Present: Carrico, C.J., Compton, Lacy, Hassell, Keenan, and
Koontz, JJ., and Poff, Senior Justice
DAVID ANDERSON, ET AL.
OPINION BY JUSTICE LAWRENCE L. KOONTZ,
v. Record No. 961284 FEBRUARY 28, 1997
LAKE ARROWHEAD CIVIC
ASSOCIATION, INC.
FROM THE CIRCUIT COURT OF STAFFORD COUNTY
James W. Haley, Jr., Judge
In this appeal, we consider whether an annual maintenance
fee assessed upon property owners of a subdivision under a
covenant recorded with the subdivision plats is subject to
increase by the community association which maintains the common
areas of the subdivision. The community association asserts that
it has such authority either by operation of the Property Owners'
1
Association Act (POAA), Code §§ 55-508 through -516.2, or under
the common law of easements.
BACKGROUND
The parties stipulated to the essential facts in the trial
court. The Lake Arrowhead Subdivision in Stafford County was
established through the recording of plats for the subdivision's
various sections by the developer, H. Ryland Heflin and his wife,
Lucille W. Heflin (collectively, Heflin), between 1961 and 1962.
The plats included the reservation of easements for the
individual lots over the roads and to the other common areas of
the subdivision. Each recorded plat was subject to identical
restrictive covenants which were recorded by deeds of dedication
1
The POAA was amended in 1991 and 1992. These and
subsequent amendments to the Act do not alter our resolution of
the issues raised here.
in the land records of Stafford County at the same times as the
plats of the sections. When Heflin conveyed his interest in an
individual lot to a purchaser, the deed referenced both the
easements contained in the plat of the section in which the lot
was located and the covenants associated with that plat.
Relevant to this appeal are covenants 12, 13, and 16.
Covenant 12 granted to Heflin the power to assign "all of the
rights and powers, title, easements and estates reserved" to him,
provided that the assignee would have the same "obligations and
duties with respect to the land area concerned." Covenant 13
required each purchaser of a lot within the subdivision to pay
Heflin or his assignee annually $20 for the first lot owned and
$10 for each additional lot owned "to be used for general
maintenance." Covenant 13 further provided that the "maintenance
fee shall be a lien on the real estate." Neither this nor any of
the other covenants expressly required Heflin, or his assignee,
to actually maintain the common areas of the subdivision.
Covenant 16 reads in full:
All of the above covenants shall remain in force until
January 1, 1970, and may be renewed for each 10 year
period thereafter by the owners of at least two-thirds
of the lots in the subdivision known as Lake Arrowhead,
except that covenant number 13 shall be binding in
perpetuity.
Lake Arrowhead Civic Association, Inc. (LACA), a Virginia
nonstock corporation, was incorporated on December 16, 1970. The
articles of incorporation provided that LACA's purpose was "[t]o
further and promote the community welfare of the property owners
in the Lake Arrowhead Subdivision . . . and to handle and
supervise any funds received for community betterment."
(Emphasis added.) A subsequent amendment added a new article
requiring that "[e]ach owner of any lot by acceptance of a deed
therefore, whether or not it shall be expressed in any such deed
or other conveyance, . . . [shall] covenant and agree to pay
[LACA]: 1) annual assessments or fees and, 2) special assessments
for capital expenditures."
By deed dated January 20, 1978, Heflin conveyed to LACA
various parcels of land consisting primarily of the roads, lakes,
2
beaches, and park areas within the subdivision. The deed
purports to convey these parcels, the common areas of the
subdivision, "subject to all encumbrances, easements, covenants,
restrictions and rights-of-way of record" and expressly transfers
to LACA the power of "collection of maintenance fees." However,
nothing in the language of this deed imposes any duty on LACA to
maintain the common area.
