What Is Covenants in Real Estate and Are They Legal?

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Written By Justin McGill

DealBloom aims to share the latest tips and strategies to help realtors, brokers, loan officers, and investors navigate the world of real estate.

If you’re thinking of buying a home, it’s important to know what is covenants in real estate. Covenants are restrictions that can be placed on a property by the owner or developer, and they can impact your ability to use or sell the property.

Due diligence will help uncover any restrictive covenants before you buy a home, so you can make an informed decision about whether or not to proceed with the purchase.

Let’s define what is covenants in real estate and how they work.

What is Covenants in Real Estate?

In residential areas, a “covenant” is a set of rules governing the use and ownership of property.

These are legally binding agreements that restrict the use of land.

When covenants are not part of a contract but are instead signed among neighbors, they are still binding and can be litigated if breached. This is true even for covenants that are part of a mutual compact.

Covenants are important for planned developments, like gated communities, condominiums, and housing cooperatives, because they help ensure a certain level of order and uniformity. This is important because it helps maintain the value of the homes in the neighborhood.

Covenants help to preserve the value of homes in a neighborhood by ensuring that they are well-maintained. This, in turn, makes the area more desirable to live in, which helps to attract new residents and businesses.

Homeowners typically find that these standards improve their quality of life by addressing things like excessive noise and lawn maintenance.

The inclusive term for these is “Covenant, Conditions, and Restrictions” or CC&R.

Why Place Restrictive Covenants on Property

Homeowners’ associations and municipalities sometimes impose restrictions, called “restrictive covenants,” on properties. These regulations limit how a person can use their property.

These are referred to as Covenants, Conditions, and Restrictions.

As private citizens, we may also regulate land use through contracts that impose restrictive covenants. This helps to ensure the safety and order of our neighborhoods, while also potentially increasing property values.

Restrictions on property use, such as size, appearance, and landscaping, are often included in restrictive covenant agreements.

Many potential homebuyers believe that once they buy their home, they can do whatever they want with it.

If they want to install solar panels on their house, they can. If they want to build a treehouse in their backyard, they can. If they’d like to repaint their house, they can.

However, such freedoms are not always guaranteed for home buyers.

Restrictive covenants are agreements that limit how homeowners can use their property. These agreements might be created by language within the deed itself or by a separate document relating to the deed.

They are said to run with the property, meaning that they apply to anyone who owns the land.

If you are planning to buy a home, condo, or other residential property, you should make sure that there are no restrictions that will impact your use of the new place.

Restrictive Covenants in Real Estate

Not sure what kinds of things you might find in a typical set of restrictive covenants? Let’s look at a few of the most common ones.

Most homeowners associations have strict regulations regarding paint colors. These restrictions usually include only allowing certain colors to be used on homes.

Neutral colors are often the only option for homes with restrictive covenants on paint colors.

You’ll have to check your CC&R first if you want to rent out your home. Many HOAs severely limit your ability to rent or lease out your home.

You may only be renting out your house for part of the year or not at all.

If your homeowners’ association (HOA) has a clause that prevents you from running a business out of your house, it can really limit your flexibility. That’s because it can prevent you from working from home, which can be a real pain.

While your HOA may not mind if you turn a spare room into a home office space, anything that increases the amount of foot traffic for neighbors may be frowned upon.

Your homeowners’ association may restrict the number of dogs that you own, as well as the breed.

Some HOAs have banned certain dog breeds such as Pitbulls or German Shepherds from living in the community.

The CC&R may also place limits on commercial breeding, which could help ensure that animals are well-cared for. You can’t have a business breeding and selling pets under most residential housing agreements.

Most covenants also ban raising livestock or owning farm animals as pets.

Your CC&R will likely lay out what type of maintenance you need to perform on your property. As a homeowner, you may have to occasionally perform tasks like mowing the lawn, removing Christmas lights, or placing your garbage out on the right days.

If you live in a housing development that takes care of the outside of your home, the homeowners association will make sure your building is up to their standards.

Restrictions on Exterior Constructions

CC&Rs may include restrictions on modifications and buildings you make on your property. You may not be able to build a shed, fence, or detached garage without first getting the design approved by the HOA.

Some CC&Rs ban additional construction altogether.

Perform Due Diligence Before Buying a Home

Restrictions on condo purchases can come from a number of sources. Before you purchase, make sure you receive a list from the seller or developer detailing all the possible restrictions on the property.

And unless you want to be an obnoxious neighbor, or are willing to become a board member of the homeowners association, you’ll need to find another place.

If your potential purchase is a “regular” home with no connection to any development, the easiest way to find out about any restrictive covenants is to look at the title commitment that you’ll get before buying insurance.

The title company should note any applicable restrictions within.

If for whatever reason you won’t be needing a title insurance policy, you can direct your real estate lawyer to visit the county’s public records office. The restrictive covenant will be written in the deed, which is a publicly viewable document.

You’ll want to find out about and consider any restrictive covenants well in advance of the closing since you might realize the limitations are more than what you are willing to live with.

Conclusion

What is covenants in real estate? Covenants are restrictions that can be placed on a property by the owner or developer, and they can impact your ability to use or sell the property. Due diligence will help you identify any restrictive covenants before you buy a home, so you can make an informed decision about whether or not to proceed with the purchase.

Justin McGill