What Are Restrictive Covenants?

Written By: Nicole Videkovich _· September 5, 2023

When you are looking to purchase a property, always be ready to ask if there are any restrictive covenants in place. Restrictive covenants, common in real estate transactions, are legal clauses that may have restrictions and limitations, and even prevent and/or prohibit certain actions. 

Developers and Homeowner Associations (HOA’s) will generally put covenants in place, where the developer makes the first set of rules for a new HOA. The HOA will then write the covenants and restrictions for its neighborhood community. 

What to Look for in Restrictive Covenants Before Moving Forward?

Some restricted covenants may limit and/or prohibit things such as:

• The types of siding and roof colors and/or materials;
• Landscaping requirements, including trees, plants, or even pools;
• Fencing options;
• The use of the property for vacation rentals;
• Parking vehicles (personal and work) on the street and/or in the driveway;
• Parking RV’s, boats, and recreational vehicles on the street and/or in the driveway;
• Yard signs and/or decorations;
• Using the property to conduct business from your home;
• Housing additions and/or shed requirements; and more!

While this is not an exhaustive list of all the types of restricted covenants, they are common ones to be mindful of. You should review the restricted covenants with your builder (if building) or purchasing a home to avoid unexpected expenses. Another option is having your attorney review these documents so you can understand the impact the restricted covenants may have. 

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Restrictive Covenants – Looking at the Long-Term Perspective

Considering the long-term impact of your decision is essential. The covenants may affect your future plans for the property, such as adding a pool or parking your RV. Some covenants may include fines for overnight parking in your driveway! Only you will know how you intend to use the property, which is why understanding any restrictions is critical. 

If you are looking for the perfect lot to build your dream home, be sure to inform your real estate agent of the size of the home. The size of the lot you are planning to build does matter! The real estate agent working with you can exclude listings for lots with restrictive covenants that require a minimum square footage. Some lots may even include easements for water drainage that restrict any building or landscape in those areas. This is also true for purchasing a property that is already built. 

While the restricted covenants may seem limiting, they are established to help protect the value of your property by maintaining a certain standard of appearance (and aesthetics) and behavior in the neighborhood. 

STAY INFORMED AND DO NOT BE DISCOURAGED! Knowing potential restrictions will help avoid any unexpected expenses or limitations on your dream home. 

What are HOA’s & Restrictive Covenants All About?

Keep in mind, there are always pros and cons to living or not living within a HOA. Only you will know what is important when buying a lot or purchasing a home. 

As a realtor, I have a cheat sheet I provide to all HOA’s with a series of questions, both common and some that are not. 

If you are getting started in finding a lot and do not have an agent, feel free to reach out.

Some questions I ask my buyers include:

• Do you have a dog or plan to have one in the future that will require a fence?
• Do you have a work vehicle that requires additional concrete beyond the driveway to create additional parking on the side of the house?
• Do you plan to have a pool? If so, will you want it to be above-ground or in-ground, or perhaps a hybrid of both?
• Do you own a camper, RV, boat, or other recreational vehicles? If so, where do you intend to park them?
• Do you have more cars than garage spaces?
• Are there any restricted easements that do not allow building extensions or landscaping?
• Is there a common space that is shared?

These are not all the questions I ask my borrowers. However, the questions I ask will help in my search for lots or properties that will fit my buyer’s needs. My goal is to ensure my buyers are informed and can make an educated decision whether living in a HOA is right for them. Just because one HOA has certain restrictions does not mean others will. No one HOA is the same as another. 

What are the Positives of a HOA?

There are several positives for buyers looking to purchase or build a home in a HOA community. So, what are some of the positives?

1. Property Values: 

A well-managed HOA can maintain property values by ensuring the neighborhood remains attractive, well-maintained, and desirable to potential buyers. 

2. Rules and Consistency:

HOA’s will establish rules and guidelines to help maintain certain standards of living within the community. This consistency can prevent nuisances or unsightly conditions that may otherwise arise. It also ensures the rules established apply to everyone. 

3. Preservation of Aesthetics:

Restrictive covenants are often established to maintain a consistent architectural style, color palette, and landscaping within a community. This serves to protect property values and create a harmonious living environment. Ignoring these covenants could mean having a property that diminishes the appeal of the neighborhood. Choosing to live in a community means agreeing to upkeep your property just as your neighbors have. 

4. Community Events:

Many HOA’s will organize social events as a way for neighbors to meet one another and foster a sense of community. Annual block parties are typical and common. 

