If you are a first-time land buyer, you might be under the assumption that you are free to whatever you want with your property. Unfortunately, it doesn’t always work this way. You can’t just build whatever you want on the property because of rules known as restrictive covenants.
Restrictive covenants are parameters placed on how the land you have purchased can be used. It can be easy for a landowner to overlook restrictive covenants, but you should be well aware of them whenever you are purchasing land as these regulations can have an impact on the land’s value.
At Santa Cruz Properties, we have been dedicated to helping family’s reach the American Dream of owning their very own plot of land since 1993. We’ve gained tons of experiences over the years and we’d like to share with you the basics of restrictive covenants so that you can make the best decision when it comes to purchasing land.
What is a restrictive covenant?
Covenants, also known as conditions, restrictions or CCRs, are limits and requirements set by a subdivider or developer for a property they are leasing or selling.
Due to their power to limit the way a land can be used or developed, potential buyers should thoroughly research to check if there are any possible restrictions fixed within the land purchasing paperwork. The restrictions can be found in deeds, declarations or leases.
If the buyer decides to acquire a title insurance for the property they just purchased, the title company will notify them of the existence of applicable restrictions on Schedule B of the title commitment.
A restrictive covenant can be binding not only to current owners but also to subsequent owners and assignees. However, in order for a restrictive covenant to have legal standing, a series of elements must be met:
- It must be in writing.
- There must be an intent to “run with the land.”
- The covenant must touch and concern the land.
- There must be horizontal privity.
- There must be vertical privity or privity of estate.
- A notice must be given to subsequent purchasers of the covenant.
Cities, developers or homeowners’ associations tend to create and implement restrictive covenants for several reasons. Generally, these restrictions have an objective to either increase the property’s value or simply maintain an orderly environment in the city or neighborhood.
Covenants can also be used to ensure a theme is maintained by new buildings within a development.
Some common residential restrictions limit how property can be used, such as forbidding commercial development within a residential neighborhood or restricting the color palette and architectural designs for new homes.
Types of Restrictive Covenants
Despite them being generally known as restrictive covenants, there are actually two different types:
- Restrictive Covenants – These restrict the use of the property and its appearance.
- Affirmative Obligation Covenants – Very much like promising to take certain actions when buying the property. For example, being contractually obligated to make payments to a homeowner’s association.
What if I purchase property in the countryside?
When purchasing rural land, restrictive covenants do not frequently occur. However, it is still worth your time to do research on the land you are purchasing to ensure that you will be able to build or utilize the land in a manner you see fit.
Most of the restrictive covenants placed on rural land are created with the country living in mind.