Covenants in Perpetuity

You are going to have to define "contracts in perpetuity"

CCRs within a contract are not "the entire" corporation status (and are amendable.)

Not getting what you are asking . . .

I do not think that the language above in the same as going on in perpetuity. If the owners desire they can pass a resolution to end the covenants on the years 2012, 2022, 2032 and so forth. For that matter, they could also amend the covenants to allow for termination at any time should they desire. But they are in place until 2012.

Part of the reason for the 10 year extensions is that (in most areas) it is presumed that people want to stability afforded in knowing that the rules will still exist next year.

" Do you also have an article titled "rule against perpetuities"? My CCRs have both. Actually the "rule against perpetuities" really applies to wills; at least that is the impression I have."

There is nothing in these particular covenants that addresses perpetuities other than the language I posted. And I have not found anything similar in the documents I have researched. (But that does not mean it shouldn't be there. So many of these covenants are very poorly written.)

I would be interested to see how your covenants address the issue, particularly both articles. Could you post the language.

As far as my research has taken me, the only area where perpetuities are sanctioned in Indiana law, (1) statutes themselves, and (2) corporations (which can be organized to exist in perpetuity). Otherwise, perpetual contracts are problematic.

AZ has no rule against perpetuities in the corp statutes, including the nonprofit corp act. In the condo act the following is stated in the statute governing "construction & validity of declaration and bylaws: "The rule against perpetuities shall not be applied to defeat any provision of the condo docs." There is not applicable planned community statute; however those statutes are not as "all inclusive" as the condo statutes. The property statutes contain the following:

"ARS 33-261. Rule against perpetuities. The common law rule known as the rule against perpetuities shall hereafter be applicable to all property of every kind and nature and estates and other interests therein, whether personal, real or mixed, legal or equitable by way of trust or otherwise."

Here is the article in my CCRs addressing the rule against perpetuities:

"If any interest purported to be created by the declaration is challenged under the Rule against Perpetuities or any related rule, the interest shall be construed as becoming void and of no effect as of the end of the applicable period of perpetuities computed from the date when the period of perpetuities starts to run on the challenged interest; the "lives in being" for computing the period of perpetuities shall be the President of the U.S., Ronald W. Reagan, and his children and grandchildren who are living at the time the period of perpetuities starts to run on the challenged interest." The CCRs of my former assn stated the "lives in being" as: ". . .those of the issue of the board who are living at the time the period of perpetuities starts to run on the challenged interest."

Here is the article of my CCRs outlining the term:

"This declaration shall be effective upon recordation hereof. As amended and supplemented from time to time, this declaration shall continue in full force for a period of 20 yrs. From and after said date, this declaration shall be automatically extended for successive periods of 10 yrs each."

Note the declaration is automatically extended. A number of people have written on this forum that their assn members were required to vote on extending the declaration.

I realize that many covenants can be amended at any point within the life of the covenant. But there are localities that courts have ruled that the amendments can only take place at renewal time. And there are even documents written for this to be the case. The thing is that where you are and specific language plays a huge part regularly.

I know that our covenants state that they renew and to be removed a registered document must be filed in the year preceding renewal. OF course nothing prevents amendments so I would guess that an amendment could be made to specify a different date to expire.

The thing is that most of the time people want the ongoing protections of the covenants. They may not want the HOA that was formed, but some people do actually want the organization as well. I would love to find some believable research on that issue to see where people really stand. Problem is that most of what I have seen is trying to prove a predetermined idea.

Kirk,

Is it possible that these rulings were based on the fact that the particular CCRs stated amendments could only take place at renewal rather than the fact that is was just a state law? Can you cite one of these court cases?

Charles,
Thank you for providing that reference. It sheds additional light on discussion here. I appreciate your efforts.

The Michigan court finds that the covenants may not be modified during the initial term. That supports Kirk's earlier posting. Right on target, again, Kirk.

As an aside, it is interesting to note that Michigan courts have a different take on restrictive covenants than do Indiana courts.

Michigan
In reviewing the language of restrictive covenants, this Court recognizes that “uilding and use restrictions in residential deeds are favored by public policy.”

Indiana
"Indiana law permits restrictive covenants but finds them disfavored and justified only to the extent they are unambiguous and enforcement is not adverse to public policy. When courts are called upon to interpret restrictive covenants, they are to be strictly construed, and all doubts should be resolved in favor of the free use of property and against restrictions."

It would be fascinating to see if the Indiana courts would accept the Michigan arguments in a similar case, or if they would make a different determination.

Again, it just shows that statutory and case law differ significantly from state to state.