CC&R Basics

In the context of residential neighborhoods, covenants are a set of rules. They govern how real property is used. Covenants also refer to promises or other governing clauses in deeds. For example, different types of covenants are recorded on a property deed:

• Restrictive covenants (negative covenants) place conditions on the use of land. Like HOA rules, they may prohibit renovations, certain paint colors, or landscaping.
• Affirmative covenants can require owners to take specific action. This includes paying for common areas or insurance expenses.

A property owner "covenants" or agrees to follow certain restrictions on how the land is used. Such covenants are promises made by a purchaser as a condition of a real estate transaction. Subsequent owners' use of the property will usually be governed by these deed restrictions.

Legal Effect of Covenants

A real covenant runs with the land and is usually recorded in writing. That means it is a binding legal document against all future owners. By contrast, a personal covenant is between private parties, such as a grantor and grantee of property. They may sign a contract that gives them privity (a direct relationship). If neighbors sign a covenant privately, only the people who sign it are required to follow it.

The disclaimer is that some covenants are unenforceable as a matter of property law or public policy. For example, real covenants that limit occupancy on the basis of national origin are illegal. A covenant cannot violate local, state, or federal laws.

Keep in mind that covenants have a separate legal effect from easements. While covenants dictate use of land, easements create a right of way over land or plat.

When Covenants Are Used

Covenants attempt to benefit all residential owners and their neighbors in:

• Most planned communities
• Subdivisions of homes built by a particular builder
• Closed or gated residential areas
• Condominium associations

Neighborhoods with properly drafted and enforced covenants have been shown to retain property value better than those with poorly enforced restrictions. Neighborhoods that follow these bylaws tend to:

• Be safer
• Look better
• Maintain better relationships with local governments

They also better retain or increase the investments that homeowners have made in their properties.

Covenants vs. Zoning Laws

Covenants differ from zoning ordinances in the following ways:

• Covenants are agreements between private parties. Zoning laws dictate the relationship between governmental entities and homeowners.
• A homeowners association or a single homeowner can enforce a covenant against another homeowner. A city or county enforces a zoning ordinance against a private citizen.
• Zoning ordinances are rules and regulations recorded as local laws on the books. That means they are codified laws. By contrast, covenants are recorded in private deeds.
• Covenants are voluntary because a property purchaser can choose different property. Thus, covenants may be more restrictive than zoning ordinances.

What Are CC&Rs?

Covenants are often referred to as covenants, conditions, and restrictions, or CC&Rs. This is a term commonly found in real estate documents. Most covenants involve some kind of condition or restriction placed upon the buyer.

The collective term CC&Rs has been more widely used in recent years. This is done to indicate the existence or future existence of limitations associated with the use of the land. Purchasers of real estate may request CC&Rs as a part of a seller's disclosure prior to closing a transaction.

Advice for Home Buyers

Home buyers may be charmed by the appearance of a house for sale, but they might fail to take the time to read the CC&Rs that come with the property. They are so pleased with a nice kitchen or a fenced-in backyard that they sign a purchase agreement quickly. They make this decision without realizing that existing CC&Rs may prevent them from:

• Keeping their boat or truck on the property
• Erecting a basketball hoop in the driveway

If you are using a real estate agent, be sure to request copies of any documents associated with the use or restrictions of the land you intend to purchase.

Often, title companies will not have copies of the CC&Rs affecting the property until the day of closing. They are often overlooked at that point. The title insurance company may require additional endorsements, at an extra cost, to your title insurance policy.

You should note that CC&Rs are binding upon the buyer, whether or not they have been reviewed, read, or understood. The general rule of constructive notice applies in these cases. Thus, you should always review all the CC&Rs and zoning laws affecting the property before signing a real estate contract.

Cut Through the CC&R Confusion: Consider Working With a Lawyer

If you plan to buy property in a planned community or condominium, beware. Certain actions are either required or prohibited through CC&Rs. If you violate a covenant, you may be liable in a legal action brought against you. It may be best to seek the legal advice of a real estate attorney to help set your mind at ease.