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Breaking the Boilerplate
The Who and When of Amending Restrictive
Covenants
by David Bennington, SVP— Senior Title Attorney
Click here for David’s Bio
Rice v. Coholan___ N.C.App. ___, 695
S.E.2d 484 (2010)
If you have done any significant
number of title examinations in
Review denied, 364 N.C. 435, 702 S.E.2d
North Carolina you have
303 (2010)
encountered a similar provision at
some point. The language is
The North Carolina Court of
extremely prevalent in older
Appeals has answered a question
residential subdivisions, and given
that has plagued me and my
the penchant of draftsmen for
attorney colleagues throughout my
repeating “standard” provisions,
career.
the same phrasing has
“As simple as the continued to be incorporated
In Rice v.
Coholan, the Court language sounds, in restrictive covenants down
to the present.
was presented with its true nature
the issue of
Wherever and whenever this
has remained
interpreting the
provision was formulated, I
inscrutable.”
meaning of a
have often cursed its original,
provision in
anonymous author. And I
residential restrictive covenants
have not been very happy with
concerning their amendment.
those that continued to use it. My
Although there were slight
irritation stemmed from my
variations in the language in
inability to decide with certainty
different deeds, the provision
how the provision should operate.
generally stated that the covenants
As simple as the language sounds
would:
its true meaning has remained
inscrutable.
Run with the land and would
be binding until (a date
It is clear that the draftsman
certain) and that after that
intended that there would be a
date the covenants would
means to amend or modify the
automatically extend for
covenants but the who and when in
successive periods of ten years
that process has not been clear to
unless amended by vote of the
me or others I have consulted over
majority of the then owners of
the years. More specifically, when
the lots in the subdivision.
is the “then?” Did the draftsman
mean that the covenants could be
amended only after the conclusion
April 2011
of the periodic ten year
increments? And when do you call
the role on the anniversary date or
at any time that interested parties
wished to take action? And “who”
constitutes the majority? Do you
count the heads of the fee title
holders or does the number of lots
constitute the electorate?
And why do we care so much?
As development continues
throughout the state, changed
circumstances motivate interested
parties to change existing
covenants to permit different
parameters for construction or use
of the restricted properties.
Continued on page 2.
In This Issue:
Breaking the
Boilerplate...
1-2
Claims Corner:
Understanding the Policy Jacket
3
NC Fun Facts
3
Meet Our Title Attorneys
4
Investors Trust Company:
Buchanan v. Buchanan
4
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P1
2
Breaking the Boilerplate... (cont. from page 1)
Developers may wish to change lot
several issues including a question
sizes, square footage requirements,
as to the enforceability of the
or set backlines to accommodate a
covenants pursuant to a common
different type of product. In many
scheme of development. Real
cases, the developers may wish to
estate attorneys should read the
change the permitted use of the
decision for the discussion of that
property altoissue alone. But of
gether. Often
greater
“Decisions in other
times in growing
significance for this
municipal areas, states break down into discussion is its
commercial
two general approaches determination
development
regarding
surrounds older - ‘one vote per owner’
amendment. Having
residential areas
determined that a
or ‘one vote per lot.’”
such that the
common scheme did
value of the
exist, the Court
property is much greater for that
turned to the effectiveness of the
type use as opposed to single family
agreement to terminate, and
dwellings.
answered those two pesky
questions: When and Who?
Regardless of the changes sought,
significant financial risks exist if
the developer is subject to an action
for damages or injunction based on
the existing restrictions. To
address that risk, the developer
seeks the protection of title
insurance and the question is
presented to underwriting counsel
– what does it take to modify,
amend, or terminate the
covenants?
In Rice, the owners of two (2)
restricted lots desired to subdivide
them into six (6) smaller lots for
further development. This
subdivision would appear to violate
restrictive covenants contained in
the chain of title, covenants which
contained a provision regarding
amendment generally as stated
above. Counsel for owners
prepared an instrument to
terminate the covenants which was
duly executed by the owners of a
majority of similarly restricted lots
and thereafter recorded. Certain
owners of affected lots who did not
execute the termination agreement
filed an action to enjoin the
subdivision and development of the
resulting smaller lots.
The Court was presented with
When: The plaintiffs contended
on appeal that the provision for
termination could only be effective
on the specific anniversary dates of
the periodic ten year extension
terms. Therefore, any attempted
modification during the interim
would not be permitted.
the other piece of the puzzle. How
to define the “majority?” Again,
the Court found that there existed
no authority in this State
addressing the issue and it notes
that there exists a split of authority
in other jurisdictions which had
considered the question. Decisions
in other states break down into two
general approaches – “one vote per
owner” or “one vote per lot.”
After considering the rationale
behind the two schools of thought,
the Court determined that the
better reasoning supports the “one
vote per lot” construction and
therefore applied that
interpretation to the language of
the covenants.
Having construed the language of
the provisions generally set forth
above to the effect that
modification could occur during
the extension periods and that a
“majority” was determined by the
number of lots represented, the
Court upheld the termination
agreement.
Noting that the North “The decision…
The North Carolina
Carolina appellate
Supreme Court
will be important
courts had not
denied discretionary
addressed this
review and therefore
for
years
to
come...”
specific issue, the
the decision of the
Court considered and
Court of Appeals is the law
relied upon a decision of the
of this State. At long last, real
Alabama Supreme Court which had
estate attorneys and title
considered and decided a similar
insurers have guidance with regard
issue [Hill v. Rice, 505 So.2d 382
to the proper modification of
(Ala. 1987)] notwithstanding
covenants containing this
contrary authority in Arizona. The
particular provision.
