Recent Changes to the Marketable Record Title Act

Imagine not being able to collect homeowners’ association dues or enforce rules in your community. For homeowners’ associations approaching thirty (30) years of age, this threat is more than a cause for sleepless nights and may become a reality if covenants are not preserved in a timely fashion from the operation of The Marketable Record Title Act (MRTA).  Given these risks, legislation was enacted last year to further empower associations and property owners to protect their covenants and restrictions while forcing associations to address MRTA issues on a recurring basis.

First, What’s MRTA and How Does It Affect HOAs?

MRTA was a law passed in 1963 to simplify land sales by rendering property free and clear of stale claims of record.  In summary, MRTA strips restrictions and encumbrances from ownership of a property after thirty (30) years if those encumbrances don’t fall within a class of statutory exceptions.  For example, covenants and restrictions that are disclosed by official record book and page in a deed or other “muniment” of title are exempted.  Given that HOA covenants are not often referred to by official record book and page or by sufficient plat reference in deeds, HOAs are at risk.  Once the restrictions start being stripped from properties within a community after thirty (30) years, properties within an HOA cease to be bound by the governing documents one by one, creating a community where assessments cannot be collected and restrictions go by the wayside.

HOAs previously had two primary avenues for relief.  One was to record a notice in the public records to extend their restrictions prior to the expiration of the deadline.  The second was to revive stale covenants through a costly process requiring the creation of a committee, an update to the documents, and a vote of the members, among other various technical requirements.

Have you discussed MRTA at your Board meeting?

In 2018, various changes to MRTA were enacted that seek to empower associations to protect themselves.  First, provisions regarding the preservation and revitalization of covenants now apply to Property Owners’ Associations rather than just homeowners’ associations.  This was important to protect covenants governing other types of property owners not in HOAs, such as certain commercial associations, and master associations technically subject to Chapter 718.  The changes also simplify procedures for revitalization (while making them available to other types of owners seeking revival) and modifies preservation procedures in various ways, such as simplifying them and creating a new form.  Finally, and perhaps most importantly, it requires boards of communities to annually discuss the preservation of the covenants and restrictions.  In other words, a board of directors needs to openly assess its governing documents to determine if action is required to preserve them.  Since the failure of a board to meet and discuss these issues can result in an expiration of covenants in their community, this is a case where “talk is cheap” in a good way given the much costlier alternatives if covenants are allowed to expire.