Restrictive Covenants or Deed Restrictions
Many people may not realize the effects restrictive covenants and deed restrictions can have on the land they are purchasing. It is important to understand restrictions before buying property.
Restrictive covenants (sometimes called "deed restrictions," "covenants, conditions and restrictions," or simply "CCR's") are contractual limits imposed on the use or occupancy of real property. Restrictions may affect a single tract of land or an entire subdivision. These restrictions can substantially limit the use and development of property.
Many people, including real estate professionals, have used the term “deed restrictions” to reference restrictions imposed by a Homeowners Association (HOA) or Property Owners Association (POA). However, DEED RESTRICTIONS also refer to restrictions found in the conveyance instrument, General Warranty Deed, Special Warranty Deed, etc. The seller is thus able to control certain aspects of the property after no longer owning it through deed restrictions. Developers place restrictions on land to maintain a certain amount of uniformity in a subdivision or development.
Deed Restrictions included in the conveyance will follow the land unless the restriction instrument provides otherwise. This is not conditioned on a formal association. The deed restrictions in the conveyance may not be voted on or amended.
Some restrictions are a form of contractual agreement, and they may be modified. Often the restrictions themselves will provide a mechanism for modification with the consent of a specified percentage of the affected landowners or a designated committee. If the restrictions themselves do not provide a process for modification, however, any change will usually require the unanimous approval of all the affected landowners. The restrictions generally have a set time period and automatically renew for another set time period if there has not been a majority or unanimous vote.
Before purchasing land that is specified as “Unrestricted” be sure to check the deed records. A Title Commitment under Schedule B lists the restrictions with the specific recorded instrument numbers of all documents related to the land. These documents should be requested and reviewed.
Buyers should carefully investigate any applicable restrictions before committing to purchase land. It is always worth the cost of an attorney to review the title commitment and excluded coverage instruments if you are purchasing and a must if purchasing for a specific use other than normal residential use.