Restrictive covenants explained

Restrictive covenants are legally binding rules attached to your property deed that limit what you can do with your home and land. These rules originate from builders, condo associations, or homeowners' associations to maintain property values and neighborhood character.

They help protect your investment by keeping the neighborhood looking sharp, but they can also surprise new homeowners who didn't count on paying HOA fees or their HOA’s strong opinion on guest parking. Here's everything you need to know.

Key takeaways:

• Restrictive covenants are binding property rules that control how you use your home.
• These agreements help maintain neighborhood standards and property values, but they also limit your freedom as a homeowner.
• Always review covenant documents before buying because violations can result in fines, legal action, or even liens against your property.

What is a restrictive covenant?

Restrictive covenants are legal agreements that set rules for how you can use, maintain, or modify your property. These covenants often serve as the basis for homeowner association (HOA) rules, which are enforced by community organizations that manage communal facilities and maintain neighborhood aesthetics.

The formal legal authority for these restrictions is documented in a set of regulations called covenants, conditions, and restrictions, or CC&Rs. This document lists all the rules and restrictions applicable to properties within a particular development or community.

You'll typically find restrictive covenants in condominium complexes, suburban developments, and planned communities. They can stipulate where you can park, whether you can get solar panels, or if you can run a home business, among other things.

Covenants fall into two categories: negative and positive. Negative covenants tell you what you can't do, like "no fences over 6 feet" or "no short-term rentals." Positive covenants require action, such as maintaining your front lawn or sharing the costs of maintenance.

Commercial properties use them, too. For example, a coffee shop's mall lease might prevent a second coffee shop from opening in the same complex.

What's the history of restrictive covenants?

In the first half of the 20th century, restrictive covenants were used to prevent minorities from purchasing homes in predominantly white neighborhoods. These covenants were sometimes enforced through courts and maintained by real estate boards as a tool for "preserving neighborhood character."

The Supreme Court ruled in Shelley v. Kraemer (1948) that these covenants were unenforceable in court, but the discriminatory language persisted. To this day, homeowners all over America discover racist or exclusionary language in their deeds. Although the language is technically meaningless, it is a grim reminder of how deeply racism was embedded in the housing system.

The Fair Housing Act of 1968 forbade discrimination in the sale, rental, or financing of housing. This law bans any restrictive covenant, either old or new, meant to restrict property ownership or occupancy based on the following:

• Race or color
• Nationality or ethnic origin
• Religion or faith
• Sexual orientation
• Gender or gender identity
• Family status, such as having dependents or being pregnant
• Other protected classes, as specified by state or local law

While discriminatory covenants may still be found in some deeds, they cannot be enforced and are prohibited by federal law.

However, not all restrictive covenants are discriminatory or illegal. Many are valid tools used by community associations to govern issues related to landscaping, fencing, maintenance, and architecture. These rules are designed to enhance and maintain home values, as well as improve the quality of life for homeowners.

The difference lies in content and intent. A law controlling the placement of garages is legal. A law regulating the ownership of homes by religion or race is not. Understanding the difference is crucial, especially when buying a house governed by a community association. It is also essential when reviewing deed restrictions on an older home.

Types of restrictive covenants in real estate

When you purchase or lease a home, it's essential to understand what you're committing to. More than half of HOA residents What might seem like a small rule can have a significant impact on your daily life, and a majority of HOA residents don’t like having one.

Typical restrictive covenants include:

• House color restrictions. Your HOA may limit the number of colors you can use on the exterior of your home. These rules encourage a cohesive look for the neighborhood, which can help preserve property values. However, they can constrain your creativity and personality.
• Rent and lease restrictions. Many communities limit or ban short-term rentals, such as those offered through Airbnb. Some also limit the number of units that can be rented out at once. These rules are designed to promote long-term residency and prevent issues related to noise, wear, and frequent tenant turnover.
• Home business restrictions. You may not be allowed to operate a business from your home, especially if it generates significant traffic, requires signage, or necessitates frequent deliveries. These covenants are typical in residential neighborhoods that want to maintain a quiet and residential atmosphere.
• Pet restrictions. Some covenants limit the kind, breed, or number of pets allowed. You may be unable to get a big dog, a specific breed of dog, or a wild animal to reduce complaints and minimize liability.
• Exterior maintenance conditions. These covenants require owners to maintain their property by mowing the lawn, touching up house trim, or cleaning the gutters. The goal is to retain curb appeal and prevent one unsightly home from dragging down neighboring property values.
• Outdoor building restrictions. You may have restrictions on what you can build on your land. That includes fencing, decking, sheds, or accessory dwelling units (ADUs).
• Required maintenance. In some neighborhoods, you may need to pay a share of the maintenance costs for common areas that are enjoyed by all homeowners. This can include parking lots, swimming pools, or common landscaping. These covenants help fund collective maintenance but may also include additional fees or special assessments.

FAQ

Here are answers to common questions about restrictive covenants.

Can you remove a restrictive covenant?

Removing a restrictive covenant is possible, but it can be challenging. You'll typically need approval from a majority of affected homeowners, and the process varies by state. Some covenants expire automatically after a specific period. Others can be modified through legal action if they're outdated or unenforceable. You may need to involve a real estate attorney, which can be a costly endeavor.

Are there limits on restrictive covenants?

Yes. Restrictive covenants must comply with state and federal laws, such as the Fair Housing Act. This means they can't discriminate against an individual based on religion, skin color, gender identity, family status, or other characteristics. Also, your HOA rules can't fine or penalize you for something that's not explicitly outlined in your deed restrictions. If it's not on the formal list of covenants or bylaws, they can't enforce it.

Can I find out if a house has restrictive covenants before I buy it?

Yes, you should order a title search when buying a home. The results provide a legal history of the property and will disclose any deed restrictions. Your real estate agent or attorney can assist you in acquiring these documents as part of the closing process. You also can request a copy of the HOA's declaration of covenants, conditions, and restrictions. These outline all restrictive covenants and real estate regulations that are in place, such as land use limitations and architectural guidelines.

What if I violate a restrictive covenant?

The consequence depends on the rule and who is enforcing it. Most HOAs will issue one warning, followed by increasingly severe consequences for violations, which may result in fines, loss of privileges, or even legal action. Additionally, when the violation affects common areas, the HOA can also use its correct the issue itself and charge the owner. In certain states, repeated offenses can result in liens against your property. That's why it's worth understanding your covenants upfront.

The bottom line: The relevance of restrictive covenants

Restrictive covenants are a common aspect of homeownership in most communities today. They're regularly used to determine what you can and cannot do with a property, influencing everything from lease terms to landscaping standards. If you're considering buying a home with restrictive covenants, carefully read the CC&Rs before signing.

If you are uncertain how these rules might affect your loan eligibility or long-term plans, don't make assumptions. Reach out to Rocket Mortgage^® for expert advice on financing homes with restrictive covenants.