To minimize risk, developers will often build a large development in phases. They build the initial development and record a Declaration of Covenants, Conditions and Restrictions (CC&Rs) against the properties. A homeowners association is created and a board of directors appointed. Once the development has sold out, they will build another tract of homes and add them to the association through annexation.
To accomplish the annexation, the original CC&Rs must contain a provision authorizing annexations. Each additional development becomes subject to the CC&Rs of the original subdivision once it is annexed into the association and buyers of units/lots in the annexed phase automatically become members of the association. To that end, the annexed developments record a document called a Notice of Addition, Notice of Annexation, or Supplemental Declaration referencing the original CC&Rs and describing the property being added to the original development.
The Supreme Court confirmed the mechanism for annexations in a case where CC&R were not in a direct line of title. The defendant in the action claimed the CC&Rs were not enforceable because they were not mentioned in the deed to his property. The Court disagreed:
[I]f the restrictions are recorded before the sale, the later purchaser is deemed to agree to them. The purchase of property knowing of the restrictions evinces the buyer's intent to accept their burdens and benefits. Thus, the mutual servitudes are created at the time of the conveyance even if there is no additional reference to them in the deed. This rule has many advantages.
The first advantage is simplicity itself. One document, recorded for all purchasers to review, would establish the rules for all parcels, not many documents that may or may not be mutually consistent. There would be no bewildering mosaic of enforceability and nonenforceability...
A rule allowing the uniform implementation of a general plan from the outset of the development would be good policy, which no doubt helps explain the modern trend in the cases of accepting as sufficient the slightest reference in the deeds to restrictions of record. (Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345, 363-364.)
Annexation Inconsistencies. It is not uncommon for annexation documents to be inconsistent. Such inconsistencies do not necessarily detract from the general plan for the community. On this point, Greater Middleton Ass’n v. Holmes Lumber Co. (1990) 222 Cal.App.3d 980 is instructive. There, among 77 deeds in a tract, 14 did not mention the general plan, 13 did not include a restrictive covenant requiring residential land use, and only 16 of the deeds containing the general plan reference also included a legal description of the dominant tenement covering the entire tract. Still, the Court of Appeal held that a covenant restricting commercial logging was enforceable under the general plan for “all parcels within the tract.” (Id. at p. 983.) The Court of Appeal found that despite the variations among deeds, the “uniformity and consistency in the vast majority of the deeds relative to the general plan and the restrictive covenants restricting the use of the land therein” was sufficient. (Id. at p. 993.) Where property owners had “purchased their property in reliance on the fact that there was a general plan to preserve the natural beauty of the area . . .[t]o hold otherwise would lead to an inequitable result.” (Id. at pp. 993–994.)
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