reasonable attorney's fees pursuant to Texas Property Code Section 5.006 and Texas Civil Practices and Remedies Code Section 37.009. The award of reasonable attorney's fees under Section 5.006, Texas Property Code, is mandatory, not discretionary. ⁽⁶¹⁾

K. Civil Penalties. The Court may award, at its discretion,

L. Declaratory Judgments. Sometimes the threat of a lawsuit by the homeowners association precipitates a preemptive declaratory judgment action or counterclaim for declaratory judgment by the homeowner. Any action which seeks to declare restrictive covenants invalid would appear to require personal service on all persons who own property within the land subject to the restrictions. ⁽⁶²⁾

M. Enforcement of Deed Restrictions by Municipalities. If a uniform ordinance is passed for the enforcement of restrictions, municipalities with a population of 1.5 million or more, or municipalities which do not have zoning, can enforce deed restrictions. Pursuant to §230.003, Texas Local Government Code, a

municipality may sue in any court of competent jurisdiction to enjoin or abate a violation of a restriction contained or incorporated by reference in a properly recorded plan, plat, or other instrument that affects a subdivision located inside the boundaries of the municipality. ⁽⁶³⁾

N. Jury or Bench Trial. Many times it is left up to the homeowners association's attorney to determine whether to have a jury trial. The reason many lawyers prefer a bench trial is that it is faster, cheaper and easier to present technical legal arguments. In addition, the jury may view the association as a relatively larger, more powerful organization taking advantage of a homeowner. Be aware, however, that many, if not most, judges live within community associations and some judges have been involved in disputes or lawsuits with their associations.

O. Problem Areas

1.

The FCC issued rules which override the deed restrictions in four areas: (a) antennas designed to receive direct broadcast satellite service, if the dish is one meter or less in diameter; (b) antennas designed to receive video programming via multipoint distribution services, if the dish is one meter or less in diameter; (c) antennas designed to receive television broadcast signals; and (d) a mast supporting one of these antennas. ⁽⁶⁵⁾

A deed restriction is only preempted to the extent that it impairs the installation, maintenance or use of the antenna or mast. An unacceptable impairment is defined as something which unreasonably delays or prevents installation, maintenance or use, unreasonably increases the cost of such installation, maintenance or use, or precludes the reception of an acceptable quality signal. ⁽⁶⁶⁾

2.

3.

4.

5.

6.

Additionally, parking a large commercial truck in front of the restricted property is usually directly contrary to the deed restrictions. Even if there is not a clear limitation in the vehicles section of the restrictions, the parking of a large truck in the subdivision is a commercial or business use of the property and a "nuisance and annoyance to the neighborhood," both of which are usually prohibited.

7.

8.

9.

While the United States Department of Housing and Urban Development ("HUD") has had a lead role in the administering the Fair Housing Act since its adoption in 1966, the FHAA greatly increased HUD's enforcement role. Complaints filed with HUD are investigated by the Office of Fair Housing and Equal Opportunity ("FHEO"). If the complaint is not successfully conciliated, then FHEO determines whether reasonable cause exists to believe that a discriminatory housing practice has occurred. Where reasonable cause is found, the parties to the complaint are notified and a hearing is scheduled before a HUD administrative law judge. The matter may alternatively be litigated in Federal court.

As stated above, the FHAA prohibits discrimination in housing against persons with handicaps ⁽⁷⁷⁾

Discrimination also results from the refusal to make "reasonable accommodations" in rules, policies, practices, or services, when such accommodations may be necessary to afford a handicapped person with an equal opportunity to use or enjoy a dwelling. ⁽⁷⁹⁾

The requirement of a reasonable accommodation does not mean that every rule must be changed to accommodate the disabled ⁽⁸¹⁾

The United States Supreme Court, in the case of

Additionally, it should be noted that individual board members can be liable under the FHAA. In one case, the Court said that a condominium board could be liable if they were in a position to deny or make unavailable a portion of a building to a disabled owner, or otherwise discriminate against the owner in the provision of housing services or facilities. ^{(88) (89)}

10. State Fair Housing Issues. The State of Texas also limits restrictions based on civil rights and fair housing issues. Section 202.003, Texas Property Code, states

(b) In this subsection, "family home" is a residential home that meets the definition of and requirements applicable to a family home under the Community Homes for Disabled Persons Location Act (Article 1011n, Vernon's Texas Civil Statutes). [FN1] A dedicatory instrument or restrictive covenant may not be construed to prevent the use of property as a family home. However, any restrictive covenant that applies to property used as a family home shall be liberally construed to give effect to its purposes and intent except to the extent that the construction would restrict the use as a family home.

