Overcoming Outdated Deed Restrictions
Whether you are a municipality, a homeowner’s association (HOA), or a property owner, you have most likely experienced some level of frustration due to outdated deed restrictions that no longer conform to the character of the neighborhood they seek to benefit. For a municipality or an HOA, that frustration could come in the form of the duty to enforce some archaic deed restriction that no longer provides the original benefit that it was intended to provide. For the property owner, the same antiquated deed restriction can create limitations on the use of their property that could effectively turn a sound investment into a financial nightmare.
The most common argument used to overcome an outdated deed restriction is that the restriction has been waived due to lack of enforcement. In order to establish the affirmative defense of waiver, the non-conforming user must prove that the violations then existing are so great as to lead the mind of the “average man” to reasonably conclude that the restriction in question has been abandoned and its enforcement waived. New Jerusalem Baptist Church, Inc. v. City of Houston, 598 S.W.2d 666, 669 (Tex. Civ. App. 1980). The factors to be considered by the “average man” are: the number, nature, and severity of the then existing violations; any prior acts of enforcement of the restriction; and whether it is possible to realize to a substantial degree the benefits intended through the covenant. Id. A good example of this would be the many residential properties in the City of Houston that are subject to deed restrictions dating back to the 1920’s that prohibit commercial use, but nonetheless are being used as commercial properties.
Our cities have changed significantly over the last 100 years, and it goes without saying that substantial changes have taken place in such a populated and diverse area as Houston. One such prevalent change in a neighborhood’s character centers around commercialization. Most deed restrictions that apply to neighborhoods established over 100 years ago have similar provisions limiting the properties to residential use only. This means that no commercial use can be made of a property subject to that restriction. As the community grows the nature of the neighborhoods may change and more residential properties may start being used for commercial purposes. This in turn creates a strain on the City’s resources as Houston is tasked with enforcing deed restrictions. Many HOA’s experience the same strain on their resources when defending outdated restrictions within their own communities.
On the other side of the coin, this creates issues for property owners that purchase property in one of these older communities. After purchasing the property and making significant investments, the City or applicable HOA can simply come in and prohibit the owner from using the property for commercial purposes. This effectively plummets the property value because no homeowner would want to raise a family in a neighborhood that is now surrounded by commercial businesses, and no investor will want to purchase a property that is limited in such a way either. So, what happens next? A long and costly legal battle for both sides over the theory of waiver of the right to enforce a deed restriction.
One way a City or HOA can avoid such a drain on resources is to consider amending any outdated deed restrictions to conform to the present character of the neighborhoods they seek to benefit.
This in turn encourages investment in these areas which then drives economic growth. The best way for property owners to avoid the headaches caused by such a restriction is to consult an attorney about what a property can and cannot be used for before making such a purchase. However, if you are one of the thousands of property owners who are looking at a good investment turned bad by the enforcement of an antiquated deed restriction, your best course of action is to contact your attorney to discuss the possibility of a waiver of the restriction in question.
Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our commercial and business litigation practice can be found here.
Carl attended the University of North Texas from 2008 to 2011, where he earned his Bachelor’s degree in History (both majoring and minoring in History). Upon graduating, he worked for TRCA, Inc. in Denton, Texas as a Sr. Account Executive, where he was personally mentored by the company’s CEO. It was in this capacity that...