Restrictive Covenants
Definition:
Restrictive Covenants are legal obligations imposed in property deeds that limit how a property can be used. These covenants are usually put in place by developers or homeowners’ associations to maintain the character of a neighborhood or community. They can cover various restrictions, such as the types of buildings that can be constructed, the use of the property, or even the color of houses in a subdivision.
Your mortgages may also have specific "loan covenants" which define scenarios such as a minimum debt service coverage ratios beyond which you may need to offer the lender additional collateral.
🔍 Did You Know?
Restrictive covenants can remain in place for decades, and homeowners must comply with these rules even if they weren’t the original buyers of the property.
Examples:
Example 1:
A restrictive covenant in a suburban neighborhood prevents homeowners from building fences taller than 6 feet or painting their homes in non-neutral colors.
Example 2:
A developer places a covenant on a new residential subdivision that restricts homeowners from building additional structures, like guesthouses, on their property.
Why It’s Important:
Restrictive covenants can significantly impact how property owners use and enjoy their land. Buyers should always review these covenants before purchasing property, as they may impose unexpected limitations on future modifications or usage.
Who Should Care:
- Homebuyers and real estate investors looking to purchase properties in planned communities.
- Developers creating subdivisions or managed communities.
- Homeowners’ associations responsible for enforcing restrictive covenants.
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