by J. Michael Hartenstine
Amendments to recorded subdivision restrictions are common and usually provoke no objection from affected lot owners. Occasionally, however, the change wrought by an amendment so offends at least some lot owners that they seek to have the amendment judicially invalidated. Over the years, the Florida courts have developed varying tests for adjudicating the validity of amendments to subdivision restrictions, generally aspiring to a rule of reasonableness. This article traces the course of that development, critiques the rationales employed by the courts in both the creation and application of the reasonableness rule, and recommends adopting the principles of the Restatement (Third) of Property: Servitudes to adjudge the validity of future amendments to subdivision restrictions.
Common Benefit and a General Plan of Development
In 1933, the Florida Supreme Court decided Osius v. Barton, 147 So. 862 (1933), answering an elementary question concerning the enforcement of subdivision restrictions: Can remote grantees enforce restrictions imposed by a common grantor? Yes, they can, the court said, if the restrictions were made for their benefit as well as for the benefit of the grantor. Such common benefit is generally found “where the scheme of restriction…is universal or reciprocal, as the consideration for the obligation to observe the restrictions is the imposition of the same or kindred restrictions on other lots similarly situated.”1
Osius involved a restriction imposed by the common grantor of lot owners Osius and Barton. The restriction prohibited commercial uses within a subdivision in Miami Beach; Osius violated the restriction by operating a beauty parlor. Each deed recited that the restriction was a covenant running with the land and could be enforced by any subdivision lot owner. Osius argued that the restriction was not enforceable by Barton because, instead of a creating a uniform plan for the subdivision, the common grantor “followed a plan flexible and subject to change from time to time.”2
The court responded that a uniform plan of development was not essential to the enforcement of restrictions by a remote grantee. Although a uniform plan of development often could be the primary indicator of a common benefit in cases in which the common benefit “is not otherwise apparent,”3 the court ruled the common benefit was apparent from the very language of the deeds imposing the restriction — namely, that the restriction was a covenant running with the land and could be enforced by any subdivision lot owner. Thus, Osius’ allegations regarding the absence of a uniform plan of development were deemed immaterial as to the enforceability of the restriction.
The Florida Supreme Court next considered the enforceability of restrictions by remote grantees in Vetzel v. Brown, 86 So. 2d 138 (Fla. 1956). A recorded agreement permitted commercial uses on some subdivision lots and restricted the remaining lots to residential usage. Vetzel sued to cancel the residential restriction on the Vetzel lots. The agreement expressly provided that its provisions were covenants running with the land and were binding on all subsequent lot owners. Under the logic of Osius, the court could have been expected to find this language sufficient to establish the common benefit necessary for enforcement of the restrictions by remote grantees. To the contrary, the court cited Osius solely for the proposition that enforcement was warranted when the restrictions were imposed “for the benefit of all of the grantees of such common grantor, and as a part of a general scheme of development and improvement….”4
In this single phrase, the Vetzel court modified the test for enforcement of restrictions by remote grantees. Under Osius, the test was whether a common benefit existed — a general scheme could be an indicator of a common benefit, but it was not a sine qua non. Under Vetzel, a general scheme was required in addition to a common benefit. The Vetzel court further parted ways with Osius in finding that the segregation of commercial lots and residential lots was alone sufficient to evidence a general plan; under Osius, the mere restriction of lots to residential purposes was insufficient to evidence a uniform plan.
In 1980, Loch Haven Homeowners’ Association, Inc. v. Nelle, 389 So. 2d 697 (Fla. 2d DCA 1980), addressed whether a developer’s right to approve exceptions to restrictions precluded enforcement of the restrictions by a remote grantee. Consistent with Vetzel, the Loch Haven court maintained that the “essential ingredient of enforceability is the finding of the existence of a building scheme . . . .”5 Rejecting the view that the power to amend restrictions automatically negated the existence of a general scheme,6 the court concluded that a reserved power to amend restrictions was only one factor to consider in determining whether a general plan of development existed. Then, reaching back to Osius without invoking its name, the court reasoned that “a general plan or scheme of development is clearly reflected in the provisions that the restrictions are to be considered covenants running with the land and that any subdivision lot owner shall have the right to bring a proceeding against any person who violates any of the restrictions.”7
Osius differentiated between a general plan of development and the common benefit that must exist to support enforcement of restrictions by a remote grantee. Osius declared that even without a general plan of development, a common benefit would arise from covenants that ran with the land and were enforceable by any subdivision lot owner — a general plan of development had nothing to do with covenants running with the land or provisions authorizing enforcement by the lot owners. Vetzel distorted Osius by making a general plan of development an essential element of enforcement separate from the existence of a common benefit, instead of recognizing a general plan as a subset of a common benefit. Loch Haven then eviscerated Vetzel by conflating the notion of a general plan with the right to enforce covenants running with the land. Whether under the Osius view that a common benefit exists if restrictions are covenants running with the land and provide for enforcement by any lot owner (whether or not a general plan exists) or the Loch Haven view that a general plan exists if restrictions are covenants running with the land and provide for enforcement by any lot owner, remote grantees can enforce restrictions if they are covenants running with the land and provide for enforcement by any lot owner.
