CC&Rs - Covenants, Conditions and Restrictions

What's That Smell?

Imagine that you're out touring houses with your West Real Estate agent. (Given where you're reading this blog, that might not be too hard to imagine.) You walk through a beautiful front door and into a foyer that is spacious and light. Room after room impresses you with its charm and style. The layout of the home is smart and efficient. Then the dream turns into a nightmare. You walk into the final bedroom expecting to be greeted once again by delight in every corner. Instead, you find the lair of a teenager. Dirty laundry obscures what is probably a beautiful carpet. Brooding faces stare down at you from movie posters which are unfamiliar to you. From the light that filters through the poorly hung curtains, you can see that there is a layer of dust and grime on every surface. The closet doors hang askew, and the uniformity of the holes in the wall is only interrupted by marks and stains that you can't and don't want to identify. And through it all is a smell that can only be described as "athletic".

At this point, your perception of the house has drastically changed as has your opinion of its value. You leave rather disappointed. On your way out, you start to notice other defects of the house that hadn't seemed to bother you before. And off you go to the next house on your list.

Wouldn't it be nice if the seller had taken the time to get some sort of agreement from their teenager whereby the teenager would keep their room as clean as the rest of the house? It wouldn't have to be an unreasonable agreement. The room would just have to match the same standards as the rest of the house. Welcome to the world of Covenants, Conditions, and Restrictions (CC&Rs)!

CC&Rs are rules that govern many aspects of a particular neighborhood. They may address such things as where you can park your RV, how many trees should be in your front yard, and what kind of fencing is allowed. The overall purpose of CC&Rs is to provide a cohesive look to the neighborhood which in turn improves the value of all of the properties.

The CC&Rs generally provide for the creation of a Home Owner's Association (HOA) which carries out the business of the neighborhood (seeing to it that the common area gets mowed) and enforces the rules. Dues are paid to the association by the owners and are used for things like maintenance of the neighborhood pool. CC&Rs often also provide for a system of fines that can be used to "encourage" owners to follow the rules. An owner can refuse to pay these fines, but the HOA has the authority to send you to collections or even place a lien on your property.

RIP HOA

Just because a house is in a subdivision doesn't necessarily mean that it still has an active HOA. Older CC&Rs used to be written in such a way that they would expire after a certain number of years. Newer CC&Rs tend to have provisions that cause them to automatically renew. Often though an HOA can simply die from neglect. If the neighborhood stops following the CC&Rs (especially the by-laws relating to electing Board members and holding annual meetings), it can eventually be argued that the entity has ceased to exist. Imagine a situation in which people have been parking dead cars in their front yard for years and then suddenly the HOA tries to reform itself, elect a Board, and start fining them. Good luck making that stick! It's often hard to determine if an HOA has died. You can check with the Secretary of State to see if they've filed recently (required annually in Idaho), but perhaps a more sure way is to simply go down the street and ask the neighbors if they pay an HOA fee.

My Land, My Rules!

Occasionally, I will meet someone who asks "how is it legal for someone else to tell me what I can and can't do on my own property?" I find that this only comes up in relation to CC&Rs. No one ever questions the right of the federal or state governments to stop illegal activities on private property. Beyond that, the city will have something to say if you want to raise a cow in city limits. If you move out of the city, the county will have something to say if you want to raise 20 head of cattle on 0.10 acres of land. The Department of Health will have something to say if you want to drill your well in the middle of your septic drain field. These are all government entities of course. CC&Rs are actually much more American. We have the right to freely associate with others. We also have the right to legally bind ourselves with contracts. CC&Rs are actually both. We make our own agreements with people of our choosing and we enforce those agreements ourselves. By buying that property, you have agreed to live by those rules.

Too Much Time On Their Hands

Most of the time, HOAs run quite peaceably. The Board members have an incentive to be reasonable in their enforcement of the rules for the simple fact that they have to live by them as well. However, once in a while you will find someone with too much time on their hands, who has decided that it is their mission in life to tell others how to live and thinks the CC&Rs grant them that authority. Everyone has heard horror stories about people going around with tape measures measuring the length of the grass. Conversely, you never hear about all the neighborhoods where that doesn't happen. In a situation where someone on the HOA Board is getting out of control, there are two primary things that you can do. First is to read the CC&Rs very carefully. You can see if they are enforcing legitimate rules or just their own preferences. You can also double check to make sure that they are enforcing legitimate rules in a way that is in accordance with the CC&Rs. Second, you can join the Board yourself. Often there are reasonable people already on the Board, but they lack someone to stand up to the member who is acting like this is their own private kingdom.

Not For Everyone

You might be thinking, "that all sounds well and good for you, but I could never live in a subdivision where an HOA could tell me what to do." That's fine. HOAs aren't for everyone. If you read through the CC&Rs for a particular neighborhood and decide that that isn't your cup of tea, then let your Realtor know so they can help you to find properties that aren't in a subdivision. In our part of Idaho, most houses that have been built in the past few decades have been built in a subdivision, so keep in mind that such a decision might limit your housing choices. For some, that is a price they are more than willing to pay.

What Should I Do?

• Double check to see if the house you are thinking about buying is in a neighborhood with an active HOA.
• Read the CC&Rs. Most of the time CC&Rs in Idaho are what most people would consider to be reasonable (i.e. no dead cars in the front yard), but you'll want to be aware of the specific provisions of your neighborhood.
• Make sure your lender is aware of the amount of the HOA dues. They have to take that into account when determining your loan approval amount.
• Most importantly, drive through the neighorhood and see what you think of it. Is this the kind of place you'd like to live? Are the owners maintaining their houses and yards in a way that you would expect and that will help your house to grow in value over the years to come?