Last year gave us an interesting case in the form of the second Colyear case, Colyear v. Rolling Hills Comm. Ass’n. of Rancho Palos Verdes (2024) 100 Cal.App.5th 110.  And this one resulted in a major loss to the Association—rejecting the association’s attempt to enforce a tree-trimming covenant and the resultant $1.3 million dollars in attorneys fees awarded to the prevailing homeowner. The interesting part of the case, though, is what is has to say on the limits of a developer’s ability to create a ‘master planned community,’ and the disastrous effects of careless drafting in the annexation process.

In a nutshell, until around 1980, developers seeking to subdivide and sell a large, planned community generally recorded an initial declaration of CC&Rs, describing some (or all, in some cases) of the property envisioned to constitute the future, built-out community.  Then, new tracts were made subject to a second set of CC&Rs, which might or might not incorporate by reference the original declaration.  Today, the developer generally records a “Master Declaration,” which (1) identifies all the property which may become subject to the Master Declaration in the future, and (2) provides for the “annexation” of portions of that property, over time, to the Master Declaration (along with possible additional restrictions tailored to the newer properties), thus assuring that the Master Declaration governs the added tracts.  But, Rolling Hills Community Association (“Rolling Hills”) was created in the mid-1930s, and therein lies the root of the problem.

When the developer began construction in 1936 it recorded a declaration of restrictions (“Declaration 150” [Original Declaration”]) which contained, amongst other provisions, a tree-trimming requirement.  This Original Declaration also provided that other tracts would be subject to the provisions of “a Declaration of Restrictions” [emphasis added].   The Original Declaration did NOT state that the annexed properties would be subject to the Original Declaration.  Neither did the Original Declaration provide the legal description of properties which were to be annexed. Some of the annexed tracts did have a tree-trimming covenant, some (including Colyear’s) did NOT contain such a covenant.  To further confuse matters, some of the annexation declarations WITH the covenant were recorded after a series of annexation declarations that did NOT contain the covenant.

The Association grappled with the inconsistencies between the Original Declaration, and the various declarations of the annexed tracts, for 60 years.  It was generally apparent that entirety of the Original Declaration (including the tree-trimming covenant) might not be enforceable against some, but not all, the annexed tracts.   First, the Original Declaration did not identify those tracts as subject to its terms, and second, some of the declarations of annexation did not specifically “incorporate by reference” all the terms and conditions in the Original Declaration.  There were tantalizing references in the Original Declaration suggesting it was intended to be the kind of “master declaration” we see today, such as describing the document as “a General Plan” for development of Rolling Hills, and a statement that the Association had the power to enforce provisions of those subsequent tracts’ CC&Rs, but the Original Declaration  did not expressly identify Colyear’s tract, nor did Colyear’s declaration expressly incorporate by reference the Original Declaration.  And that meant the tree trimming covenant could not be enforced against Colyear’s lot.

The Association tried to argue that Colyear must have known about the Original Declaration, since his declaration referred to the Original Declaration (“constructive notice.”)  The Court was having none of it.   First, Colyear’s title report did not list the Original Declaration as binding his lot.   And, although Colyear’s declaration mentioned the Original Declaration, it did not “expressly incorporate by reference the restrictions found in the [Original Declaration.]”  Other annexed tracts DID expressly incorporate by reference the provisions of the Original Declaration, just not Colyear’s tract CC&Rs.  This in turn meant the portions of the Original Declaration enforceable against the various tracts changed depending on the exact language of the annexation declarations.  The appellate court quoted the trial court with approval:  “…To the extent a crazy quilt exists, it is a byproduct of the method by which [the developer] and [the Association] expanded this community.’  Ibid. at 124.

What should the Association have done to make the tree-trimming covenant effective against Colyear’s lot, avoiding the “crazy quilt” situation where some lots are covered by particular provisions, and others are not?  It could have sought either to amend the Original Declaration to specifically add the additional lots, or to amend Colyear’s tract declaration to incorporate the tree trimming language from the Original Declaration.  The record indicates the association considered doing this, until it concluded such an amendment was not likely to pass, or at least, not without considerable effort and cost.  What the association DID do was to issue several “resolutions” addressing the issue, some of which simply asserted the tree-trimming provision DID apply to the annexed tracts, despite a well-documented record of internal ‘back and forth’ on whether the Original Declaration’s tree trimming covenant did apply to the annexed tract.  As the court noted, however, a resolution is not a CC&R amendment.

Takeaways?

• • • • If your association was built before 1980 or so, and includes tracts annexed after the original declaration was recorded, look over the annexation declarations to make sure that all relevant covenants (for example, architectural covenants, noise control, view protections) are either spelled out explicitly in all tracts, or incorporated by reference—specifically—restrictions set forth in other declarations.
      • Before enforcing a covenant against an owner in an annexed tract, make sure the covenant you seek to enforce unquestionably applies to the lot in question. It’s helpful to look over a title report for a lot in the tract in question, if an owner is willing to share it.
      • If you have doubts after reviewing the governing documents as to the applicability of the covenant in question, consider whether to attempt a CC&R amendment, to avoid the “crazy quilt” result in the Colyear case.
      • It’s unlikely that adopting a rule requiring tree trimming on all lots would have sufficed in this case, because of the differences in the CC&R language in the various tracts. As we know, a rule must be consistent with the CC&Rs.  And while a rule might flesh out vague maintenance guidelines (and thus be appropriate), given the notoriety of these inconsistencies in the Rancho Palos Verdes community, an owner in one of the tracts without such a requirement could easily argue that had the developer intended to encumber HIS lot with such a restriction, it could easily have done so, but did not—an inference that the developer intended NO tree trimming covenant.