Origin of the Reasonableness Rule
Loch Haven did not venture an opinion on the degree to which a developer’s power to amend restrictions may be exercised, although it noted that the court in Flamingo Ranch Estates, Inc. v. Sunshine Ranches Homeowners, Inc., 303 So. 2d 665 (Fla. 4th DCA 1974), had conditioned the validity of the power on the reasonableness of the exercise. In Flamingo Ranch, the successor to a subdivision developer, pursuant to an amendment power reserved in the subdivision restrictions, amended the restrictions to allow commercial development within a part of the subdivision. The homeowners’ association and some lot owners sought a declaratory judgment voiding the amendment.
The Flamingo Ranch court perceived an “inherent inconsistency between an elaborate set of restrictive covenants designed to provide for a general scheme or plan of development…and a clause therein whereby the grantor reserves to itself the power at any time in its sole discretion to change or even arbitrarily abandon any such general scheme or plan of development….”8 That inconsistency, the court reasoned, could and must be reconciled by “reading into the reservation clause a requirement of reasonableness,” so that the amendment power would be valid “so long as it is exercised in a reasonable manner as not to destroy the general scheme or plan of development.”9
The reasonableness limitation created by the Flamingo Ranch court was suggested in Johnson v. Three Bays Properties #2, Inc., 159 So. 2d 924 (Fla. 3d DCA 1964). There a developer amended subdivision restrictions to reduce the allowable minimum house size. The amendment was accompanied by the developer’s waiver of any further diminution of the minimum house size. The court upheld the amendment, but noted that the lot owners were “entitled to protection against an unreasonable diminution of the building requirements of the subdivision….”10 That protection, the court said, was supplied by the developer’s waiver.
The Johnson court offered no authority for its pronouncement of lot owner entitlement to protection against an unreasonable reduction in building requirements, and the Flamingo Ranch court’s reconciliation of supposedly inconsistent provisions by mandating a reasonableness restraint is scarcely ineluctable. These courts as easily could have followed the path chosen by the Texas courts, first expounded in Couch v. Southern Methodist University, 10 S.W.2d 973 (Tex. 1928).
Texas Takes an Alternative Approach
Lot owner Couch sought to construct commercial buildings on lots initially limited to residential use by restrictions imposed by Southern Methodist University. The restrictions permitted amendment by vote of three-fourths of the neighboring lot owners. An amendment adopted by the requisite vote removed the residential use limitation. SMU argued the amendment was invalid because the amendment destroyed the residential use restriction. The Texas Supreme Court acknowledged that the change effected by the amendment was radical, but recognized that the “very instrument which creates the conditions likewise creates the right and the method to amend the restrictions.”11 The court then announced the rule that has governed all subsequent Texas cases dealing with amendments to restrictions:
We take it to be that generally speaking the right to amend a contract implies only those changes contemplating a correction, improvement or reformation of the agreement rather than a complete destruction of it…. But this rule is in nowise violated by the proposed amendments in this case. The express authority conferred is to amend the “conditions” so far as they affect the property conveyed, but the legal effect necessarily is to amend the contract or deed of conveyance through a change in the conditions. Now, a change of these conditions in any or all respects is not a destruction of the contract nor does it change the essential nature of the same. It is still a deed of conveyance.12
Applying this rule, the court held that the lot owners’ destruction of the residential restrictions “was clearly their right under the power conferred in the deeds. Such course has not destroyed the major contract but the change wrought in it is in exact accordance with that contract.”13 The rule, the court said, was consistent with the public policy favoring the “utmost liberty of contract,” and the power of the lot owners to amend their restrictions was “not only lawful but just.”14
Under the Texas rule, virtually any amendment to restrictions that is not illegal or against public policy will be held valid, as long as the amendment is adopted pursuant to the provisions of the restrictions, and the restrictions themselves are not destroyed. The rule applies whether an amendment is made by a developer or by lot owners.15
Florida Courts’ Development and Application of the Reasonableness Rule
The courts in Johnson and Flamingo Ranch could have followed the Texas rule, since Florida courts adhered to the public policy favoring liberty of contract as much as Texas courts.16 But the Texas rule was not followed, nor even mentioned, in Johnson and Flamingo Ranch. The same was true in Bay Island Towers, Inc. v. Bay Island-Siesta Association, 316 So. 2d 574 (Fla. 2d DCA 1975). The initial subdivision restrictions at issue in Bay Island restricted the lots to single-family houses, except for Lots 1-4, where apartment buildings were allowed. The restrictions permitted amendments by a majority of the lot owners. When a developer proposed a high-rise apartment building for Lots 1-4, a majority of the lot owners amended the restrictions to allow only single-family houses on these lots. Citing Johnson and Flamingo Ranch (both of which concerned developer-initiated amendments), the court declared, “A modification of restrictions according to the provisions of the declaration is valid if it is not unreasonable with respect to the general scheme of the development.”17 The court then held that the amendment limiting Lots 1-4 to single-family houses was reasonable, noting that the developer only contemplated garden apartments, not high-rise buildings, for these lots.
