What Is a Restrictive Covenant?

Restrictive Covenant Explained

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A restrictive covenant is a legal binding agreement that outlines what a homeowner is and is not allowed to do with their property. These rules are written into the deed of the property and may have penalties for violations.

Purchasing a home with a restrictive covenant binds you to the rules, which makes it important to carefully consider the pros and cons before completing the purchase. While a restrictive covenant is intended to be good for a residential community, some of the rules could block plans you have for your new home. Learn about types of restrictive covenants, how they work, and more.

Definition and Examples of a Restrictive Covenant

A restrictive covenant is a legal agreement that limits what a homeowner can do with their property as well as what they're obligated to do. The covenant is part of the deed, which binds the homeowner to the covenant at the time of the home purchase. Homeowner associations (HOAs) commonly use restrictive covenants to determine what's allowed within the community.

How Do Restrictive Covenants Work?

Many planned developments and residential communities have a homeowner association that develops rules to ensure the community is clean and cohesive. The rules usually are recorded as part of a restrictive covenant with the county clerk's office. The restrictive covenant remains part of the property, regardless of ownership, unless there's a time limit on the restriction. Buyers who violate the rules of a restrictive covenant may have to pay a fine or penalty.

In 1948, the U.S. Supreme Court ruled that racially restrictive covenants violate the Equal Protection Clause of the 14th Amendment. Some older restrictive covenants related to race still exist on public record, but should not be enforced, as they violate the Fair Housing Act.

A restrictive covenant may limit the installation of fences; define when trash can be placed outside and in what type of container; define when holiday lighting can be displayed; or even limit the homeowner's ability to offer short-term rentals.

State laws and statutes govern the use of restrictive covenants. However, restrictive covenants may not be legally enforceable if they are discriminatory, violate civil liberties, or the person seeking to enforce the covenant is not in good standing.

Types of Restrictive Covenants

Land-Use Restrictions

A restrictive covenant may include land-use restrictions. For example, the rules may require that the property be used only for residential purposes, prohibit business activity, disallow tents, and even define how and where signs should be placed on the lot.

When a restrictive covenant conflicts with local zoning ordinances, the stricter set of rules usually supersedes.

Property Alteration Restrictions

To maintain a cohesive look within the community, restrictive covenants may have specific rules about what homeowners can do with their property. This may include limits on the height of the home; removal of trees; paint colors for the front door, trim, or garage; or installation of antennas or satellite dishes.

Maintenance Requirements

Restrictive covenants may dictate home and property maintenance, including maintaining the home’s exterior in good shape, keeping lawns mowed, and removing weeds from flower beds.

Pros and Cons of Restrictive Covenants

Pros
  • Maintains integrity of the community

  • Allows for easier dispute resolution

Cons
  • Restricts the ability to make design changes to your home

  • May face penalty for violating the rules

Pros Explained

  • Maintains integrity of the community: Having rules and guidelines ensures the community is both aesthetically appealing and a safe place to live in.
  • Easier dispute resolution: With documented rules, it's much easier to deal with neighbors who violate the rules of the restrictive covenant; for example, by violating noise regulations or parking cars along the curb or in their yard.

Cons Explained

  • Restricts your ability to make design changes to your home: Some restrictive covenants set rules to ensure the houses have a coordinated look, which means you may not be able to paint your home a certain color or install a deck or patio.
  • May face penalty for violating the rules: Breaking the rules of the restrictive covenant may result in fines; suspended access to common areas or amenities; towing of vehicles; suspension of homeowners association voting privileges; or even foreclosure for unpaid special assessments or fines.

What a Restrictive Covenant Means for You

By purchasing a property with a restrictive covenant included in the deed, you're volunteering to follow the rules included. It's important to be familiar with the rules or to consult them before making alterations to your home to make sure you're not violating a rule. Violation of the rules could lead to penalties, including fines, suspension of privileges, and even foreclosure, after repeat violations.

Key Takeaways

  • In real estate, a restrictive covenant is a legal agreement that states what a homeowner can and cannot do with their property.
  • The restrictive covenant is attached to the deed, obligating the homeowner to the rules at the time the property is purchased.
  • Homeowners who violate the restrictive covenant are subject to penalties, which can be as minor as a warning or as severe as foreclosure.