May was a busy month in Teton County, Idaho and Lincoln County, Wyoming. Teton Valley saw 26 residential sales with 19 transaction pending sale. Star Valley had an even bigger month with 26 residential sales and 35 pending transactions.
CC&R’s Do they expire?
Note: the following information is a culmination of opinions from local professionals (including my own), none of which whom are attorneys. The below information should be verified with legal counsel in the event the information is to be used in real-world application.
First, a quick overview as to what CC&R’s are. CCR stands for covenants, conditions, and restrictions. Basically, they are the rules of a subdivision or neighborhood. The goal is to help preserve property appearances and values. They are filed in the record associated with specific subdivisions against every lot or home owner, who is required to abide by them.
Several times over the course of my career in real estate I have run into a situation where I am told that CC&R’s are no longer binding, have expired, or cannot be upheld. In most circumstances, I believe this is wishful thinking. It is not uncommon, however, for a developer to outline a term of existence for these documents. The general idea would be to protect values while the developer is selling lots, but to allow those within the homeowners association to make amendments as they see fit once the community has evolved or built-out. Oftentimes, the magic number is somewhere around 20 years. The wording could be tricky and state something along the lines that the documents dissolve once the development has built out. It doesn’t necessarily have to outline a timeframe, date, or number of years. It can be something that triggers the termination, though I personally wouldn’t find this to be as definitive.
The above being said, a couple of other questions along these lines I often times get asked:
-Why terminate CC&R’s?
The simplest answer in my opinion to this question is trends in real estate and lifestyle. A couple of examples would be brick construction or large square footage. In the 50s, brick construction was extraordinarily popular. Today, masonry is very expensive by comparison, and fairly uncommon. The same goes for square footage. Currently, the trend for new construction is not only modern, but simplistic. Often times, simplistic means small. This has been one of the biggest challenges with our evolving local market, smaller homes are popular today, but weren’t 10-15 years ago when most of these developments were created.
-Can CC&R’s be terminated without expiring or dissolving naturally?
I believe the answer to this is yes. Every set of CC&R’s has a section that dictates how the CC&R’s can be amended, or presumably terminated. Most of the documents I have reviewed for local developments require 60 or 70% of the home owners vote, or two thirds. In some cases I have seen 90 and even 100% requirement to amend these documents.
Circling back to the amount of knowledge I have on the topic – it’s limited. When some people ask the question, I think that they already know most of the answers I have described above. I think what some are looking for is an obscure law or case law that would allow for termination of documents if they are not upheld, or a certain amount of time has passed without an active homeowners association. To that end, I cannot say. In my opinion, and attorney would best be consulted to (try to) answer these questions. Better yet, Idaho case law, might help answer these questions if such case law exists. My only advice in this scenario would be not to make assumptions when it comes to documents recorded against a piece of property.
April ’17 Market Stats
Transactions and Utilities
Here in Teton County Idaho, closing a transaction is a bit more complex due to the proration of utilities at closing. A couple of things need to be taken into consideration. Those items typically include property taxes, electricity, liquid propane or oil, water and sewer bills, local improvement district assessments, and so on.
Most of the above items will be addressed in any real estate transaction in most every state. Here in Idaho, taxes are assessed in arrears. I have written a few different articles on how property taxes work, I’m happy to provide that link. If anyone has pre paid their taxes, they will get a credit at closing. Otherwise the seller might have a deduction on their closing statement. In this scenario, the buyer would be responsible for the entire tax bill when it comes due.
Things I would like to focus on would be electricity, liquid fuel, and Municipal Water and Sewer bills.
When it comes to electricity in Teton County Idaho, the provider is Fall River Electric. Fall River Electric is actually a co-op with over 13,000 members in three states and eight counties. The co-op owns and manages several hydro-electric stations in the region. The co-op operates on a non-profit basis with a primary goal to deliver safe and reliable electricity to it’s owners. Revenue that exceeds the cost of delivering this service is allocated back to the owners in the form of capital. This capital is distributed approximately every 20 years. Over time this Capital accumulates. So, what happens if you sell your property prior to receiving your funds whereas co-op only distributes every two decades? The answer is that you are still entitled to these accumulated funds, but you can’t receive payment until distributions are made. With that being said, if you’ve owned the property here in Teton County for any significant amount of time, it’s a good idea to make sure you continue to keep your account address updated with Fall River Electric. In the short-term, you will be working with prorating electricity charges through the date of closing. Fall River is extremely efficient when it comes to keeping track of member accounts. It is a good idea for a new buyer to set up an account prior to taking possession, and providing the exact date of closing. If the seller also provides the exact date of closing, Fall River Electric can bill accordingly. For this reason, we usually don’t see any prorations on a closing statement when working with your real estate agent and Title Company. It’s also important to remember that Fall River ties the bill to the property, not the owner. Even if the owner leaves an unpaid balance, it will run with the property and the new owner will be responsible to make that payment. Most of the title companies are very good about making sure balances are current prior to closing.
Liquid propane and fuel oil or diesel fuel is a different story. Idaho’s contract provides for a section that describes who is ultimately responsible to receive, or pay for any fuel left in a tank upon closing. Since we don’t have natural gas piped and metered in the area, and very few Community Propane systems with meters, this comes up frequently. If the contract states that the buyer is responsible to reimburse the seller at closing for fuel remaining in the tank, a representative from the title company who acts as a third-party will usually get a reading on the tank or a percentage level and to multiply that by the size of the tank and at the current rate. In this circumstance, you will see a proration or a credit or a debit on the closing statement. Build is less common, fuel oil is something that comes up periodically. If the buyer is not responsible to reimburse the seller at closing they are entitled to any remaining fuel in the tank. In this scenario, it’s easy peasy. If the buyer is required to reimburse the seller for the fuel remaining in the tank, it gets a little complicated without a gauge present to provide information as to how much fuel is left in the tank. The basic process for testing how much fuel remains in a fuel oil tank is basically a dipstick similar to you are car oil. Oftentimes The seller might top off the tank so that they can calculate based on a full tank. Alternatively, the buyer can top off the tank and deduct that amount from the total tank volume. There a few other moving factors with all of this, usually comma and more specifically with liquid propane, the tanks are never filled to 100%.
Water and Sewer is also a bit peculiar when it comes to the way things operate in Teton County Idaho. In most cases, the cities do not want to try to prorate to the day any bills as it complicates their Billing System. In most cases the buyer and the seller are able to come to an amicable agreement as to who will pay for it, or how they will split the difference. If a tenant resides in the property it can further complicate things as the city’s generally require owners to keep the city water and sewer Billings in their name since the owner is tied to the property and the Tenant is not. This allows the city to have better control with regards to who is using the service comma and who the owner is. If a tenant moves out of the property, they would rather be able to communicate with the owner as opposed to keeping track of the different residents or tenants in each property.