In a separate deed, also dated January 20, 1978, and
recorded contemporaneously in the land records with the deed
conveying the common areas, Heflin and LACA purported to renew
the covenants associated with the subdivision which would have
expired under their terms on January 1, 1970. This deed recites
that the "covenants were renewed by vote of the then owners of at
least two-thirds of the lots in Lake Arrowhead Subdivision prior
to January 1, 1970." It further recites that "through oversight,
no memorandum of renewal of such covenants was ever recorded
2
Heflin retained for himself other parcels within the
subdivision, including an island in one of the lakes.
among the land records."
Since at least 1986, LACA has imposed upon the property
owners an annual assessment for general maintenance and upkeep of
the common areas of the subdivision in amounts ranging from $88
to $123 per first lot owned in the subdivision. In 1992, LACA
filed a bill of complaint to enforce liens against the lots of
those property owners who were delinquent in paying their 1991
assessments. LACA's 1991 assessment per first lot was $98. From
the dollar amounts of the delinquencies alleged in the bill of
complaint, it appears that some property owners refused to pay
the assessment in its entirety, while others paid $20, leaving an
alleged delinquency of $78. The bill of complaint further
reflects that property owners with multiple lots were assessed
only $10 for each additional lot owned as contemplated by
covenant 13. Again, it appears that some owners of more than one
lot elected to pay $20 plus the additional $10 per additional lot
assessed, leaving an alleged delinquency of $78.
In 1995, while the 1992 suit was still pending, LACA filed a
second bill of complaint seeking to enforce liens against
property owners who had incurred additional delinquencies in the
interim. As with the 1991 assessments, it appears from the bill
of complaint that some property owners elected to pay the
assessment due under covenant 13, while others were alleged to be
delinquent for the full amount assessed by LACA. Both the 1992
and the 1995 bills of complaint assert that the assessments were
made "pursuant to valid authority and in accordance with the
restrictions and covenants of the subdivision and the provisions
of Virginia law, and [LACA's] own by-laws . . . for the purpose
of maintenance of the common areas and common facilities."
Neither bill of complaint specifically makes reference to the
POAA.
The property owners filed cross-bills in each suit seeking a
declaration that the 1978 deeds renewing the covenants and
conveying ownership of the common areas to LACA were both void.
On that basis, the property owners asserted that LACA was without
authority to make any assessments and was liable for any amounts
collected under the guise of such authority.
The trial court consolidated the two suits, received briefs,
and heard oral argument. After determining that LACA qualified
under the provisions of the POAA to assess such sums upon the
property owners in the subdivision as were reasonably necessary
for the maintenance and upkeep of the common areas and, in
addition, that LACA had that authority under the common law of
easements, the trial court granted judgment for LACA. We awarded
the property owners this appeal.
DISCUSSION
1. The 1978 Deeds
We begin our analysis in this appeal by determining the
effect of the two 1978 deeds between Heflin and LACA. These
deeds, in combination with the recorded covenants, are central to
the parties' assertions in support of their conflicting
positions. The essence of the disagreement is whether in 1978
Heflin could effectively transfer to LACA the ownership of the
common areas, and if so, which of the restrictive covenants
remained in force at the time of that transfer and thereafter.
We are guided by well-established principles that
restrictive covenants are not favored and must be strictly
construed. Mid-State Equipment Co. v. Bell, 217 Va. 133, 140,
225 S.E.2d 877, 884 (1976). Substantial doubt or ambiguity is to
be resolved against the restrictions and in favor of the free use
of property. Friedberg v. Riverpoint Bldg. Comm., 218 Va. 659,
665, 239 S.E.2d 106, 110 (1977).
By its express terms, covenant 16 operated to terminate
covenants 1 through 12, 14, and 15 on January 1, 1970, unless
those covenants were renewed for each subsequent ten-year period
by the owners of at least two-thirds of the lots in the
subdivision. Although the deed of renewal avers that such action
was taken to effect that renewal for the first ten-year period,
nothing in the land records prior to January 1, 1970, supports
that averment. 3 LACA was not incorporated until more than eleven
months after these covenants expired; thus, it could not have
been the proper organization to conduct the alleged vote.
