Rule against perpetuities not violated

Houston Court of Appeals considers whether a homeowners' association's right to levy maintenance-fee assessments and to foreclose on a real property lien based upon a members' failure to pay such assessments violates the rule against perpetuities. The court's answer is NO.

Supkins v. Madison Place Homeowners Ass'n
No.01-07-00573-CV (Tex.App.- Houston [1st Dist.] June 19, 2008)(Radack) (homeowner's law, rule against perpetuities not violated)
Opinion by Chief Justice Radack
Panel members: Chief Justice Radack, Justices Jennings and Bland
Case style: James L. Supkis v. Madison Place Homeowners Association, Inc.
Appeal from 133rd District Court of Harris County
Trial Court Judge: Hon. Lamar McCorkle
Disposition: Trial Court's judgment affirmed

MEMORANDUM OPINION [EXCERPT]

B. Rule Against Perpetuities

The Texas Constitution states that "[p]erpetuities . . . are contrary to the genius of a free government, and shall never be allowed." Tex. Const. art. I, § 26. Texas courts have enforced this provision by applying the common-law rule against perpetuities. Mattern v. Herzog, 367 S.W.2d 312, 314 (Tex. 1963).

Under the rule, an interest is not valid unless it must vest, if at all, within 21 years after the death of some life or lives in being at the time of the conveyance. Peveto v. Starkey, 645 S.W.2d 770, 772 (Tex. 1982).

Supkis argues that the Declaration is "constitutionally void" because it "attempts to create real property interests, including unknown and contingent assessments, and liens, that may continue indefinitely." Specifically, Supkis contends that the Declaration violates the rule against perpetuities because, after its initial 20-year term, it can be "automatically extended" in 10-year increments.

We disagree.

In State v. Reece, 374 S.W.2d 686 (Tex. Civ. App.--Houston 1964, no writ), the purchaser of the property bought land subject to a restriction that it be used only for residential purposes. Id. at 688. The restriction instrument provided that the restriction was to "remain in full force and effect perpetually" unless, after the expiration of 15 years, 75% of the lot owners vote to change the restrictions. Id. The purchaser of the property argued that the restriction violated the rule against perpetuties. Id. This court held that, "the restrictions, being covenants running with the land, although described as perpetual, are not in violation of the rule against perpetuities which, in the final analysis, is merely a rule against the too remote vesting of the title to real property." Id. We noted that, as a covenant running with the land, the interests created by the restrictions passed with the conveyance of the title to the property and vested immediately as the title to the property vested. Id. (citing Butler v. Southwest Dairy Products Co., 146 S.W.2d 1036 (Tex. Civ. App.--Galveston 1941, writ dism'd)). As such, the rule against perpetuities was not implicated. In Cornett v. City of Houston, 404 S.W.2d 602, 604 (Tex. Civ. App.--Houston 1966, no writ), the purchaser of the property wanted to open a liquor store, but the restrictions on file in the county deed records limited use of the property to residential purposes only. The document containing the restriction provided that it was valid for a term of 25 years to be automatically extended for successive 15 year periods. Id. at 605. This Court, citing State v. Reece, held that "[t]he covenants and restrictions do not violate the rule against perpetuitites because that rule merely relates to the remote vesting of an estate." Id.From Reece and Cornett, we conclude that a restriction on property that runs with the land does not implicate the rule of perpetuities if it does not remotely vest a property interest.

Thus, the issue we decide next is whether the covenant to pay fee assessments, found in the Declaration, is a covenant running with the land that implicates remote vesting of an interest in the property.

