There are numerous private subdivisions in Jefferson County and the State of Missouri. The developer of a private subdivision often creates and files an Indenture subjecting the lots within the subdivision to various easements, assessments and restrictions. In many, the Indenture provides for appointment of or election of Trustees whose duties include maintenance of the common ground and roads, enforcement of the restrictions, determining a budget for anticipated expenses, and levying assessments against lot owners to fund the budget.
Missouri Law favors the unrestricted use of real property. Accordingly, any terms of the Indenture that may restrict the free use of the real property are interpreted strictly.
Trustees, whether appointed or elected, often are given authority to enforce the terms of the Indenture, including restrictions. At times, Trustees may have to balance whether to enforce the restrictions against lot owners against the cost of enforcement. Trustees must carefully consider each case on its merits, including determining how the Indenture will be interpreted, determining the facts, evaluating whether there is a violation of the Indenture, considering what has been done in the past in the same circumstances, and considering the precedent of any decision that may be made. Repeated failure to enforce a restriction in an Indenture may result in that restriction being waived. In addition to investigating and determining the full facts, the Trustees should seek and consider advice from competent legal counsel. Such advice may help the Trustees both with evaluation of the facts and law, but also with the manner of proceeding, and may result in substantial savings.
The expense of litigation to enforce an indenture can be substantial. Indentures regularly authorize the Trustees or a lot owner to recover their attorney fees and expenses of litigation if they are successful, although the amount of the recovery may be subject to the discretion of the court. In some circumstances a judgment for attorney fees and expenses may be substantially less than the amount of the full expenses incurred, or they may be difficult to collect, or both. If the Trustees (or the lot owner) are not successful in the litigation they will not recover their expenses.
For the above reasons, lot owners should stay informed, should exercise their right to vote with respect to Trustees, should attend owners’ meetings, and should require Trustees to explain the purpose of and the probable expense of any proposed litigation. Lot owners and Trustees must evaluate whether that purpose is worth the probable expense. Failure to exercise these responsibilities may casue the lot owners and the Subdivision Property Owners’ Association (POA) to suffer substantial expense.
In a recent case, alleged members of a POA Board of Trustees (Plaintiffs) prosecuted two cases in which they claimed violations of the restrictions by the lot owners. Although issues were raised before a lawsuit was filed and early in the cases with respect to whether the Plaintiffs had been actually elected, whether the circumstances actually were violations of the restrictions, whether past elected Trustees had approved the acts, and whether similar circumstances had existed for several years in the subdivision without any enforcement by the Trustees, the Plaintiffs nevertheless pressed both cases. At the conclusion of the trials, the evidence did not support a finding that the lot owners had violated the restrictions, the evidence supported a finding that the acts had been previously approved by past Trustees, and the evidence supported a finding that similar circumstances had existed within the subdivision for several years without any attempt to enforce the restriction in the manner argued by the past Trustees or the Plaintiffs. The Plaintiffs lost both cases. In prosecuting the claims, however, Plaintiffs had incurred more than $40,000.00 in legal fees. Defending the claims, the 2 lot owners incurred substantial legal fees as well. After the Plaintiffs were replaced following an election of new Trustees, the POA and lot owners were left to address the legal fee claim.
The above cases illustrate that it is important that lot owners exercise their right to vote in Trustee elections, that lot owners keep abreast of matters the Trustees are handling and the expenses associated with handling those matters, and that the Trustees properly evaluate claims with the advice of competent legal counsel. The mistakes made in the cases mentioned above were quite avoidable, and expensive to both the lot owners and the POA.
At the Thurman Law Firm we have competent legal counsel who are available to provide legal advice to developers who need to prepare an Indenture, and to trustees and lot owners regarding the proper interpretation of an Indenture as well as other legal questions involving real estate.