Similarly, it was merely self-serving for LACA to assert that it
was the proper party to represent the property owners on the
subsequent deed purporting to renew the covenants.
On these facts, we hold that the failure to record the
renewal of these covenants in the land records prior to their
expiration, even if "through oversight," was fatal to any attempt
3
The record does not show whether the covenants were again
purportedly renewed in the subsequent ten-year periods beginning
January 1, 1980 and January 1, 1990, as would have been required
under the terms of covenant 16.
to revive these covenants thereafter. Certainly, no property
owners who acquired their interests between January 1, 1970, and
the date the deed of renewal was recorded would be subject to the
expired covenants. Additionally, absent some affirmative
evidence of the alleged vote and how it was conducted, there is
no basis for continuing the covenants against the property owners
who acquired their interests prior to the expiration of the
covenants. Any other result would run contrary to the
presumption in favor of the right to free alienation of land and
the strict construction of covenants that would limit that right.
Lipps v. First American Serv. Corp., 223 Va. 131, 135, 286
S.E.2d 215, 218 (1982); Hutchinson v. Maxwell, 100 Va. 169, 175,
40 S.E. 655, 657 (1902).
There is no merit, however, to the property owners' further
assertion that the deed conveying ownership of the common areas
to LACA is void because covenant 12, concerning Heflin's power to
assign or transfer his "rights and powers, title, easements and
estates" to another party, expired on January 1, 1970, and was
never effectively renewed. Under a proper interpretation,
covenant 12 was a restraint, reasonable in its scope, on Heflin's
right to dispose of his property during and after the development
of the subdivision. Thus, the expiration of that covenant could
not in any way restrict Heflin from disposing of his interest in
the property.
2. Application of the POAA
Having concluded that LACA holds legal title to the common
areas of the subdivision, we must now determine whether the
incidents of that ownership bring LACA within the operation of
the POAA, supporting LACA's assertion that it has the power to
levy assessments "for the maintenance and upkeep, including
capital expenditures, of the common area," Code § 55-514, in
addition to any fee permitted by covenant 13.
The POAA is applicable "to developments subject to a
declaration initially recorded after January 1, 1959, and
property owners' associations incorporated or otherwise organized
after such date." Code § 55-508. The POAA defines a "[p]roperty
owners' association" as "an incorporated or unincorporated entity
upon which responsibilities are imposed and to which authority is
granted in [a] declaration." Code § 55-509. As pertinent to
this appeal, a "Declaration" is defined by the POAA as
any instrument, however denominated, recorded among the
land records of the county or city in which the
development or any part thereof is located, that either
(i) imposes on the association maintenance or
operational responsibilities for the common area . . .
[funded by] a regular annual assessment or (ii) creates
the authority in the association to impose on lots, or
on the owners or occupants of such lots . . . any
mandatory payment of money . . . per year per lot as a
regular annual assessment in connection with the
provision of maintenance and/or services for the
benefit of some or all of the lots, the owners or
occupants of the lots, or the common area.
Id. 4
Reading these two definitions together, it is clear that in
order to qualify under the POAA, an association must possess both
4
Code § 55-508 includes a provision that a $150 minimum
threshold for the annual assessment contained in the definition
of "Declaration" would not be retroactively applied to
declarations recorded prior to July 1, 1991. Accordingly, that
threshold does not apply to the Lake Arrowhead Subdivision.
the power to collect a fixed assessment or to make variable
assessments and a corresponding duty to maintain the common area.
In addition, these conditions must be expressly stated in a
recorded instrument in the land records of the jurisdiction where
some portion of the development is located.
