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Guide To Restrictive Covenants In Real Estate – Forbes

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When comparing homes to buy, you may discover that some communities have restrictive covenants in place. These housing rules are most common in condominiums, townhomes, planned communities and subdivisions with a homeowners association (HOA).

Many different types of real estate covenants enforce uniform aesthetics outside your unit and property use limitations within a planned community. Familiarizing yourself with the various property and homeowner requirements can help you avoid a potential covenant breach, which can sometimes result in fines.

What is a Restrictive Covenant?

A restrictive covenant in real estate is a rule governing the appearance and permissive use of a residential or commercial property. For example, there can be rules regarding paint schemes, landscaping and the location of storage sheds.

These covenants are typically issued by a property developer, such as an HOA or condominium association, or are privately agreed upon between neighbors. They’re not legally enforced by city or county officials like zoning ordinances, although private covenant breaches can be settled through legal action or paying a fine when initiated by a resident or HOA.

These contract terms can easily be found in an HOA’s Declaration of Covenants, Conditions, and Restrictions (CC&R). A property deed may also list certain restrictive covenants.

Some covenants naturally “run with the land” and remain in effect indefinitely, even when a home changes owners. It’s only possible to terminate permanent covenants when property owners reach an agreement or after a favorable HOA board meeting vote. The courts can also uphold or terminate a restrictive covenant under certain circumstances.

Types of Restrictive Covenants

Here are several restrictive covenant examples that can govern how you may use your home and grounds.

Limitations on Property Usage

Restrictive covenants can be stricter than zoning ordinances regarding your property use. Some of the potential prohibitions include:

  • Gardens and outbuildings: You may not be able to place clotheslines, gardens, swimming pools and external storage units on your property.
  • Home-based businesses: Working remotely for an employer should be okay, but providing services that require customers to visit your dwelling might be impermissible.
  • Noise: Loud noises typically aren’t allowed past a certain time. For instance, an HOA may implement quiet hours daily from 10 p.m. to 8 a.m. This initiative can restrict large parties or noisy hobbies, such as rebuilding classic cars.
  • Recreational vehicles: Planned communities may not permit storing campers, boats or RVs. Additionally, vehicles generally must park overnight in the driveway or garage.
  • Signage: Political signs and commercial signs may not be allowed.

Required Maintenance

It’s common for neighborhood association agreements to outline the maintenance requirements for common areas and “separate interests” (the property you own).

Communities desire to maintain a specific appearance and degree of curb appeal. Restrictive covenants can prevent deviations when repairing or replacing items such as these:

  • Awnings, decks and fixtures
  • Driveways and sidewalks
  • Exterior paint colors
  • Fence height
  • Landscaping and gardens
  • Roof condition and style
  • Window treatments

For example, you may need to replant dead grass and shrubbery. You also may be unable to repaint your house a vibrant color when the covenants only permit neutral tones. Property improvements can require an architectural review to determine if your proposed changes in material and appearance comply.

In addition to defining what property owners cannot do, community regulations also include affirmative obligations, which are minimum actions you must take, such as mowing the lawn, repainting on a fixed schedule or only parking on the driveway.

However, some HOAs consider the areas outside your home as their responsibility, and will hire landscapers and painters to refresh the external parts of your house as part of the monthly HOA fee that you pay. That’s why it’s critical to check everything that’s included in the HOA fee before buying the home.

Property Setbacks

You’ll want to verify that all existing and future structures and improvements are built within the designated setbacks—that is, the space between your property and the property lines. These barriers prevent potential disputes with neighbors if one party places a fence or tree too close.

Setbacks also can provide ample room for utilities and common area usage on the edge of your lot. Non-complying features can be subject to fines and may need to be relocated or removed.

Pets

Most domestic animals such as dogs, cats, birds and fish are typically allowed to dwell on the property but each property might have a maximum number of animals or weight restrictions.

Additionally, restrictive covenants may prohibit large dogs or certain breeds associated with aggressive behavior, such as pit bulls and rottweilers. Barnyard animals like chickens and pigs might also be restricted.

Rental Property and Tenant Limits

An increasing number of communities are prohibiting or limiting the number of short-term rentals, like Airbnb, to encourage year-round occupancy.

Some neighborhoods also place limitations on long-term rentals. For example, the minimum lease period may need to be six months, or a new owner must possess the property for a minimum duration before converting it into a rental property.

Other communities may also cap the number of rental properties, such as only allowing one-third of the total properties to be rented out at a time.

In addition, HOAs might have the legal right to limit the number of occupants. Associations can also screen prospective tenants but must comply with The Fair Housing Act and cannot discriminate for race, color, gender, religion, national origin or disability.

What Is the Purpose of Restrictive Covenants in Real Estate?

The primary purpose of restrictive covenants is to have all property owners agree to the same set of rules. A universal standard makes it easier for the community to maintain a consistent appearance.

These regulations can also deter residents not willing to comply with the agreements from moving in. In addition, the covenants prevent any potential homebuyers from straining the community by not maintaining their property adequately or having controversial hobbies and businesses.

Pros and Cons of Restrictive Covenants

Restrictive covenants are used to keep communities in good shape and prevent residents from negatively impacting property values. They provide homeowners and potential buyers a mixture of benefits and burdens.

Pros of Restrictive Covenants

  • Aesthetics: All properties adhere to specific appearance and maintenance guidelines that prevent eyesores, making the neighborhood more desirable to live in.
  • Conduct: Each property owner must practice the same personal and business conduct to help maintain a clean and professional reputation.
  • Enforceability: Neighbors and associations have a legal contract to enforce the agreements through fines and legal action to maintain a desirable community.
  • Uniformity: Residents know exactly what they can and cannot do which removes confusion or favoritism when performing repairs or requesting improvements.

Cons of Restrictive Covenants

  • Lack of liberty: In addition to complying with government zoning laws that impact all homes within a legal jurisdiction, restrictive covenants place additional limits on how you can use your residence and land for personal benefit.
  • No business or rental income: Entrepreneurs are restricted to which neighborhoods they live in if they operate a specific type of business. If this is a second home, you may not be allowed to earn rental income from short-term or long-term tenants, for example.
  • Potentially unenforceable: Covenant breaches may not stand if a dispute isn’t filed promptly. Unreasonable restrictions that don’t benefit both parties can also be struck down in the legal system.
  • Selective enforcement: Confusing regulations are more susceptible to selective enforcement, where a handful of owners can receive illicit exemptions. This relative lack of enforcement can reduce property values and create disgruntled residents.

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