Not only must prospective buyers of homeowner association controlled homes retain a competent lawyer, if one can be found who will represent the buyer, but must also understand the fact that covenants are being constantly interpreted by the courts. That means whatever you or your attorney think you’ve agreed to, assuming unlike today the buyer doesn’t even have to see the CC&Rs in order to be bound by them, the court may give any entirely different spin on the meaning of the covenant.
That’s called making new law. And that’s on top of existing legal precedent heavily in support of HOA governments, and against the privileges and immunities to which we all are supposed to be entitled. To a very good extent, buyers of HOA homes are getting “a pig in the poke.”
When further considering the argument, like CAI and HOA promoters like to argue, that buying a home is buying an investment, this HOA investment is a very bad deal for an investor. Recall that even the common law authority on servitudes (covenants)[i] recommends that in the event of a conflict between servitude law and constitutional law, servitude law should prevail. There goes any vestige of any rights still retained by a homeowner.
In a recent example of “surprise” by the Wyoming Supreme Court[ii], owners who sued their HOA for imposing unreasonable requirements on modifications to their home, and won on that issue, were still denied their breach of contract claim. Now follow carefully. The trial court accepted the claim of unreasonableness and stopped there, not addressing the other claim of breach of contract and payment of attorney fees. The supreme court took the position,
While we have often explained that restrictive covenants are contractual in nature . . . that does not necessarily mean that a homeowner is entitled to recover contract damages against a homeowners association. Ms. Dwan has not identified any provision of her CCRs that would allow her to claim damages against the Association. She has not provided any legal authority, from Wyoming or any other jurisdiction, supporting her claim for damages.[iii]
The court distinguished between equitable relief — this ain’t right — from a contract with its explicit wording and absence of wording, which doesn’t have to be equitable. The board can act unreasonably, but they are not punished for doing so. (Contrast this with the right to punish the homeowner with fines, which is granted to the HOA under both the CC&Rs and almost every state HOA statutory Act). Once again, the developer’s “take it or leave it” contract does not protect against board actions by providing a penalty as a detriment against any such further actions. Once again, where wrong-doing was found against the HOA, the CC&Rs adhesion contract favors the HOA with its silence on damages in the event the homeowner does win a lawsuit.
[i] Restatement Third, Property: Servitudes, § 3.1, comment h.
[ii] Dwan v. Indian Springs Ranch HOA, No. S-09-0064, (WY June 3, 2010).