What is a Restrictive Covenant?

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Restrictive CovenantResidential and commercial real estate buyers should inquire about any limitations for the use of properties that they desire to purchase, and restrictive covenant is the collective term used to describe these limitations on most real estate contracts. Restrictive covenants could also include things that property owners must do to maintain their property. Nearly all communities except those that are found in the most remote, rural locations have been planned by municipal authorities in partnership with developers. Imposition of restrictive covenants help to make sure that property owners use their land and building structures in ways that align with their communities’ suburban and urban development strategies. Here are some examples of common constraints and obligations associated with restrictive covenants.

Home Businesses

A number of entrepreneurs use their homes to conduct business operations. Usually these individuals must check the zoning ordinances for their communities to make sure that their home business activities are not prohibited by law. Generally, business owners who are not using their property for manufacturing operations can use their homes for other business purposes. However, those owners who have restrictive covenants in place may not be able to use their homes for business purposes at all. One reason that business owners like public accountants and beauticians are restricted from conducting business out of their homes is because they may have too many business clients that visit the subdivision that was originally designed for residential use. These rules which are designed to protect neighborhoods from undue commercial traffic are usually enforced by home owner associations.

Architectural Review of Structural Additions or Modifications

Many smart, young families purchase small homes that are built on large lots so that they can expand their living spaces as their families grow. These buying strategies should be discussed with their real estate agents thoroughly, because many restrictive covenants limit additions or modifications to existing structures. Most of these prospective building plans must go through review processes before construction occurs. These limitations can apply to putting up decks, detached garages, outdoor kitchens and even fences. Home owners may even be restricted on the color choices that they use for their home remodeling projects. While many property owners find the restrictions irksome, others are thankful for these rules that help to make sure that everyone within the community can enjoy their property without having to worry about their neighbors’ unsightly construction projects or garish color choices.

Property Leases

Some people purchase property in strategic locations so that they can easily lease their homes for profit. However, many restrictive covenants prohibit the short term leasing of property. For example, home owners who purchase property in the mountains, near the beach or by theme parks will not be able to rent out their homes to tourists who want two week rentals. This discourages property owners from turning residential neighborhoods into a haven for non residents who are looking for hostels, inns or hotels. Alternately, property owners can usually lease their homes to tenants for minimum rental periods of six months. The terms of these types of restrictive covenants can get a little complicated when home owners participate in popular home swapping programs with other vacationers; legal assistance may be required in these cases, according to Lawyers.com.

Assessment Fees

The beautiful landscaping that attracts many potential home buyers to upscale communities are funded collectively by the home owners who live in those subdivisions. The terms of some restrictive covenants allow home owner associations to assess fees to cover the cost of community landscaping, pool maintenance and club house upkeep. Restrictive covenants that contain assessment fees must be agreed to with caution because most home owners do not have much control over the amount of the assessed fees that can rise steadily over the years.

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Restrictive covenants can undoubtedly have major impacts on property owners’ use and enjoyment of their real estate purchases which is why good real estate agents do not fail to disclose the terms and conditions of these covenants prior to closing on contracts. However, many residential and commercial real estate buyers find that they can fulfill restrictive covenant terms so the practice of placing the covenants within real estate contracts is likely to continue.

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