Impact of developer out of business on deed restrictions
by Em
(Dixie County, Fl)
Visitor Question: If the original incorporation, that established a deed restriction when it sold off land to new buyers years ago, has been shut down and revoked by the state of Florida for over 20 years, are the deed restrictions enforceable and can the current land owners force a new buyer to sign a new covenant?
Editors Reply: You are asking a legal question to a group of planners, so for a final answer you would need to consult a Florida attorney. We are happy to give some general observations though, since they form a checklist of things you may want to consider to prepare for talking with an attorney if the outcome is important enough to you.
Generally speaking across the U.S., it makes no difference whether the deed restrictions were imposed by a person, group of persons, or a corporation. Persons die, so subsequent buyers may have to deal with heirs to change or eliminate deed restrictions. The same may be true of corporations.
However, in Florida we think it would be quite unusual if the original master deed failed to set up a homeowners' association that would gradually gain a voice and ultimately control as lots were sold off. If you have a functioning homeowners' association, as your question seems to imply, the fact that the developer's corporation is now defunct has become irrelevant.
Another thing to consider is that Florida has a marketable record title act, which aims to clean up old restrictions of many kinds if they are more than 30 years old and not being used or enforced. In broad terms a homeowners' association is required to formally act to renew deed restrictions at some point before the end of the 30-year period. If that did not happen, your deed restrictions may be null and void, and in that case, no, current owners cannot force the restrictions on a new owner.
For other readers, Florida is not the only state with some version of a marketable title act that aims to simplify transfer of real estate.
Now let's say there is a situation that appears to us from our mail to be all to common, in which the homeowners' association that was described in the original master deed, CC and R's, or other document really was never established and does not meet or have officers. In that case, it may be more difficult for an individual current owner to enforce the restrictions, in the sense that one owner would have to foot the bill for legal enforcement, not to mention the hassle. But that does not mean that the restrictions can be ignored because there might be that one owner or a small group of owners that would be willing to fund the enforcement action.
So before you consult an attorney, if the answer to this question is important enough to you, try to have the actual document imposing the deed restrictions in your hand. Read it yourself, and it may answer some of your questions beforehand. Also make sure you understand the status of the homeowners' association if one exists. Does it meet? Does it have a board? What actions, if any, has the board taken to renew the deed restrictions? Your county office where deeds are recorded can help you determine if there were any follow-up actions taken by your homeowners' association. How close are you to the 30-year time limit when restrictions would need to be renewed and recorded in order to continue them? (The relevant date would be the date when the original developer first recorded the restrictions.)
Learning the answer to these questions in advance should prepare you to save expensive attorney time as you obtain a definitive answer to your question.
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