Court was persuaded by the
With the advent of planned
reasoning in Hill to the effect that
communities, provisions for
restrictions should be strictly
modification or amendment of
construed in favor of the free use of
restrictive covenants are often
property. In that the Court found
more clearly defined. Nevertheless,
no unambiguous requirement that
the decision in Rice v. Coholan will
the anniversary date in such a
be important for years to come as
provision should control, it
many older subdivisions are more
determined that modification could
be accomplished at any time during likely to be in areas undergoing
transition and subject to the
the periodic extensions.
pressure to bend and mold them to
Who: The Court next turned to
new uses.
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April 2011
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3
attorney, who the client had trusted
who understands the coverage of the
to get title insurance protection,
policy will be better able to assist the
chose a policy which does
client if a problem
“Attorneys who
not offer protection for
arises in understandread and
his or her particular
ing what the client can
problem over another
expect from the title
understand
the
policy or an endorsement
company, and what
Understanding the
available
policies
which
would
have.
In
assistance will need to
Policy Jacket
those cases, Investors
come from other
will find
Investors Title offers different types Title will not be able to
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help the client with their themselves better study can help the
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example, the most frequently
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the client’s needs,
right
questions...”
issued owner
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obtain the best
policies currently are “Investors Title
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Attorneys who read and
Residential 1-4
types of owner
and unrealistic expectations with
understand the available
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policies with
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06 – Mobile Home)
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needs, and explain the coverage
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regarding the claims process.
additional bonus is that the attorney
The Venus Flytrap (also Venus's Flytrap or Venus' Flytrap), Dionaea
muscipula, is a carnivorous plant that catches and digests animal prey—mostly
insects and arachnids. Its trapping structure is formed by the terminal portion of
each of the plant's leaves and is triggered by tiny hairs on their inner surfaces.
When an insect or spider crawling along the leaves contacts a hair, the trap closes
if a different hair is contacted within twenty seconds of the first strike. The
requirement of redundant triggering in this mechanism serves as a safeguard
against a waste of energy in trapping objects with no nutritional value.
The plant's common names refer to Venus, the Roman goddess of love, whereas
the genus name refers to Dione. Dionaea is a monotypic genus closely related to
the waterwheel plant and sundews.The Venus Flytrap is found in nitrogen and
phosphorous-poor environments, such as bogs and wet savannahs. Small in
stature and slow growing, the Venus flytrap tolerates fire well. It survives in wet
sandy and peaty soils. Although it has been successfully transplanted and grown
in many locales around the world, it is found natively only in North and South
Carolina in the United States, specifically within a 60-mile radius of Wilmington,
North Carolina.[1]
1Darwin,
C. R. 1875. Insectivorous Plants.
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Steve Brown
[email protected]
Steve Brown was born in Gilmer, Texas, and graduated from high
school in Tullahoma, Tennessee in 1977. He attended Wake Forest
University where he received a Bachelor of Arts degree, cum laude, with
Honors in History in 1981. In 1984, he earned a Juris Doctor degree
from the University of North Carolina School of Law, in Chapel Hill, North
Carolina, graduating with Honors, and earning membership in the Order of the
Coif. Prior to joining Investors Title Insurance Company in October 2002, Mr.
Brown engaged in private practice in Raleigh, NC, for 18 years, with an emphasis
on commercial litigation, including real property and bankruptcy litigation,
corporate and commercial law, and creditors’ rights law, including almost all
aspects of commercial lender representation. Mr. Brown engages in underwriting;
assists in identifying and resolving major claims and formulating risk
management; and manages North Carolina legislative and regulatory matters for
Investors Title. In addition, he participates as a speaker and writer in employee,
agent, and attorney education regarding legislative and regulatory issues and
claims prevention and management on behalf of the Company. Steve is also an
advisory member of the board of directors for Real Estate Lawyers of North
Carolina, Inc.
Buchanan v. Buchanan
In a Will construction case, the North
Carolina Court of Appeals has ruled
that a property interest “‘which by the
terms of its creation must expire at a
period certain and prefixed…is an
estate for years.’” The case developed
after Kelly Buchanan died in
September 2005. Under his Will, his
surviving spouse was given the right to
live in his residence “until such time as
my daughter, Tiffany Hope Buchanan,
attains the age of eighteen (18) (not to
exceed twenty (20) years of age) and is
graduated from high school.” Tiffany,
a minor, was the only natural born
child of Kelly and Teresa Buchanan—
two other adult children by a prior
marriage also survived their father.
When the surviving spouse moved into
the residence along with an adult
daughter by another marriage, Kelly’s
surviving adult children objected. The
children argued that there was an
ambiguity in their father’s Will, and
that their stepmother should only be
allowed to live in the residence until
Tiffany reached the ages specified.
Specifically, their argument was that
Teresa received only the right to live in
the home, “not some exclusive
possessory interest….” The trial court
disagreed, and in December 2006,
ruled that Teresa Buchanan received
an estate for years under her husband’s
Will and that she therefore had “an
exclusive possessory right.” Kelly’s
adult children, the court ruled,
received a vested remainder interest in
the property, which would begin “at the
termination of the Defendant’s Estate
for years.” The appellate court agreed,
and affirmed.
--Buchanan v. Buchanan, No. COA
09-1085, N.C. Ct. App. 9/7/10
The above article is for information purposes
only and does not constitute legal advice.
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