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Title restrictions can scare away buyers, but they have pluses

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Question: We have a detached single-family dwelling on more than five acres of land that we're having difficulty selling because real estate agents say we have a restriction on our title. We have a homeowners association and board of directors, and that appears to be a problem for some potential buyers. Though we've had little to do with our association, we can't convince buyers it's OK. They say they "don't want the hassle." What exactly is a "restriction" and "deed restricted title?" Can we get it off our house title?

Answer: Whether your home is detached, attached or sits on acres of its own, due to the restrictions, certain property rights enjoyed by unrestricted titleholders are not available to those whose properties are thus burdened. Properties in California residential and/or mixed use common-interest developments have mandatory deed restrictions that attach to and are recorded on those property titles at the time of sale and in some instances at the time of lease. These developments include different housing types, such as mobile homes, time shares, town houses, condominiums, cooperatives and detached single-family dwellings.

As a member of a nonprofit mutual benefit corporation, you share in common with other titleholders certain rights and liabilities intended for the "mutual benefit" of owners. In this environment, deed restrictions on use and enjoyment of individual properties are mandated to establish and maintain those so-called benefits. Benefits consist of anything from tot lots, swimming pools, elevators, roads or even an easement where community mailboxes stand. All such benefits are simultaneously "liabilities."

Civil Code section 784 defines "restriction" as a "limitation on, or provision affecting the use of real property in a deed, declaration, or other instrument, whether in the form of a covenant, equitable servitude, condition subsequent, negative easement or other form of restriction."

On becoming a titleholder, membership in the association was automatic and mandatory. Upon written request, the board of directors should provide you with a copy of the association's covenants, conditions and restrictions (commonly known as CC&Rs) or declaration of restrictions, bylaws, and governing documents pertaining to your association's operations. Civil Code section 4530 specifies the scope of the association's duty to provide you with the governing and related documents. Civil Code section 4525 requires the seller to provide documents listed therein (as soon as practicable) to a prospective purchaser before they execute a sales contract or title is transferred. Your real estate agent should be familiar with such disclosure responsibilities.

This is extremely important as, under Civil Code section 4540, a person who willfully fails to comply with this disclosure requirement is liable for damages to the purchaser affected by the failure, plus a civil penalty not to exceed $500, and in an action to enforce this responsibility, the prevailing party shall be awarded reasonable attorneys fees and costs.

Although potential buyers of your property, after reviewing the mandatory disclosures, may be reluctant to purchase because of use limitations imposed by the association's governing documents, your real estate agent could point out that the mutual benefits gained by being part of the association may outweigh the mutual use limitations or restrictions. Buyers should scrutinize these "benefits versus burdens" very carefully.

Title restrictions "run with the land," meaning every buyer has the association's restrictions recorded along with his or her title or grant deed. Unless a court of law deems the restrictions set forth in the governing documents to be unreasonable, they are applicable to all titleholders. Business and Professions Code section 11018.1(c) warns buyers that restrictions can be minor or major in scope and carry a variety of penalties enforceable by boards against titleholders.

Restraints can limit an owner's ability to paint the house a color of his or her choosing, add a skylight or an extra room for a growing family or an elderly parent or make space to park one's car. Limitations on pets, swimming pool usage, children's access to certain common amenities, television antennae or satellite dish installation, piano practice or after-hours parties all fall under the board's control, not the owner's.

Without titleholders' agreement and vote, things do not look promising in terms of removing restrictions imposed by the CC&Rs. Buyers and sellers should review Civil Code section 5300 (distribution of the association's annual budget report), Civil Code section 5310 (distribution of the association's annual policy statement), Civil Code section 5320 (distribution of the association's summary of annual budget report). All should be reviewed in conjunction with the CC&Rs.

Holders of the deeds of trust on the various properties within the association may also have rights as to any amendment. A detailed analysis of the future effects of any proposed amendment should be conducted by a real estate attorney.

Larry Mikelson, partner at Mikelson & Mikelson, a commercial and residential real estate and business law firm specializing in transactional and litigation matters, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.

Copyright © 2014, Los Angeles Times
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