Buying a Home:
Ask About Restrictive Covenants Before You Buy

When you own your home, you can use it however you wish, right?  Maybe not if restrictive covenants are in place that say otherwise.  What are restrictive covenants and what types of things do they govern?  Let's take a closer look.

What They Are
Restrictive covenants are deed restrictions that dictate what you can do to or on a piece of property. Sound a bit like zoning regulations?  There may be overlap between the stipulations in some restrictive covenants and zoning regulations, but know that they are not the same.  Covenants exercise more control over aesthetics and activities for a group of homes.  The amount of control varies depending on the community, with some communities such as condominiums typically having more rigid restrictions in place than subdivisions. 

What They Govern
Most restrictive covenants have standard clauses that stipulate things like minimum home size, type of construction, and density or number of homes per lot.  They may also regulate in-home businesses, rental property, and easements -- legal rights that others have to use parts of the property.  In addition, covenants can contain rules that govern the color of window treatments or home exterior, type of fencing allowed, number and type of pets allowed, limits on tree cutting, types of prohibited motor vehicles (recreational vehicles, boats, inoperable cars), and more.   Some environmentally conscious communities may even regulate the type of herbicides or pesticides you can use.

Why They Exist
Although they may not sound like it to some, restrictive covenants are designed to safeguard a community and preserve or enhance the quality of life for the homeowners.  They do so by helping to maintain a harmonious appearance and by restricting activities that could cause the community to fall into disrepair and disarray.  Therefore restrictive covenants, when properly enforced, can help protect property values.

Who Provides Them
When working with a real estate agent, he/she should share a copy of the restrictive covenants that apply to the property you are buying.   If you are buying directly from the owners, they should provide this document as well.  If you don't get a copy, make it a point to ask for it.   Also be aware that restrictive covenants for a given property should be recorded in public records.

Before You Buy
Do your homework on restrictive covenants.  Understand what restrictions are in place and decide if you can abide by them before you place an offer on a home.  If you find some of the restrictions confusing, or if you simply want to ensure that you are interpreting them correctly, have a real estate attorney review the restrictive covenants and answer any questions you have.

What should you do if the document containing the restrictive covenants is not available, but you want to make an offer on your ideal home before someone else does?  Make an offer with a contingency clause that covers this area.  In other words, put a condition in your purchase offer that says you reserve the right to receive, read, and approve of the restrictions; and that if you do not approve of them, you can legally walk away from the deal with no penalties. 

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.