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Real Estate Restriction

DEFINITION

Real estate restrictions also known as deed restrictions are requirements that are part of a property deed, which impose limits on how to use property and the structures that can be built on the property. Such restrictions are legally known as restrictive covenants. 

EXPLANATION

Real estate restrictions are legally binding obligations that are appended to a property deed by the seller and are extremely hard to undo. Some of the provisions in restrictive covenants are quite reasonable such as the requirement to maintain the property in good condition, while others are quite extreme such as limiting the number of people that can live in a rental property.

Examples of Common Limits Imposed By Restrictive Covenants

Some of the most common limits imposed by sellers through restrictive covenants includes how the new owners or tenants are supposed to use the property. For example, a restrictive covenant might forbid the property occupants from conducting any business activities on the property. This restriction is commonly found in residential areas, but might be quite limiting to an occupant who wants to operate a home-based business.

Another common restrictive covenant is in relation to the architecture of a property where such restrictions may prohibit the occupant from making any alterations to the property. This is usually a major obstacle to most buyers who might have different plans for the properties or homes that they purchase, such as adding an extra room to a home. Other buyers might want to alter the appearance of the property in order to meet their aesthetic preferences, but may be prohibited through architectural obligations that require them to maintain the property’s outward appearance.

The History of Deed Restrictions

Restrictive covenants originated in English law with the main difference between the application of the law in England and the USA being that in the latter, such covenants are allowed to run with the land, which is not the case in English law. In the United States, exclusionary covenants were used to prohibit individuals from minor races from owning land in certain municipalities.

These segregationist laws were quite prevalent in the 1920s and were implemented up to the 1940s and some may still exist up to date, but are no longer legally binding. These laws allowed many state and local governments to prevent individuals from minority races access to decent housing in most cities. The primary goal of these laws was to forcibly ensure that white neighborhoods remained white.

How to Protect Yourself from Little-Known Deed Restrictions

The first step you should take before making an offer on a property or a piece of land is to conduct a title search for the property. After conducting a title search you should also carefully peruse the current deed on the property as the current owner might have added new restrictions that will be reflected in the current deed.

A defining characteristic of deed restrictions is that they “run with the land,” which means that any future owners of the property must abide by the restrictive covenants attached to the land. This might seem quite frivolous but such restrictions are legally binding on all future owners even if the restriction was imposed 100 years ago when the property was simply a large farm.

U.S. Homeowners Associations Rules vs. Deed Restrictions

Most property buyers are familiar with the fact that neighborhoods with active homeowners associations (HOAs) usually have numerous rules that must be followed by all homeowners in the neighborhood. For example, homeowners associations may have specific guidelines in regards to how the occupants of a property use their homes as well as limiting the types of property improvements allowed and outward color schemes on such homes.

However, HOA rules can be easily changed if majority of the members approve the changes, which is the main difference between such rules and deed restrictions. It is quite easy to change HOA rules, but it is extremely difficult to change deed restrictions unless they are no longer enforceable.

In most cases where deed restrictions exist within a neighborhood with a HOA, they are very likely to have been specified by the developer during the construction of the project. For example, some deed restrictions that are common in multifamily developments include requiring all properties to have a particular type of roof or a unique color scheme. All homeowners in such a development are required to adhere to these requirements, which ae very difficult to change.

Legal Requirements for the Creation of Deed Restrictions

For a real estate deed of restriction to be legally binding, it must meet the following conditions:

–             It must be memorialized in writing in accordance with the Statute of Frauds.

–             The intention of the originators of the deed must have been to bind future owners by the agreement.

–             The new owner must have had access to a notice or record of the restrictions.

–             The restriction must be in regards to the use or the enjoyment of the specified land.

–             Horizontal privity between the originators must have existed prior to the signing of the agreement.

–             Vertical privity is a must for the restrictions to be binding.

Additional Examples of Common Real Estate Restrictions

1. Obstructing the Neighbor’s View

In most neighborhoods, the existing owners are likely to oppose plans by a new owner to construct a home or structure that completely obstructs the existing views from the neighbors’ back decks, front porches, bedroom windows among other choice locations. In such neighborhoods, homeowners may have created covenants, also known as deed restrictions, which require everyone in the neighborhood to maintain the views as they were when the neighborhood was initially created. This is very common in neighborhoods with tourist attractions such as beach and mountain views among others.

2. Vehicles and Garage Spaces

In most planned neighborhoods, there are restrictions on the number of garages that a lot can have and sometimes there are limits to the number of cars you can park on your driveway. This may not be a concern for a family with two cars, but for those with more than two cars, you should make sure that the real estate restrictions in your community allow you to park more cars on your driveway, or to add more garages.

3. Approved Types of Fences

Most neighborhoods in America have restrictions on the types of fences that residents are allowed to construct on their properties. In such neighborhoods, the height of fences is usually restricted as well as the type of material used to erect the fences; very tall fences and chain link fences are frequently prohibited.

4. Cutting down Trees

Most planned neighborhoods have restrictions on cutting down trees growing on the lots, which might be a major obstacle to new owners who want to develop or redevelop their individual lots. For example, a buyer may purchase a lot on a planned community with the intention of cutting down most of the trees on his lot in order to build his dream home. However, he may be rudely shocked to find that some or all of the trees on the lot are protected and cannot be removed.

5. Approving Building Plans

In most neighborhoods, the developers or HOA may have a deed restriction on all lots that grants them the final say on any plans to renovate or improve a property, which could hinder owners from making changes to their properties. Such restrictions may be in force for many years after all the homes in the community have been built.

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