Will the Courts Enforce Your Restrictive Covenants?

From Northern Kentucky Builder Magazine, October 2007

A recent Kentucky Court of Appeals case calls into question whether a developer can enforce restrictive covenants when it has placed the covenants in the direct chain of title of purchasers.1 The story begins about twenty years ago, when Triple Crown Developers, Inc. started developing an 800 acre tract in Boone County. In 1990, Triple Crown recorded a Declaration of Covenants for the Triple Crown Subdivision. Then Triple Crown began selling off portions of the 800 acres to developers. The developers in turn formed their own homeowners’ associations with their own covenants.

In most cases, Triple Crown amended its Declarations to include the new developments. But when Triple Crown conveyed a parcel to Fischer Development Company, Inc., it did not amend its Declaration, although it did incorporate the Triple Crown Declaration specifically in the deed.

Fischer Development then conveyed a deed for the same parcel to Henry Fischer Builder, “subject to and/or benefited by all easements, restrictions, zoning ordinances or regulations, and taxes and assessments both general and special, but yet due and payable.” Henry Fischer then conveyed to individuals, referencing the same “subject to” language contained in the deed to Henry Fischer.

Individual homeowners contended that they had no obligation to pay the Triple Crown association’s dues, and the matter ended up in court. Initially, the Boone Circuit Court found in favor of Triple Crown, and ruled that the homeowner should pay the dues. But the Kentucky Court of Appeals sided with the homeowner and reversed the Boone Circuit Court. The Court of Appeals’ rationale was that even though the land “is subject to the [Triple Crown] Declaration through the direct chain of title,” the Court determined that is must “ensure that the Declaration applies pursuant to its own terms.” In other words, the Court held that it did not matter that the restrictions were in the direct chain of title. Since Triple Crown did not amend the Declaration to include the land, the restrictions did not apply.

This controversial result prompted Triple Crown to seek discretionary review from the Kentucky Supreme Court, and the high court granted review of the case in June of 2007. Since the Court of Appeals’ ruling could have highly detrimental results for many homeowners’ associations, the Home Builders Association of Northern Kentucky has requested leave of the Kentucky Supreme Court to file an amicus brief in support of Triple Crown.

1 The information in this article is based upon the opinion of the Kentucky Court of Appeals, set forth in Oberst v.Triple Crown Subdivision Homeowners’ Association, Inc., 2006 WL 2457411 (August 25, 2006) (NO. 2005-CA-000066-MR, 2005-CA-000242-MR), Unreported.