Published on: November 6, 2018
By Mark Einhorn and Patrick Brady
A friend traveling through the deep south many years ago stopped at a small gas station to ask for directions. The owner, happy to oblige, told him: “Go to the end of this road, take a left and….Nope,” he said. “That won’t work.” Thinking again he said, “Go out of the station, turn right and take your first left… Nope,” he said again. “That won’t work either.” After a long pause he looked at my friend and said apologetically, “You can’t get there from here.”
That story came to mind as we were advising a homeowner association on how to extend covenants that were set to expire. The extension process is easy and straightforward for condominium associations, but it is far more difficult, and at times impossible, for Massachusetts Home Owner Associations (“HOAs”). The reason is the Massachusetts Restriction Statute, which applies to HOAs, but from which condo associations are exempt.
The statute generally sets a 30-year time limit on restrictions on the use of land but creates a process for extending them “for further periods of not more than 20 years at a time.” That process requires the approval of owners of 50 percent or more of the land that is subject to the restrictions and requires that notice of the extension be filed before the original restrictions expire.
If its covenants expire an association wouldn’t cease to exist, but its authority would be diminished in key areas. Covenants consist of “restrictions” governing how members of an HOA can use their property; and “equitable servitudes,” which impose specific obligations on them – for example, the obligation to pay dues and obey the association’s rules. The “Restrictions Statute,” as the name suggests, applies only to restrictions. The expiration of covenants would not affect “equitable servitudes” allowing the association to collect fees, maintain association property or enforce rules governing the use of common areas. But if the covenants expire, the association could not enforce smoking bans, architectural controls, pet prohibitions, restrictions on the rental of units or any other measures dictating what owners can or can’t do with or within the property they own.
The Extension Process
HOA declarations typically set a 30-year expiration date for covenants. The restrictions statute describes the process HOAs must follow to extend their covenants beyond that period, and two Massachusetts court cases provide guidance on how the extension process works in different circumstances.
In a 2001 case (Stop & Shop v. Urstadt Biddle Properties), an HOA amended its covenants to eliminate the 50-year term limit on them. When a dispute arose over whether restrictions barring construction on association property were still in place, the Supreme Judicial Court (SJC) ruled that removing their stated expiration date made the covenants “unlimited as to time,” which meant they would expire automatically in 30 years, with no option for extension beyond that. The court also ruled that an HOA could amend its documents to permit extensions beyond 30 years only if the original expiration was longer than 30 years.
In a more recent (2017) case, Berger v. Wyndcliff, the SJC ruled that even if the original documents set a term longer than 30 years, the covenants can’t be extended unless the documents also specify the process for extending them. Additionally, the court said, flawed documents that don’t meet the statutory requirements for extending covenants can’t be amended unless 100 percent of the owners approve the change.
Both of these decisions highlight the tension, reflected in the Restrictions Statute, between the traditional reluctance to restrict ownership rights and a desire to give owners a process for revising or eliminating outmoded restrictions.
The original covenants in Berger set a 30-year time limit, allowing for amendments within that period by a two-thirds vote of owners. The disputed amendment owners had tried to adopt would have permitted two-thirds of owners to extend the restrictions beyond 30 years. The problem with that, the court said, is this: Buyers who purchased subject to the original covenants would be on notice that the ability of two-thirds of the owners to amend the restrictions would end in 30 years. The revised amendment would allow that two-thirds majority “to extend the restrictions indefinitely, by successive 20-year increments. That is not what owners agreed to” when they purchased, the court said. Permitting covenant extensions only if the original documents specify the statutory extension process, the court explained, “ensures that after thirty years, no owner is bound by a restriction unless that owner, whenever he or she bought the lot in question ,expressly agreed to the mechanism by which the restrictions could be extended.”
So, where does this leave associations concerned about expiring covenants? Not in all cases with the conclusion reached by the service station attendant quoted earlier (“You can’t get there from here”), but also not with quite as much clarity as they and we might like. The case law we’ve discussed makes some points clear:
- If your original documents don’t specify an expiration date for the covenants, you can’t extend the covenants – period (without 100% consent). You really can’t (or most likely won’t) get there from here.
- If the original documents specify an expiration date of more than 30 years but don’t describe the extension process, you can’t extend the covenants unless 100 percent of the owners agree to amend the documents. In this case, only owners who agree to extend the restrictions will be bound by them. Owners who rent their units, paint their doors day-glow orange, or have multiple pets can ignore any provisions prohibiting those actions. The result ─some follow the rules and some don’t ─ would not be a prescription for peace and harmony in the community.
- If the original documents set an expiration date of more than 30 years, specify that the term can be extended in 20-year increments, in accordance with the statute, and describe the statutory extension process, the association can extend its covenants, as long as it files notice of the extension before the 30-year mark.
How many 20-year extensions beyond the initial 30 can owners approve? Under the current case law, you are limited by the term specified in the original documents. So, if the documents say the covenants expire in 50 years, you could extend for one additional 20-year period. If the expiration was 70 years, you could approve two 20-year extensions after 30.
For anyone drafting original declarations today, we advise the ‘belt-and-suspenders’ approach. Set an original expiration term of 99 years with the appropriate language permitting extensions and describing the extension process. Owners could approve three 20-year extensions beyond the original 30-years. At that point – around 90 years after the declaration was filed ─ owners could determine whether additional extension are permitted