Deed Restrictions in Real Estate | Definition & Examples

If you’re entering the real estate industry or preparing for your real estate licensing exam, understanding deed restrictions is a must. These restrictions can influence property values, define how land is used, and impact the potential of properties you might work with in the future.

Knowing what they are and how they operate will give you an edge in providing valuable insights to your clients. In this article, we’ll dive into what deed restrictions in real estate mean, their types, how they differ from other property laws, and their effect on property ownership.

What exactly is a deed restriction in real estate?

It is a legal condition written into the property deed that limits what can be done on the property. In simpler terms, it’s like a rule that “travels” with the property, regardless of who the owner is. These restrictions are binding agreements attached to the property title itself and can last for decades or even be permanent unless removed.

To put it another way, it is a bit like a playbook for the property that tells you what’s allowed and what’s off-limits. For example, if it says, “no commercial vehicles on the property,” even if the property changes hands 10 times, the new owners will still need to follow this rule.

Who creates them and why are they used?

Deed restrictions can be put in place by several parties, including developers, previous owners, and Homeowners’ Associations (HOAs). They’re usually designed to maintain a certain aesthetic, ensure uniformity, and preserve property values in a community. Think of them as a way to protect neighborhood integrity.

Deed restrictions Example

Let’s say a developer builds a new community of single-family homes and wants to maintain a uniform look. To do this, they place restrictions on the color palettes homeowners can choose for their exteriors. So, even if a new owner prefers bright purple, they’ll be limited to earth tones like beige or soft gray. This helps keep the deed restricted community visually cohesive and maintains its market appeal.

Common deed restrictions

They vary widely, depending on the goals of the person or organization that implemented them. However, some of the most common deed restriction examples you’ll encounter include:

1. Building and structural restrictions: Limits the size, height, and type of structures allowed on the property. For instance, you may see rules like “No building can be taller than two stories” or “Only single-family homes allowed.”
2. Landscaping limitations: Dictate what kind of plants and structures are permissible. For example, you might not be able to plant certain types of trees that obstruct a neighbor’s view or install a chain-link type of fence.
3. Use limitations: Restrict how the property can be used. Common examples include prohibitions on using residential property for commercial activities like running a business or operating a short-term rental.
4. Vehicle and parking rules: Determine the types and number of vehicles you can have on the property. For example, “No commercial trucks or RVs parked in the driveway.”
5. Animal restrictions: Limit the number and type of animals you can have. Many subdivisions prohibit livestock or certain breeds of dogs.
6. Architectural controls: Define what the house must look like on the outside. For example, you might only be allowed to use certain paint colors, finishes, or even roof types.
7. Right of first refusal: Requires you to offer to sell the property back to a specific party, such as a developer or neighbor, before selling it to others.

Real-Life example

Consider a deed restricted community with limits on the number of bedrooms in each house. This might seem overly restrictive, but it’s often used to prevent overwhelming local utilities like the sewage system. If every home suddenly added more bedrooms, it could strain infrastructure and affect home values. Such restrictions ensure that the neighborhood remains in line with the capacity of public services.

How are they enforced?

Deed restrictions are enforced by the party that initially created them, which is often a homeowners’ association (HOA) or a developer. Violating these restrictions can lead to severe consequences, ranging from fines to legal action.

• Homeowners’ associations (HOAs): Typically have the power to enforce restrictions in a residential community. For example, if a homeowner builds a pool without permission, the HOA can issue fines until the pool is removed or the homeowner complies with community guidelines.
• Legal action: If a restriction is violated, the enforcing party can take the homeowner to court, seeking either the removal of the violation or compensation for damages.

Real-Life scenario

Imagine Sarah, a real estate agent who’s helping her client Tom purchase a property in a historic district. They’re excited to add a modern-style extension to the home. However, after reviewing the deed, Sarah discovers a restriction stating that any exterior changes must maintain the property’s historic appearance. If Tom went ahead with his modern plans, he could be fined by the HOA or even taken to court.

Deed restrictions vs. zoning laws: What’s the difference?

While deed restrictions and zoning laws both regulate how property can be used, they’re different in nature and authority. Zoning laws are established by local governments and apply to entire regions, determining how land in a particular area can be used (residential, commercial, industrial, etc.). On the other hand, deed restrictions are private agreements tied specifically to a property or subdivision.

When both apply to the same property, the more restrictive regulation prevails. This means if there’s a conflict between what zoning allows and what a deed restriction permits, the deed restriction will often take precedence, limiting the property’s use to the stricter standard.

For instance, zoning might permit a property to be used for a small business, but if there’s a deed restriction that limits it to residential use, then the deed restriction will override the zoning, .

Example

Consider a piece of land zoned for a two-story commercial building, but the deed restriction only allows single-story residential homes. Even though local zoning says you can go ahead and build a two-story shop, the deed restriction will prevent it. If you violate the deed restriction, you could face lawsuits from the property owner who placed the restriction or the community enforcing it.

How to find it on a property

If you’re working as a real estate agent or just starting out, knowing how to identify deed restrictions is critical. Here are some methods:

1. Real estate agents and brokers: If you’re the buyer’s agent, you can often access property records through local MLS databases to check for any noted deed restrictions.
2. Contacting the builder or developer: For newer properties, the builder should have all the documentation related to the property’s restrictions.
3. County clerk’s office or public records: They are often recorded in public records, which you can access through the municipal clerk’s office or online databases.
4. Title search: A title search conducted by a title company is the most comprehensive way to uncover restrictions. It’s typically done during the closing process but can be requested earlier.
5. HOA documents: If the property is in an HOA-governed community, review the HOA rules and covenants, conditions, and restrictions (CC&Rs).

How long do they last?

The duration can vary widely. Some restrictions are set to last forever, while others have an expiration date. For example:

• Permanent deed restrictions: These last indefinitely and will continue to bind every future owner unless legal action is taken to remove them.
• Time-limited restrictions: These expire after a set number of years (e.g., 25 or 50 years) unless renewed by the homeowners or enforcing body.
• Conditional expiration: Some deed restrictions are tied to a specific event or condition, such as the completion of a neighborhood’s development.

How to change or remove them

Changing a deed restriction isn’t easy. Here are the steps involved:

1. Obtain a copy of the original deed: Understand the exact terms and any conditions for modification.
2. Seek approval from the enforcing party: You’ll need the consent of the party that established the restriction (usually the HOA or developer).
3. Get agreement from affected neighbors: Some restrictions may require neighboring property owners’ consent to be altered.
4. Petition a court: If all else fails, you may be able to seek a court order to remove the restriction, particularly if it’s discriminatory or outdated.
5. Hire legal assistance: Consider consulting a real estate attorney to navigate this complex process.

Real-life examples

Let’s look at a couple of scenarios to understand how it plays out in real-world real estate practice:

1. Jane, a new agent, is helping her client buy a home in a high-end neighborhood. Her client wants to build a large in-ground pool. Before proceeding, Jane checks the deed restrictions and finds that pools are prohibited. By understanding this, Jane avoids wasting her client’s time and money on an unsuitable property.
2. Mike, an investor, buys a deed-restricted property and plans to turn it into a rental. After closing, he discovers a restriction stating that homes cannot be rented for less than 6 months. This impacts his business plan for short-term rentals, forcing him to rethink his strategy.

Summing up

Deed restrictions in real estate are vital considerations that can influence how a property is used, developed, and valued. As a future real estate professional, understanding these restrictions gives you an advantage in advising clients and navigating property transactions. Remember to review any existing deed restrictions thoroughly before finalizing a deal, and ensure they align with your client’s goals.

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