by Gary Taylor

Chipman’s Subdivision HOA v. Carney and Carney
(Iowa Court of Appeals, February 29, 2012)

In the 1960s, Carroll and Daisy Chipman developed fifteen lots (Chipman’s Subdivision) in rural Johnson County.  E.R. Carney and Kathy Mickalson Carney purchased three lots located in the subdivision in December 1997. In 2010, Chipman’s Subdivision Homeowners Association, Inc. (HOA) commenced a small claims action against the Carneys, claiming the Carneys owed association dues in the amount of $1820 pursuant to covenants originally recorded in 1969 and revised in 1986 and 2003. A member of the HOA board of directors testified that the HOA sought to recover dues under the 1969 covenants, which were amended in 1986 and again in 2003. The document entitled “Protective Covenants and Restrictions” was recorded on April 8, 1969, and specified that any change to the covenants required a majority vote by current lot owners. A document entitled “Covenant” was recorded on January 27, 1986, and stated the intent to establish a homeowners association for the express purpose of “maintenance, repair, upkeep and management of the roads within the Chipman’s Subdivision.”  Further, it set forth a “dues structure,” requiring a new resident to pay a one-time fee equal to one-half the annual dues and all residents to pay ten dollars per month. Five property owners signed the document. The document entitled “Revised and Restated Covenants and Restrictions” was recorded on May 22, 2003, and stated that pursuant to the 1969 covenants the majority of homeowners adopted the revised and restated covenants set forth. One provision extended the obligation to pay dues from only the owners who had a home in the subdivision to those who owned lots in the subdivision. The HOA director testified the Carneys owed dues for the maintenance and repair of the common road in the subdivision.  E.R. Carney testified he purchased the lots in 1997 from a real estate attorney who had informed him the 1969 covenants had expired and the HOA had no legal authority. Carney argued that the covenants recorded in 1969 had expired on April 8, 1990, pursuant to the twenty-one year limitations period set forth in Iowa Code 614.24, and that the document recorded in 1986 was insufficient to extend the covenants.  The district court found the 1986 document was valid and ruled in favor of the HOA.

The Court of Appeals, however, agreed with the Carneys that the 1986 document was inadequate to extend the limitations period.  Specifically the 1986 document did not meet the requirements of Iowa Code 614.24. It did not set forth the nature of the interest as a use restriction previously created, nor did it identify the 1969 covenants that created the use restriction or the date the 1969 covenants were recorded. The 1986 document was not indexed in the claimant’s book.  Finally, the 1986 document was not acknowledged or notarized. The district court found that because the documents were recorded, they were enforceable; however, the recording of a document does not demonstrate its validity.  As the covenants expired because of the invalidity of the 1986 document, the 2003 covenants could not extend the limitations period. The HOA was therefore precluded from recovering the dues it claimed were owed.