On December 5, 2017, the Massachusetts Appeals Court issued an important decision in Berger v. 2 Wyndcliff, LLC, No. 16-P-336 (Mass. App. Ct. Dec. 5, 2017), clarifying the extent to which land owners in a common-scheme development may extend restrictive covenants. The Court held that an agreement among lot owners to extend the term of a restrictive covenant burdening a common-scheme development is only enforceable if the original agreement creating the restriction expressly provides that it may be extended for further periods, or if all of the owners of the properties subject to such restriction agree to such an extension.
This case has implications for anyone seeking to develop land subject to common-scheme use restrictions and anyone seeking to either enforce or avoid existing common-scheme restrictions. Those seeking to impose restrictive covenants for common-scheme developments must include a specific provision allowing for an extension of the restrictions (if, as a selling point, they wish to give owners that option). On the other side of the coin, those seeking to avoid restrictions that were recorded more than thirty (30) years ago should review the original instrument of restrictions to see if it specifically reserved the right to extend the restrictions beyond their original term.
The facts of the case are straightforward. In 1980, the then-owner and developer of the subject land executed and recorded a restrictive covenant covering the lots in the development. The restrictive covenant expressly provided that it was to “run with the land” and bind subsequent lot owners “for a period of thirty (30) years from the date these covenants are recorded.” The restrictive covenant further provided that it “may be amended or revoked, in whole or in part, by an instrument signed by two-thirds or more of the then owners of the lots covered.” It did not, however, expressly provide that through such an amendment instrument, the lot owners could amend the agreement to extend the time period governing the restrictions. In 2001, nine years before the restriction was to expire under its original term, two-thirds of the lot owners voted to amend the restrictive covenant to provide that it could be extended for additional twenty-year periods, so long as two-thirds of the lot owners approved. Seven months later, two-thirds of the lot owners approved an extension of the restrictive covenant and had it recorded.
Litigation ensued over whether the extension was valid. The case required the Appeals Court to construe section 27 of chapter 184 of the Massachusetts General Laws, which provides, in pertinent part:
No restriction imposed after December [31, 1961] shall be enforceable . . . (b) after thirty years from the imposition of the restriction, unless (1) the restriction is imposed as part of a common scheme applicable to four or more parcels . . . and provision is made in the instrument or instruments imposing it for extension for further periods of not more than twenty years at a time by owners of record, at the time of recording of the extension, . . . ." (emphasis added).
Thus, the key issue was whether a provision in a restrictive covenant allowing the lot owners of a common-scheme development generally to amend the agreement creating the restriction fit the statute’s requirement of a provision “for extension for further periods.”
The Appeals Court held that it did not, concluding that “[w]here extension provisions are not contained in the original instrument, the statutory scheme does not allow subsequent amendments to add new provisions for extensions.” The Court further explained that pursuant to the statute, “the mechanism for the extension of the restrictive covenants must explicitly be in the original document, and cannot be added by a later vote (even a majority vote) of less than the agreement of one hundred percent of all property owners in the common scheme.” Thus, the lot owners could not enforce the longer-term restrictions approved pursuant to an after-the-fact amendment approved only by two-thirds of the lot owners.