The Bay Island court seemed unfazed by the elimination of the right to build any apartments, even garden apartments, on Lots 1-4, even though this elimination was a dramatic departure from the original plan of development. Moreover, the court effortlessly and without analysis expanded the reasonableness rule of Johnson and Flamingo Ranch to apply not only to developer-initiated amendments but also to lot owner-initiated amendments. In doing so, the Bay Island court subtly modified the rule. Whereas the Flamingo Ranch court insisted on a reasonableness limitation “as not to destroy the general scheme or plan of development,”18 the Bay Island court deleted destruction of the general plan as an element of the rule — the test is simply whether the amendment is “unreasonable with respect to the general scheme of the development.”19
Six years after the Bay Island decision, Johnson and Flamingo Ranch were again cited as authority for the reasonableness rule in Carrigan & Boland, Inc. v. Worrock, 402 So. 2d 514 (Fla. 5th DCA 1981). The restrictions at issue in Carrigan vested in each subdivision lot owner a 1/35 interest in a riverfront lot that was to be developed for a dock. When permits to construct the dock were denied, the developer amended the restrictions to delete the section granting the 1/35 interest, even though six lots at this point had been conveyed. The court held that the amendment did not defeat the vested 1/35 interest of the existing six lot owners, but otherwise upheld the amendment as to lot owners purchasing after the amendment. Those subsequent lot owners had notice of the amendment, the court reasoned, and, therefore, could not have relied on the original section granting the 1/35 interests. The court correctly noted that the amendment was supported by the principle of impossibility of performance. Indeed, that principle was all the court needed to sustain the amendment.20 But the court went further, asserting that the “amendment in the instant case did not unreasonably destroy ‘a general scheme of development.’”21
By modestly rearranging the words used by Flamingo Ranch and Bay Island, the Carrigan court further confused the reasonableness rule. Flamingo Ranch said that an amendment could not destroy the general plan of development — that would be unreasonable. Carrigan claims that destruction of the general plan is not, contra to Flamingo Ranch, per se unreasonable — only an unreasonable destruction of the general plan of development is invalid. Carrigan implicitly admits that deletion of the 1/35 interest in the lot intended for a dock did destroy the general plan of development, but characterizes the destruction as reasonable due to the doctrine of impossibility of performance. Carrigan intimates that other circumstances could warrant a destruction of a general plan of development, as long as the circumstances were reasonable.
Even though the concept of a general plan of development was introduced into Florida law as merely one factor to consider in determining whether restrictions could be enforced by remote grantees, the Flamingo Ranch, Bay Island, and Carrigan courts transmuted the concept to a decisive standard by which the validity of amendments to restrictions would be judged. This new standard emanated solely from the Flamingo Ranch court’s questionable conclusion that the “inherent inconsistency” purportedly posed by the power to amend a general scheme of restrictive covenants must be reconciled by the introduction of a reasonableness limitation.
Such was the state of the law when the Florida Supreme Court reviewed the Loch Haven district court decision in Nelle v. Loch Haven Homeowners’ Association, Inc., 413 So. 2d 28 (Fla. 1982). The court articulated the question before it as “whether the developer’s reservation of the right to approve exceptions to the restrictive covenants prevents enforcement of the remaining covenants by a remote grantee.”22 Ignoring Vetzel, the court returned to the rule first announced by Osius — that remote grantees could enforce restrictions if a common benefit existed, which may be indicated by the presence of a uniform scheme. The court then examined the effect on enforceability of a developer’s power to modify the restrictions. The court digressed into a discussion of how the power to amend restrictions could be exercised to entirely change the character of a development and thereby destroy “the mutual benefit or consideration necessary to allow enforcement.”23 Citing with approval Flamingo Ranch and Johnson, the court observed that the reasonableness rule preserves the mutual benefit and burden “necessary to sustain the covenants.”24 This three-paragraph discussion was nothing more than dicta, but subsequent decisions seem to regard the discussion as the court’s holding. The Florida Supreme Court’s actual holding was a paraphrase of the district court’s holding:
We, therefore, hold that a reservation by the developer of the power to approve exceptions to the restrictive covenants is merely one factor to be considered in determining whether the developer intended to establish a uniform plan of development.