The Texas Fair Housing Act, ⁽⁹⁰⁾ provides that

(a) A person may not refuse to sell or rent, after the making of a bona fide offer, refuse to negotiate for the sale or rental of, or in any other manner make unavailable or deny a dwelling to another because of race, color, religion, sex, familial status, or national origin.

(b) A person may not discriminate against another in the terms, conditions, or privileges of sale or rental of a dwelling or in providing services or facilities in connection with a sale or rental of a dwelling because of race, color, religion, sex, familial status, or national origin. ⁽⁹¹⁾

The Act also forbids discrimination based on disability. ⁽⁹²⁾ In addition, Texas cases have held that the Federal Fair Housing Act prohibits deed restrictions against group homes. ⁽⁹³⁾

11. Architectural Control Committee Deemed Approval.

Some deed restrictions only give 10 days for a response from the ACC and some restrictions grant automatic approval to an alteration if suit is not filed prior to the completion of the construction. ⁽⁹⁴⁾

Where the application is deemed approved by a lapse of time, the court will treat the application as approved. ⁽⁹⁵⁾

III. Conclusion

Experience has shown deed restrictions to be an effective method of regulating land use. The case law is replete with examples of successful enforcement actions by associations as well as extensive due process protections for homeowners.

The restrictions protect land developers during development and thereafter protect property owners, lenders and mortgage insurers. This private enforcement scheme also benefits cities and counties because it allows a wide variety of land use control levels, giving people more choices in the type of neighborhood in which to live.

Private restrictions are enforced with private funds, not tax dollars. Enforcement decisions are made by the board of a nonprofit corporation that has been elected by the property owners within the subdivision. This places the management of neighborhoods, with home values amounting to billions of dollars nationally, in the hands of those most interested in, and capable of, managing them, the property owners themselves.

86. City of Edmonds v. Oxford House, Inc., 514 U.S. 725, 115 S. Ct. 1776, 131 L. Ed.2d 801, 9 A.D.D. 402 (1995).

87. Id.

88. Schroeder v. De Bartolo, D. Puerto Rico 1995, 879 F. Supp. 173.

89. U.S. v. City of Taylor, Mich., E.D. Mich. 1995, 872 F. Supp. 423, affirmed in part, reversed in part, 102 F.3d 781.

90. Tex. Prop. Code Ann. § 301.001, et seq. (Vernon's 1995).

91. Tex. Prop. Code Ann. § 301.021 (Vernon's 1995).

92. Tex. Prop. Code Ann. § 301.025 (Vernon's 1995).

93. Deep E. Tex. Regional Mental Health Mental Retardation Servs. v. Kinnear, 877 S.W.2d 550, 1994 Tex. App. LEXIS 1398, 5 Am. Disabilities Dec. 998 (Tex. App. - Beaumont 1994, no writ); for further discussion see Kinnear v. Texas Comm'n on Human Rights, 14 S.W.3d 299, 2000 Tex. LEXIS 42, 43 Tex. Sup. Ct. J. 654 (Tex. 2000).

94. Foxwood Homeowners Asso. v. Ricles, 673 S.W.2d 376, 1984 Tex. App. LEXIS 5655 (Tex. App. -- Houston [1^st Dist.] 1984, writ ref'd, n.r.e.).

95. Bank United & Utah State Retirement Inv. Fund v. Greenway Improvement Ass'n, 6 S.W.3d 705, 1999 Tex. App. LEXIS 8289, 1999:46 Tex. Civil Op. Serv. 35 (Tex. App. - Houston [1^st Dist.] 1999, pet. den.).