Court applies "reasonableness" standard for amendments

An interesting court case appealed all the way to the NC Supreme Court may impact what amendments may be made to CCRs, even if you follow all the 'rules'.

The NC Supreme Court struck down amendments made by an association that added common fees where none existed before and also added rental restrictions. The court said that any amendment must be reasonable in light of the orignal contracting parties 'intent'. The NC court said that this requirement is currently being used in Arkansas, Florida, Illinois, North Dakota, Ohio, and Wyoming.

The interesting note here is that all amendments were made following the CCRs and Bylaws, but the court still struck them down because they were not 'reasonable' considering the expectations of an original buyer reading the original declarations.

The court said, "We hold that amendments to a declaration of restrictive covenants must be reasonable. Reasonableness may be ascertained from the language of the declaration, deeds, and plats, together with other objective circumstances surrounding the parties' bargain, including the nature and character of the community. Because we determine that the amendment to the declaration sub judice, which authorizes broad assessments "for the general purposes of promoting the safety, welfare, recreation, health, common benefit, and enjoyment of the residents of Lots in The Ledges as may be more specifically authorized from time to time by the Board," is unreasonable, we conclude that the amendment is invalid and unenforceable."

Regarding rental restrictions, the court said, "Thus, it may not be reasonable to retroactively prohibit rentals in a mountain community during ski season or in a beach community during the summer. Similarly, it may not be reasonable to continually raise assessments in a retirement community where residents live primarily on a fixed income. Finally, a homeowners' association cannot unreasonably restrict property rental by implementing a garnishment or "taking" of rents (which is essentially an assessment); although it may be reasonable to restrict the frequency of rentals to prevent rented property from becoming like a motel.
[44] Correspondingly, restrictions are generally enforceable when clearly set forth in the original declaration. Thus, rentals may be prohibited by the original declaration. In this way, the declaration may prevent a simple majority of association members from turning established non-rental property into a rental complex, and vice-versa. "

See: http://www.ccfj.net/courtdecNCamenddeedrestr.html