Developer Revising Covenants

(Tennessee)

Visitor Question: We are in a subdivision of five lots. The developer sold the fifth lot to a charity that builds houses to donate to wounded veterans, which we all agree is a great cause.

Two houses that have already been built range around 8000 sq. ft. in area. (These are approximately 10 acre lots). The covenants state that the minimum sq feet for a ranch is 3400 sq. ft. of liveable space. We found out today that the house being built is only 2800 sq. ft. of liveable space. Obviously it is way smaller than the other houses and doesn't even meet the minimum.

The developer has now said that he amended the covenants to allow the smaller square footage. This development still has a sign in the front that states "five exclusive lots" as this was supposed to be a higher end community. Can he just amend the covenants? Don't we have to be notified? Thanks.

Editors Respond: The answer to your two questions is that "it depends." The exact wording of the covenants, and any other documents wrapping around the covenants (such as a master deed), will determine whether what the developer has done is legal.

Sometimes covenants are drafted in such a way that the developer retains control until 50 percent, 80 percent, or some other percentage of the lots are sold. The legal language itself may grant the developer wide latitude until all or a significant share of the lots have been sold.

So read all of your documents to try to discover the answer for yourself.

As for notification, your deed and covenants may or may not require that, depending on how they were drafted.

The real question is what to do now. Apparently you have already talked with the developer and not received satisfaction.

In this case you will need to consult an attorney to determine what rights you have and to seek advice on whether a civil lawsuit is likely to be productive for you.

Often we are a little hard on people who have purchased a home and only learned later what the covenants actually say. We're even tougher with the real estate agents and developers involved.

But in your case, we have to say that our opinion is that this is appalling behavior, especially if two homes much larger than the minimum already have been built. With only five lots, that can't have escaped the developer's notice.

Since you no doubt feel that you have a significant amount of home value on the line, your best course of action may be to go straight to an attorney. Check on how other property owners feel so that you can combine your efforts and your funding for the legal advice, but it may be very much worth your time in this case.

Note well that we are not attorneys, but this one caught our attention as planners.

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