From CAI Law Reporter:

Chipman’s Subdivision Homeowners Association, Inc. v. Carney, No. 1-867/11-0545, Iowa App. Ct., Feb. 29, 2012

State and Local Laws and Legislation/Covenants Enforcement: A document filed by a homeowners association did not extend the term of the previously recorded protective covenants and restrictions because it did not meet statutory drafting and recording requirements.

Carroll and Daisy Chipman developed an area of land consisting of 15 lots in rural Johnson County, Iowa. In 1969, they recorded protective covenants and restrictions stating that the Chipmans must approve all proposed building plans before building could proceed and specified that any amendment to the covenants required a majority vote of the lot owners.

In 1986, a document entitled “Covenant” was signed by five lot owners claiming all 15 lots were subject to the covenant. The new covenant also stated an intention to establish a homeowners association and set forth an assessment structure that required new residents to pay a one-time fee equal to half the annual assessments and all residents to pay $10 per month to the new association. In 2001, Chipman’s Subdivision Homeowners Association, Inc. (association) was established to maintain and manage the subdivision. In 2003, the association recorded a document entitled “Revised and Restated Covenants and Restrictions,” which stated it was adopted by a majority of lot owners in accordance with the original 1969 covenants. The revised covenants and restrictions contained a provision extending the obligation to pay assessments to all lot owners—the 1986 covenant had only required owners with homes on their lots to pay assessments.

E.R. and Kathy Carney purchased three lots in the subdivision in 1997. In 2010, the association sued them in small claims court for $1,820 in unpaid assessments. Carney testified that he purchased his property from a real estate attorney who had informed him that the 1969 covenants had expired and that the association had no legal authority. Carney argued that the covenants expired in 1990 in accordance with the 21-year limitation period established by Iowa statutes.

Iowa law provides that “No action . . . arising by reason of the provisions of any . . . use restrictions in and to the land therein described shall be maintained either at law or in equity . . . after twenty-one years from the recording of such contract . . . unless the claimant shall file a verified claim with the recorder of the county wherein said real estate is located within said twenty-one year period.” Carney contended that the 1986 covenant did not extend the limitation period, and it was not binding because only one-third of the owners had signed it. The court entered judgment in the association’s favor. Carney sought review by the district court, which affirmed the judgment. Carney then appealed the district court ruling.

Carney argued that the 1969 covenants terminated in 1990, pursuant to Iowa Code Section 614.24. He further asserted that the 1986 covenant was inadequate to extend the duration of the covenants for multiple reasons, including: it did not identify or refer to the 1969 covenants; it was not indexed or entered into the Johnson County Recorder’s claimant’s book; it was not acknowledged, notarized or verified; and it was not signed by the required majority of landowners.

Section 614.24 was enacted to simplify land transactions in Iowa by limiting the title-search period. It imposes a 21-year limit on the life of land-use restrictions by providing for automatic termination of the covenants in the absence of affirmative actions to extend them. To avoid automatic termination, a claimant may file a verified claim to extend the covenants for an additional 21 years. A verified claim must state the nature of the claimant’s interest; the manner in which the interest was acquired; and the date the deed, conveyance or contract was recorded. Further, the claim must be indexed under the property description in the “claimant’s book” that is kept in the local county recorder’s office. The claim must also be recorded in the official records.

The appeals court agreed that the 1986 covenant was inadequate to extend the limitation period because it clearly did not comply with Section 614.2.4. The court noted that recording a document did not demonstrate its validity and determined that the 1969 covenants expired in 1990, and the 1986 covenant did not extend the limitation period. Since the covenants had previously expired, the 2003 revised covenants and restrictions could not extend the limitation period.

The association, therefore, could not recover the assessments it claimed Carney owed based on the 1969 covenants and subsequent purported amendments. The court reversed the trial court’s ruling and remanded the case for further proceedings consistent with its findings.

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