Restrictive Covenants: What Buyers Should Know
When looking for a home, there are many factors that buyers must consider, from the location of the home to the cost of potential renovations. In some cases, other things to think about can include whether the property is connected to authority figures who could have control over the choices homeowners make once they purchase the home. Therefore, before you make a moving decision, it’s important that you’re aware of restrictive covenants, what they are and what they imply.
What Is A Restrictive Covenant?
A restrictive covenant creates a deed restricted community. It is an agreement that states what a homeowner can or cannot do with their house or land. They are binding legal obligations which sellers write into the deed or contract of the property, and they can have penalties against buyers who fail to follow them. Restrictive covenants can be simple or complex and cover many issues which may include not letting owners make changes to the property or operate trades or businesses on the land.
Restrictive Covenants And HOAs
Homeowners associations, individual owners and planned communities can all set and enforce restrictive covenants, but it’s most common for homeowners associations to play a role in setting restrictive covenants for their neighborhoods. There are many reasons why homeowners associations set restrictive covenants for their neighborhoods to follow. For example, restrictive covenants can better encourage residents to be good neighbors and create harmony in the neighborhood. Restrictive covenants can also help maintain the neighborhood’s property value, neighborhood quality and safety.
But when homeowners don’t follow their restrictive covenants, homeowners associations have the power to enforce resident compliance in a number of ways. Homeowners association bylaws can allow the association to issue a fine, sue a homeowner, or even force the home into foreclosure if there are repeated violations. However, the punishment will vary depending on the severity and frequency of the violations. We will talk more about this topic later.
Although today’s restrictive covenants are intended for good, they have not always been seen in a positive light. In the past, there was a history of racially restrictive covenants that divided neighborhoods and presented problems in communities. Since then, legislation has been passed to help minority homeowners and eliminate institutional racism in the home buying process.
What Restrictive Covenants Can Apply To
There are many things restrictive covenants can potentially be applied to in a homeowner- controlled neighborhood or on properties where there is an authority figure to establish rules for residents. Here are some of the most common situations that involve restrictive covenants:
A property purpose restrictive covenant can limit a purchaser’s use of their property. This is most common when applied to business being conducted in the home. For example, this covenant evaluates whether a homeowner can conduct business out of their home or if the property is strictly meant for residential use. It can also limit what types of at-home businesses are acceptable in a given neighborhood and whether a business owner can advertise their business on their property or within the neighborhood limits.
Restrictive covenants can also establish rules for basic upkeep of homes in the neighborhood. This is called a property maintenance restrictive covenant, and can cover expectations regarding lawn care, exterior siding or paint, roofing, gutters and shutters.
Some homeowners associations and covenant enforcers are strict about the architectural styles that are allowed to be built within their neighborhood, as many want a sense of uniformity to the overall look of the area. Some neighborhoods also create restrictions on structures like sheds being built in residents’ backyards.
It’s also common for some homeowners associations and covenant enforcers to require residents to follow certain guidelines regarding the aesthetic of their homes. For example, this can include keeping the color and external decoration of their homes within a more limited range.
Number Of Tenants
Covenant enforcers can also be strict to the point of setting a maximum for the number of people allowed to reside in individual properties. This number can vary depending on the size of the property, but is something you should be aware of if you plan to live with others.
Penalties For Covenant Compliance Failure
If residents fail to comply with the restrictive covenants of their property, they can be penalized in one of three ways: they can be issued a fine, presented with a lawsuit or their property can be foreclosed. Read on to learn more about how to avoid these violations.
Issuing a fine is the first and least severe action an HOA can take for a homeowner’s noncompliance with a restrictive covenant. If this is the case, your homeowners association will fine you until you address or fix the issue.
If the circumstances grow more severe and you don’t fix the problem or pay your fines, your homeowners association or covenant enforcers have the right to sue you for failure to comply.
In the worst case, enforcers who own a property may be able to foreclose it on the resident for repeated violations.
Because of these penalties, it’s important that home buyers are aware of these consequences before purchasing a home.
The Bottom Line
Now that you know more about restrictive covenants and their consequences, it’s important to look out for them when buying a home. Check to see if the properties you’re looking at have any restrictive covenants before you fall in love with or purchase your dream home.