How restrictive covenants affect land use

Most people know about homeowners associations but few are well-versed about restrictive covenants despite the fact that these two concepts are intertwined. If you’re considering buying a property within a development with an HOA, then you need to understand how restrictive covenants may affect your land use.

What is a restrictive covenant?

A restrictive covenant is a legally binding agreement that you make with a homeowners association regarding the ways that you can use your property. A restrictive covenant covers both the things that you cannot do with your property in addition to the things that you must do to your property.

The homeowners association is able to enforce these covenants based on your agreement while also performing maintenance with the overall goal to uphold property values. The policies within your restrictive covenant are voted on by the members of your community and they can be added or removed with a vote at any time.

However, homeowners associations don’t necessarily have free rein when it comes to restrictive covenants. They are not permitted to place any restrictive covenants that violate state or federal laws.

What are the pros and cons of restrictive covenants?

While restrictive covenants usually get a bad rap, there are both pros and cons to this concept.

Some of the benefits of restrictive covenants include:

Maintaining a uniform and appealing look to a neighborhood
Protecting the value of your home and making it easier to sell down the road as a result
Dispute mediation between neighbors based on the agreed-upon CC&R documents

Some of the drawbacks of restrictive covenants include:

Limited control and freedom over your property to do with it as you wish
Being confined to the legally binding limits of your CC&R agreement
Paying a monthly fee to the homeowners association for enforcement purposes

What are some examples of common types of restrictive covenants?

We’ve seen some pretty crazy restrictive covenants out there, but in most cases, these restrictions are quite routine and usually aren’t a big deal. While exact restrictive covenants vary from development to development, here are some examples of common types of restrictive covenants that you may see when buying a property:

Restrictive covenants may limit what color you can paint the outside of your house to promote an aesthetically pleasing community. In most cases, the “approved” colors are neutral and bold colors are banned.
Restrictive covenants may limit your ability to rent or lease out your property. Some homeowners associations place a complete ban on leases whereas others limit your ability to lease out your property for only a few months a year.
Restrictive covenants may limit your ability to own or breed certain types of pets. These limitations relate to both size and types of pets. Certain breeds of dogs are commonly banned under restrictive covenants. Furthermore, commercial breeding of animals or owning livestock may be banned by your homeowners association.
Restrictive covenants may require you to perform a specific type and frequency of maintenance on your property to promote a clean community. For instance, you may be required to mow your lawn every so often or only put your trash outside on trash day.
Restrictive covenants may limit your ability to modify your existing home or build on to it without their permission. For instance, you may not be able to build a shed, fence, or separate garage without first getting the designs approved by the homeowners association.
Restrictive covenants may limit what types of activities you conduct on your property. For instance, they may state that the property can only be used for residential purposes and that commercial activities are not allowed.
Restrictive covenants may limit what you can display on the outside of your home. For instance, you may not be able to display signs or flags on your property outside of what has been pre-approved by the homeowners association.
Finally, restrictive covenants may dictate setbacks wherein you’re not able to place buildings or structures too close to the street or lot lines to help prevent problematic encroachment issues.

What is a CC&R document?

If you’re worried about restrictive covenants sneaking up on you or agreeing to them without even knowing it, then you need to carefully analyze a document called a “CC&R.” This document details the covenants, conditions, and restrictions that are associated with the property. The seller of a property provides the buyer with a copy of this document before closing. In some cases, sellers offer this document to potential buyers before they even make an offer.

After the buyer receives the CC&R from the seller, they generally have a set number of days to review its contents and agree to them before the sale can proceed. For this reason, it’s especially important to go through this document with a fine-tooth comb to make sure that you are aware of what you’re agreeing to. When it comes to CC&Rs, you’re not able to claim ignorance as an excuse for noncompliance.

At the same time, you must still consider the fact that the homeowners association is still able to vote on new policies and restrictions at a later date. They may also vote to remove existing policies and restrictions. As a result, it’s important to keep up with the happenings of your homeowners association and make sure to vote on policy proposals.

Are restrictive covenants legal and constitutional?

Based on what we’ve discussed so far, you may be wondering if and how restrictive covenants are legal and constitutional. After all, it’s your property that you’re paying for. How can anyone else have power over that when they’re not the one on the deed or paying the mortgage every month?

Unfortunately, restrictive covenants are considered legally binding private agreements. As a result, courts will generally enforce restrictive covenants so long as they are still considered by the court to be “necessary” and “advisable.”

At the same time, courts have rules that restrictive covenants cannot be used to discriminate against individuals on the basis of race, creed, color, national origin, or ancestry as that would violate the 14th Amendment of the U.S. Constitution.

How are restrictive covenants enforced?

While it may seem like restrictive covenants are unenforceable, that’s definitely not the case. Generally speaking, restrictive covenants are enforced by the homeowners association within the community. However, individual owners may also be able to enforce restrictive covenants by suing the offending owner for an injunction.

Even though the power of homeowners associations tends to vary by state and locality, they are all able to effectively enforce restrictive covenants through a specific set of processes and are also able to come onto your property without permission to inspect the area for any potential issues.

In North Carolina, for example, homeowners associations must first provide the offending owner with a notice regarding their violation and the opportunity to either appeal or rectify the violation. After providing notice, the homeowners association is able to fine the offending owner up to $100 per day for the violation. They are also able to suspend access to certain community amenities like pools, tennis courts, clubhouses, etc.

If the fine remains unpaid after a set amount of time, the homeowners association can file a claim of lien against the offending owner’s property. If the lien remains unsettled, your property could end up being foreclosed upon.

Should you purchase a property under a restrictive covenant?

When it comes to whether or not you should purchase a property under a restrictive covenant, it’s really up to you. As you now know, there are both pros and cons to this concept that you will need to weigh out based on your personal preferences.

For example, some people are fine with restrictive covenants and actually prefer them to achieve a unified and appealing community aesthetic. On the other hand, some people do not want to be restricted on what they can do with their own property and prefer to have more freedom. In this case, you may not want to live in a community with restrictive covenants.

While you may assume that properties that aren’t located within a community development are automatically free of restrictive covenants, this isn’t always the case. Instead of assuming, you should check the deed of the property for any existing rules, restrictions, and prior agreements that you should know about. Be on the lookout for wording that limits property use or provides others the right to use the property.

Final thoughts on restrictive covenants

At the end of the day, it’s up to you to decide whether or not you’re willing to deal with restrictive covenants. If you have found the perfect property -- restrictive covenant or not -- but you’re still trying to figure out financing, feel free to reach out to the lending experts at Vaster Capital for tailored advice.

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