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HomeMy WebLinkAboutLetter Brown to Lieblong Bill of Assurance issuesBrown, Schwander, Greene & Sloan AProfessional Limited Company Charles A. Brown, P.A. L. Howard Schwander, III, P.A. Alice Ward Greene, P.A. R. Brannon Sloan, Jr., P.A. April 16, 1998 Dr. Daniel A. Lieblong, D.D.S. 8822 Chicot Road Little Rock, AR 72209 Attorneys at Law 1295 Tower Building 323 Center Street Little Rock, Arkansas 72201 Phone (501) 374-7582 Fax (501) 374-7584 RE: Your Request for Opinion Concerning Covenants in the Bill of Assurance, As Amended, of Lots 8-9, Turley's Replat of Tracts 5, Crystal Valley Glen Subdivision tot he City of Little Rock, in Pulaski County, Arkansas Dear Dr. Lieblong: Thank you for providing me with a Bill of Assurance, Amended Bill of Assurance No. 1 and Amended Bill of Assurance No. 2 to the above -referenced subdivision. You have advised me that the Board of Adjustment has disapproved your rezoning request for Lots 4, 5, 6 and 7 solely upon the grounds that the Bill of Assurance covenants that this property will be used for residential purposes. The anticipated dental office to be located thereon is not a residential purpose. The original Bill of Assurance dated October 1, 1971, filed in Book 1166, at Page 529, refers to a plat recorded in Deed Book 1166, at Page 531. A copy of the plat was also attached. The legal description set forth in the original Bill of Assurance, by Amendment No. 1, was corrected. That was the sole purpose of the "Amendment to Plat and Bill of Assurance" filed of record on October 12, 1973, and recorded October 15, 1973, in Deed Book 1267, at Page 167. At the time of the recording of the amendment to Plat and Bill of Assurance, there were only two sets of owners for Lots 1 through 8, which was the subject matter of the original Bill of Assurance. The plat attached to the amendment was recorded in Deed Book 1267, at Page 169. The original Bill of Assurance, and the first amendment thereto, is an effective conveyance which dedicates the lots according to the lot numbers shown on the plat, and the building lines as described on the plat. The streets were dedicated, as well as the roads and easements as shown on the plat. The only restriction in the original Bill of Assurance is as follows: -2 - "All buildings constructed on said lot shall be constructed no nearer to the road than the building line shown on the plat." The Amendment also provides that, upon filing, the Amendment shall be a dedication of the easements shown on the plat, and also that the building should not be constructed any closer than the building line shown on the plat. Neither the Amendment to Plat and Bill of Assurance, nor the original Bill of Assurance, contain any provisions relative to the termination date of the restrictions in Bill of Assurance, nor the manner in which the Bills of Assurance may be amended. If the Bill of Assurance had not been modified after the amendment dated October 12, 1973, then there would be no restriction of use upon the lots upon which you are proposing to build your dental office. Neither of the three Bills of Assurance provide any method to amend the Bill of Assurance, nor does any of the three Bills of Assurance have a termination date for which the restrictions would terminate as a restraint upon the use of the property. There are two rules of property that are involved in these Bills of Assurance. The first rule is that a perpetual restraint upon the alienability of the property that extends beyond the life of a person in being, plus 21 years, is a violation of the Rule against Perpetuities. The purpose of the Rule of Perpetuities is to make the property alienable, freely and without conditions, and that rule may be infringed upon only to a reasonable degree. Covenants that run with the land are normally reasonable restraints, however, when they are in Perpetuity, the restraint may become unreasonable merely because of the failure to terminate within a reasonable period of time. This violation would breach the Rule against Perpetuities and, therefore, would be an unreasonable restraint on transferability. The pertinent portion of the Arkansas Constitution reads as follows: "Article II, Section 19. PQM fetnities and Monopolies. Perpetuities and monopolies are contrary to the genius of a republic and shall not be allowed; ... " There is another rule of property that states that unreasonable restraints upon the alienability of property voids the covenants that make the restraints unreasonable. Even though they are two separate rules, both of them have a part in making land freely alienable, or transferable. The