We find that the restrictions in the instant case show an intent on the part of the developer to establish a uniform plan of development. They are comprehensive and detailed. Moreover, the language of [the covenants] . . . expresses an intent that the covenants are to run with the land and be binding on and enforceable by all parties and owners.
With this holding, the Florida Supreme Court expressly approved the Loch Haven district court opinion, modified Osius, and effectively rendered Vetzel moot. Although a developer’s intent to create a common building plan is “critical” for enforcement of restrictions by a remote grantee, a developer’s reservation of the power to amend restrictions does not by itself destroy the common plan.25 Notwithstanding a developer’s power to amend, restrictions that constitute covenants running with the land and that provide for enforcement by the lot owners are sufficient to evidence the existence of a uniform plan of development. The Loch Haven opinion remains the Florida Supreme Court’s last word on the subject of amendments to subdivision restrictions. To date, the court has never held that such amendments are subject to a reasonableness test.
1 Osius v. Barton, 147 So. 862, 865 (1933).
2 Id. at 865.
3 Id. at 866.
4 Vetzel v. Brown, 86 So. 2d 138, 140 (Fla. 1956).
5 Loch Haven Homeowners’ Ass’n, Inc. v. Nelle, 389 So. 2d 697, 698 (Fla. 2d DCA 1980).
6 See, e.g., Finchum v. Vogel, 194 So. 2d 49 (Fla. 4th DCA 1966).
7 Loch Haven, 389 So. 2d at 699.
8 Flamingo Ranch Estates, Inc. v. Sunshine Ranches Homeowners, Inc., 303 So. 2d 665, 666 (Fla. 4th DCA 1974).
10 Johnson v. Three Bays Props #2, Inc., 159 So. 2d 924, 926 (Fla. 3d DCA 1964).
11 Couch v. Southern Methodist Univ., 10 S.W.2d 973, 974 (Tex. 1928).
15 See, e.g., Baldwin v. Barbon Corp., 773 S.W.2d 681 (Tex. Civ. App. 1989) (upholding developer amendment removing restrictions from a portion of the land initially encumbered by the restrictions); Dyegard Land Pshp. v. Hoover, 39 S.W.2d 300 (Tex. Civ. App. 2001) (upholding developer amendment to restrictions to prohibit drilling of private wells); and Sunday Canyon Prop. Owners Ass’n v. Annett, 978 S.W.2d 654 (Tex. Civ. App. 1998) (upholding lot owners’ amendment to restrictions to impose mandatory association membership, assessments, lien rights, and architectural control).
16 “[U]nder our system of free enterprise, the public policy of this state and this nation favors the fullest liberty of contract and the widest latitude possible in the disposition of one’s property . . . .” Sinclair Ref. Co. v. Watson, 65 So. 2d 732, 733 (Fla. 1953).
17 Bay Island Towers, Inc. v. Bay Island-Siesta Association, 316 So. 2d 574, 575 (Fla. 2d DCA 1975).
18 Flamingo Ranch Estates, Inc. v. Sunshine Ranches Homeowners, Inc., 303 So. 2d 665, 666 (Fla. 4th DCA 1974) (emphasis added).
19 Bay Island, 316 So. 2d at 575 (emphasis added).
20 The court appropriately cited Osius in support of this principle, which stated: “[T]he general rule [is] that equity will not take cognizance of a restriction imposed as to the use of property where by reason of a change in the character of the neighborhood not resulting from a breach of such conditions, it would be oppressive and inequitable to give the restriction effect, as where the enforcement would have no other result than to harass or injure the defendant without accomplishing the purpose for which it was originally made. . . . The foregoing doctrine, as applied to real covenants restricting the use of land, may be said to rest upon what is now the generally accepted principle of contract law known as discharge of contractual obligation by frustration of contractual object.” Osius, 147 So. at 867.
21 Carrigan & Boland, Inc. v. Worrock, 402 So. 2d 514, 517 (Fla. 5th DCA 1981).
22 Nelle v. Loch Haven Homeowners’ Ass’n, Inc., 413 So. 2d 28, 29 (Fla. 1982).
J. Michael Hartenstine is a shareholder of Williams Parker Harrison Dietz & Getzen in Sarasota and concentrates his practice in the representation of commercial and residential developers. He is board certified in real estate and is a member of the Condominium and Planned Development Committee of the Real Property, Probate and Trust Law Section. Hartenstine is a magna cum laude graduate of Harvard College and received his J.D., with distinction, from Duke Law School. The author thanks Lisa Gonzales Moore for her research assistance in the preparation of this article.
This column is submitted on behalf of the Real Property, Probate and Trust Section, Margaret Ann Rolando, chair, and Kristen Lynch and David Brittain, editors.