Changing the CCR document in a non HOA neighborhood

by Fran
(Sedona AZ)

Visitor Question: We have a 40 year old ambiguous CCR (covenants, conditions, and restrictions) initially created by the community developers that was bond to our title. It automatically renews every ten years. It created an Architectural Control Committee requiring elections with a 75% vote of members and a 2 year term.

There has never been a vote and, until recently, the members were mostly unknown to most neighbors, but the members claimed to have been on the committee for 10-20 years. There is nothing in the CCR that gives them the ability to engage in litigation or fine a neighbor if there is an infraction.

The CCR currently allows short-term rentals. Recently a few neighbors organized to petition the neighborhood to amend this CCR to deny the right of owners to make short-term rentals, however still grandfathering those currently engaged in this. Those with rentals are happy to reduce the competition, and those few that want to disband all short-term rentals are happy to get their votes. We moved to the specific area because it was NOT part of an HOA and because it DID allow short-term rentals. We had considered offering a short-term vacation rental in the future in order to supplement income during retirement. The ability to have short-term rentals in this area also maintains or potentially increases our property value.

The question is whether this neighborhood, without an HOA and without unanimous vote, can legally change and amend this CCR and prevent us from utilizing our own property as previously understood and previously intended.

Editors Reply: You say that there is no HOA (home owners association) in your title and in the third paragraph above, so we are somewhat perplexed as to how there can be “members” who vote on an Architectural Control Committee. We suspect that there is a passive HOA that does not have powers such as litigation and fines as methods of enforcing the covenants. We are answering on the basis of there being some form of rudimentary community organization where members vote, whether it is in an HOA as you imagine it or not. You say that a few owners "organized to petition the neighborhood," so there is some way that decisions are made.

We are quite sympathetic with your situation of buying the property with an eye toward using short-term rentals as a part of your retirement income. Unfortunately, most CCR covenants can be changed, and the document itself, which we hope you have a copy of, tells how they can be changed. It is possible that changing the CCRs requires unanimous consent of current property owners, but it is at least as possible that a percentage of the current owners can change covenants. We also will note that sometimes the developer or original owner of the property at the time the CCRs were set in place has a voice, or even a substantial or deciding voice, in how and whether covenants are changed. Or maybe the gist of your question implies that the Architectural Control Committee is empowered in the covenants to make these decisions.

In short, what you previously understood and previously intended is irrelevant legally in most situations, unless you want to file a civil suit against some persons or corporations that deceived you. Proving that is usually very difficult. However, if you are campaigning with your neighbors about how to vote, by all means use the emotional appeal of stating what you hoped to do when you bought the property.

Now let's go back to the issue of the Architectural Control Committee. If you have never been informed that it was time to vote on the members of that committee, that appears to be a violation of the CCR master deed document. (However, it is possible that the vote you refer to is a vote of a board of directors; that is not clear to us from your question.) If it is the Architectural Control Committee that will make the decision on land use (in your case, whether short-term rentals are permitted), then an element of any legal action you might take would be pointing out the fact that those who claim to be on the committee have not been elected in recent memory, and certainly not in the last two years.

We have two recommendations for you. First, if this is really important to you, see an attorney whose practice explicitly includes real estate law in your state. Second, think about organizing your own neighborhood meeting where both the broad situation of how rules are changed and the narrower question of short-term rentals could be discussed by everyone. You need to understand the exact governance mechanism of your development, so you need an opportunity to ask pointed questions about how decisions legally are made. You want to know about the history and practices of the community. This could be a socially distanced affair in the clubhouse if you have one, or if your climate permits, an outdoor meeting is ideal.

You may want to take both actions, but we would begin with finding out a firm understanding of who can change the CCR and by what method. To do this, you will have to read the document closely, and if it is not perfectly clear (and it probably isn't, since you characterize them as "ambiguous"), that's where you consult an attorney who can research case law to find out how ambiguous situations are handled in your region. We know it is small comfort, but ambiguous and poorly written CCRs are pretty common. After this first step, and armed with this information, you are in a better position to talk with your neighbors, either quietly and one-on-one or in a group setting that you create or participate in.

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