A covenant runs with the land when it touches and concerns the land; relates to a thing in existence or specifically binds the parties and their assigns; is intended by the original parties to run with the land; and the successor to the burden has notice. Inwood N. Homeowners' Ass'n v Harris, 736 S.W.2d 632, 635 (Tex. 1987); Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903, 910-11 (Tex. 1982).In Inwood North Homeowners' Association, a declaration of covenants and restrictions for the subdivision, which was on file in the county's real property records, provided that any person receiving a deed for a lot in the subdivision was to pay an annual assessment and any special assessments for capital improvements. 736 S.W.2d at 633. The court held that the covenant to pay maintenance assessments for the purpose of repairing and improving the common areas and recreational facilities of the subdivision met all of the requirements for a covenant running with the land because (1) it "touched and concerned" the land, (2) the declaration of covenants evidenced the intent of the original parties that the covenant run with the land, (3) the covenant specifically bound the parties and their successors and assigns, and (4) because the property was conveyed in a succession of fee simple estates, the requirement of privity was met. Id. at 635.The same is true of the covenant to pay maintenance fees and assessments in this case. The purpose of the fee assessment in this case is to "be used exclusively for the purpose of promoting the recreation, health, safety, and welfare of the Owners and in particular for improvement and maintenance of the property, the Common Areas, and services and facilities relating to the use and enjoyment and of the Townhouses and other improvements new or hereafter situated thereon . . . ." As such, the fee-assessment provision "touches and concerns the land." Id. at 635. Here, the declaration also provides, in both the enabling paragragh and in Article X, that the covenants and restrictions shall run with the real property and be binding on all parties acquiring the property and their heirs, successors, and assigns. As such, the fee-assessment provision meets the requirements that it be intended to run with the land and be binding on the parties and their assigns. Id. Finally, the deed signed by Supkis referenced the declaration; he was thus on constructive notice of its restrictive covenants. See id. As such, the requirement that he have notice of the burden has been met. Id.Therefore, under the reasoning of Inwood North Homeowners' Association, we conclude that the requirement that homeowners in Madison Place pay maintenance fee assessments is a covenant running with the land. Moreover, the assessment burden vests upon transfer of the property and thus does not implicate the rule against perpetuities because it does not involve the remote vesting of a real property interest. See Cornett, 404 S.W.2d at 605; Reece, 374 S.W.2d at 688.Our holding today is consistent with the holdings of other jurisdictions that covenants to pay fee assessments do not violate the rule against perpetuities because they burden a present, not a future, interest in property. See In re County Treasurer & Ex Officio County Collector, 869 N.E.2d 1065, 1086-87 (Ill. App. Ct. 2007) (holding that declaration created present interest in collecting assessments on all lots in development and that covenant of assessments is present interest and does not violate rule against perpetuities); Kell v. Bella Vista Prop. Owners Ass'n, 528 S.W.2d 651, 653 (Ark. 1975) (holding that assessment covenant, which provided for initial term of 26 years followed by successive 10-year periods, not an illegal perpetuity because nothing prevents property from vesting); Lowry v. Norris Lake Shores Dev. Corp., 203 S.E.2d 171, 172-73 (Ga. 1974) (holding that annual fee assessment for beach privileges is covenant running with land and does not violate rule against perpetuities).C. Lien is Enforcement Mechanism for Covenant Running with the LandHaving decided that the fee-assessment provision of the Declaration is a covenant running with the land and does not violate the rule against perpetuities, we consider whether the lien to enforce the fee assessment presents a violation of the rule. In Inwood North Homeowner's Association, after holding that a fee assessment was a covenant running with the land, this Court further held that the restrictions contained "valid contractual liens which run with the land," and that the homeowners took the property subject to the homeowners' associations's right to foreclose for delinquent assessments. 736 S.W.2d at 635-36. This Court held that this right to foreclose was superior to the landowner's homestead rights because it pre-existed the landowner's purchase of the property. Id.The same is true in this case. The Homeowners' Associations's right to foreclose its lien for non-payment of fee assessments is specifically provided for in the Declaration. According to Inwood North Homeowner's Association, this lien right also runs with the land, id. at 635, and Supkis took title to his property subject to such right. The foreclosure right is the enforcement mechanism for the homeowner's assessments, burdens which are immediately vested upon transfer of the property. Thus, the right of foreclosure cannot result in a remote or contingent vesting interest, and as the provision which it enforces does not violate the rule against perpetuities, neither does it.III.

CONCLUSION

The fees assessment provision is a covenant running with the land that does not remotely vest any property interest and thus, does not violate the rule against perpetuities. Accordingly, we overrule Supkis's first and second issues. We affirm the judgment of the trial court.