Common Interest Community Covenants and the Freedom of Contract Myth

Abstract

Courts take a hands-off approach with respect to the content of common interest community (CIC) covenants, reasoning that freedom of contract mandates their enforcement. But CIC covenants differ from voluntary private contracts in important ways, making deferential enforcement in the name of contract policy unwarranted. Covenants that run with the land are specifically enforceable and bind subsequent owners of the property, potentially in perpetuity. Furthermore, CIC covenants are contracts of adhesion, made up of completely non-negotiable, recorded terms bundled into home acquisition. Developers and lenders generally prescribe the content of such covenants, and they may not reflect community desires or values. Contract analogy should not create presumptive validity for all CIC covenants and properly enacted rules. The reality of CIC governance is more complicated and implicates property and constitutional concerns as well as contract law. The proper approach to CIC governance review must draw from all three of these areas of the law. The subject matter scope of CIC governance should be limited based on servitude law principles. Constitutional protections should be legislated for members of CICs. And bona fide, deliberate assent should be prerequisite to holding owners bound to CIC obligations.