unreasonableness of the time of the restraint is also grounds for violation of the latter rule, and the failure to permit a provision for amendments could be as a factual matter to declare an unreasonable restraint. -3 - Although Lot 8 was subdivided as a part of the original and First Amendment of the Bill of Assurance, it was not included in the Second Amendment. The Second Amendment was signed by John E. Boyd and Anita Boyd, and if they owned all 7 lots at the time, then the restrictions would affect those 7 lots and not affect Lot 8. Lot 8 could be used for any purpose, as long as it conformed to the building setback line. Lot 8 is not protected concerning the use of Lots 1 through 7 either. Some of the provisions of the Second Amended Bill of Assurance, such as mobile homes and temporary structures, and livestock and noxious activities, could be of benefit to Lot 8. In Broach V. City of Hampton, 283 Ark. 496, 677 S.W.2d 851 (1984), there is a discussion by the Arkansas Supreme Court concerning restraints on alienation. It also has a provision involving the Rule of Perpetuities, above mentioned. The repurchase option was the subject matter of the case. The language for the repurchase option was ambiguous and since it was ambiguous, it would not be construed as continuing beyond the life of a person in being to whom it was granted and, therefore, did not violate the Rule of Perpetuities because the right would terminate or vest during the lifetime of a person in being at the time of the contract. As far as the restraints were concerned, it is pointed out the option to repurchase was not a restraint on alienation because there was no reverter clause involved. In White v. Lewis, 253 Ark. 476, 487 S.W.2d 615, the Arkansas Supreme Court also obliquely approached the provision in a Bill of Assurance that could have been ambiguous with a construction that would provide that the majority of the owners of the subdivision could amend the Bill of Assurance at any time, rather than only after the first 25 years. The essential language is as follows: "... that the covenant shall be binding for a period of 25 years from the date of recordation, after which they are automatically extended for successive periods of 10 years, unless an instrument signed by a majority of the property owners is filed agreeing to a change in whole or in part." The Supreme Court construed the last clause to provide that the restraint on the use of the property could be amended at any time after the filing of the Bill of Assurance signed by the owners of more than 50% of the land involved. The case of Owens v. Canfield, 1 Ark. App. 295, 614 S.W.2d 698 (1981), is one where the residential purpose restrictions were canceled by the Court because the value ofthe land as commercial property was so diminished by the restriction to residential use, that the Bill of Assurance defeated the purpose of protecting the value of the lands it covered. 10 Absent that provision of 50%, such as in the Bills of Assurance that you furnished me, it would take 100% of the owners of the land involved in the Second Amendment to place on those 7 lots the additional restrictions. Therefore, to remove the restrictions as to usage, it would take the owners of all 7 lots, Nos. 1 through 7. This in itself may be evidence of an unreasonable restraint upon the alienability of the property and could be adequate to cancel the agreement. The most important defect, however, is that there is no provision for the termination date of the covenants encumbering the use of the property at any time. In other words, the covenants are perpetual and cannot be terminated within the life of a person in being, plus 21 years. It clearly violates the Rule against Perpetuities. A court could quickly dispense with the covenants of the Bills of Assurance because they violate the Rule against Perpetuities, and also, because of the length of time that the covenants remain in force, certainly perpetual covenants prohibiting land use would be an unreasonable restraint upon the alienability of property. My suggestion to you would be to get all 7 owners of the lots to agree upon the use of each individual lot in the future, and to have a good and valid Bill of Assurance filed to supercede the other three, including Lot 8, and provide for a sensible use of the property to protect property values, somewhat in accord with the determination of the Planning Commission of the City of Little Rock as to what the use of the property should be at the present time, and the near future. Please advise if there is anything further you need to discuss with me. Yours very truly, lr, Charles A. Brown CAB:rr