The language of the deed which conveyed the common areas
from Heflin to LACA conveys to LACA the power to collect
maintenance fees, but it does not expressly require LACA to
maintain the common areas. The deed further subjects LACA to the
"covenants . . . of record." At the time the deed was recorded,
however, the only covenant remaining in force of potential
benefit to LACA's assertion that it is subject to the POAA is
covenant 13, binding in perpetuity through the provisions of
covenant 16. Thus, only if we can construe the provisions of
covenant 13 to impose a duty on LACA to maintain the common areas
will LACA's argument for application of the POAA have merit.
By operation of covenant 13, when acquiring property in the
subdivision, a property owner covenants to pay Heflin, or his
assignee, specified fees "to be used for general maintenance."
The ambiguity in this phrase is patent. By placing the
obligation on the property owner, covenant 13 permits Heflin and
any assignee to collect the fees, but does not require that the
fees be collected. Nor does covenant 13 expressly require that
maintenance of the common areas be undertaken. Rather, it merely
places a condition on the power to collect the fees by limiting
the permitted expenditure of the funds received to payment for
general maintenance costs. Thus, while LACA possesses, by
operation of covenant 13, an adequate power of assessment to
qualify under the POAA, there is no corresponding express duty
imposed upon LACA to actually maintain the common areas.
It is not relevant that LACA may choose to exercise its
power of assessment in order to expend the funds derived
therefrom for maintenance of the common areas. The POAA applies
only to associations upon which a mandatory duty to maintain is
imposed. The Act has no application to an association, like
LACA, which assumes such responsibilities voluntarily, even if
the voluntary assumption is done as a condition of enforcing the
property owners' covenant to pay fees for that purpose.
Accordingly, we hold that LACA does not meet the definition
of a property owners' association found in the POAA. Absent
qualification under the POAA, LACA's right to impose an
assessment on the property owners, and to seek liens against the
lots of property owners who are delinquent in paying that
assessment, arises only from covenant 13. That covenant limits
LACA to assessing annually no more than $20 against the first lot
of a property owner and $10 for each additional lot. There is no
mechanism in that covenant or otherwise provided by statute to
increase this assessment.
3. Common Law of Easements
LACA asserts that even if it is not subject to the POAA, it
can make assessments against the property owners as owners of
dominant estates with a duty to maintain the easements over the
servient estate owned by LACA. We disagree.
It is true that the owner of a dominant estate has a duty to
maintain an easement. Pettus v. Keeling, 232 Va. 483, 490, 352
S.E.2d 321, 326 (1987); Oney v. West Buena Vista Land Co., 104
Va. 580, 585, 52 S.E. 343, 344 (1905). The owner of the dominant
estate may fulfill this obligation by conducting the maintenance
himself, or by voluntarily contributing to the maintenance costs
of the owner of the servient estate. Nothing in our case law
suggests, however, that, absent a provision in the instrument
creating the easement or a contract between the parties, the
owner of the servient estate can impose a mandatory contribution
to maintenance costs against the owners of the dominant estates.
Accordingly, we hold that LACA cannot enforce an assessment, in
excess of that provided for in covenant 13, under the common law
of easements.
In summary, LACA is not a property owners' association as
defined by the POAA, but merely an assignee of Heflin which
chooses to function as a voluntary community association. As
such, it can continue to collect the assessment permitted under
covenant 13 provided that it expends those fees for no other
purpose than general maintenance. To the extent that a property
owner is delinquent in this assessment, LACA may obtain a lien
5
against the property owner's lot or lots.
For these reasons, the judgment of the trial court will be
5
We recognize that as a result of our decision, the property
owners may have effectively "won the battle but lost the war," as
the limited maintenance fee provided by covenant 13 may well be
inadequate to maintain the common areas of this subdivision.
However, the parties are certainly free to act to their mutual
benefit with voluntary dues or other forms of assistance for the
purpose of maintaining these areas.
reversed and the case remanded for a determination of which, if
any, of the liens sought in the bills of complaint can be
maintained and enforced to the extent allowed under covenant 13.
Reversed and remanded.