5. Community Amenities:

Some HOA’s will have managed and shared amenities that may come at a cost. These include things such as swimming pools, fitness centers, parks, and common green spaces. Having amenities such as these makes it a desirable community to live in. 

6. Shared Expenses:

Many HOA’s will have regular dues and/or fees that residents must pay as part of maintenance and improvement of common areas and shared amenities. This shared cost can make it more affordable to maintain high-quality facilities and landscaping. You should always ask what the HOA fees are and if the HOA intends to add amenities or other costs that may increase those dues now or in the future. 

7. Quality of Life:

Many restrictive covenants are established to promote a certain quality of life. These could include noise restrictions, rules about outdoor structures, or regulations about renting out your property. Understanding and adhering to these rules can help maintain a peaceful and enjoyable living environment. If you opt out an HOA, you run the risk of having things such as chicken coops, broken driveways, RVs and other recreational vehicles parked on the driveways and in the streets, and unruly laws. 

8. Staying Informed: 

HOA’s will typically have an annual meeting with an agenda of items homeowners can vote on. These can include expenses like common area fence repair, lawn maintenance in out lots, block party budgets, and more. Everyone can vote on these matters, which gives homeowners a chance to voice where they want their dues to be spent. Most HOA’s keep minute notes that are shared, along with monthly financial reports. There should be no surprise where your HOA dues are being spent. 

What are the Negatives of a HOA?

Some people want the option to have a fence or a dog, including an above-ground pool. You might not want to pay $1,000 for a mailbox and lamp post you are required to have and do not like. You might even want to go with less expensive siding and put more money into your home – like the kitchen. The truth is some people just want to keep to themselves and don’t want to bother with the HOA. So, what are some of the negatives?

1. Loss of Flexibility:

One of the most significant drawbacks of restrictive covenants is the potential loss of flexibility for property owners. These covenants can limit how you use and modify your property. If your plans don’t align with the restrictions, you might be forced to compromise or abandon your ideas altogether. 

2. Personal Expression:

Restrictive covenants can sometimes stifle personal expression and creativity in home design and landscaping. Homeowners may have to adhere to specific architectural styles, color schemes, and landscaping guidelines that don’t align with their preferences. One thing to consider is house color. If you want a dark blue house but your neighbor has the same color, the HOA may deny your request to have two houses with the same and/or similar paint colors next to each other. 

3. Higher Costs:

While the goal of restrictive covenants is often to maintain property values, adhering to certain guidelines can increase construction and maintenance costs. For instance, using specific materials or designs mandated by the covenants might be more expensive than alternatives. 

4. Invasion of Privacy:

Some covenants could involve intrusive rules, such as limitations of the placement of outdoor structures or restrictions on specific activities. These rules may be perceived as invasive, limiting a homeowner’s ability to enjoy their property as they see fit. For instance, some people want to put in a privacy fence. The HOA prohibit privacy fences, or require a certain opacity. 

5. Conflict and Litigation:

Disagreements can arise when property owners interpret or enforce covenants differently. This can lead to conflicts in the community or between homeowners and the HOA. Legal battles over restrictive covenants can be time-consuming and expensive. Any legal fees are usually paid through the HOA, which is part of the homeowner’s dues. 

6. Misalignment and Lifestyle:

A property owner’s lifestyle or needs might not align with the restrictions imposed by the covenants. For example, someone who runs their business out of their home might have conflicts with covenants that restrict home-based businesses that require non-residents to come to your house to buy and sell items. Noise restrictions might be another deterrent for some property owners as well. 

7. Future Uncertainty:

Homeowners might not foresee future changes in their circumstances that could conflict with the covenants. A new job, growing family, or other life events could necessitate changes to the covenant restrictions. 

8. Board Members and Management Companies: HOA’s are typically comprised of residents who are voted into a Board position. If those Board members do not fulfill their duties or maintain open communication, it can have a negative impact on the community and its residents. Management companies are often enlisted to carry out services for the HOA. These can be costly. It is important to understand how much of your dues pay the Management company and what things they can do for you, as the homeowner. 

Conclusion

Overall, understanding and considering restrictive covenants when building a new home or buying an existing one is not just a legal formality, but a crucial step to ensuring your dream home aligns with community standards to maintain value over time. As a real estate agent, your role is to guide your clients through these considerations, helping them make informed decisions that lead to a successful and harmonious homeownership experience.