Find out about deed restrictions on your property before it’s too late

Erik J. MartinThe Mortgage Reports Contributor

April 14, 2020 - 5 min read

Don’t let deed restrictions catch you off guard

Are you planning to buy a home or a vacant lot on which to build?

Be forewarned: That property could have hidden risks. More specifically, the risks may lie within the deed to that property.

These are called “deed restrictions.” And they could limit how you can use or build on that piece of real estate.

Learning about deed restrictions and restrictive covenants is crucial. That’s because accidentally breaking one could lead to fines or even (in a worst-case scenario) foreclosure.

Here’s how to do your due diligence before closing.

Common deed restrictions

Deed restrictions are conditions written into the deed of a property. They are legally binding to those who acquire title to that property.

Phil Georgiades with FedHome Loan Centers says deed restrictions constrain what you can do on a property.

For example, a deed restriction could prohibit high privacy fences on your property. Or it could ban using your residence for a commercial business. Other examples of common deed restrictions include limits on:

• Height, width and/or square footage of your home or structures on the property

• Number of bedrooms you can have in your home

• Type or quantity of trees you can plant or remove

• Number of garages, detached structures, pools, or sheds you can have.

• Exterior color, design, or construction materials you’re allowed to use during remodeling

• Amount of vehicles you can keep on the property

• Breeds or types of pets you can own

Deed restrictions are also sometimes called “restrictive covenants.” These are typically rules enforced by a subdivision or homeowners association (HOA).

“Some of the most common deed restrictions are HOA rules. These are also often the most frequently enforced. That’s because the enforcing body literally lives next door and can see what you’re up to,” Georgiades says.

Who enforces deed restrictions?

Neil Narut is senior underwriting counsel for Proper Title. He says, in general, when it comes to single deed restrictions, only the person or body who created the restriction can enforce it.

Imagine your state set a law about no boats allowed on your property. If so, “your state would enforce this deed restriction,” says Georgiades.

But restrictive covenant restrictions covering an entire condo building or subdivision are enforceable by one or all the owners within that community.

“If your HOA set a rule about painting the exterior of your home, then the HOA would enforce it.”

When it comes to liability for breaking these covenants, the titleholder for the property is on the hook — even if he or she isn’t the one who technically broke it.

For example, assume you hire a builder to construct a restaurant on a property you own. But the land has a deed restriction limiting it to residential use.

“In this case, the builder is not liable for violating the deed restriction. Ultimately, it’s the owner’s responsibility to comply,” Narut cautions.

Also, not all deed restrictions are enforceable.

“In fact, some restrictions are illegal if they violate the Constitution,” explains Narut.

For example, he says, “Say there’s a decades-old deed restriction on your property limiting ownership to only Caucasians. This is not enforceable today because the Constitution forbids this discrimination.”

How to find out about deed restrictions

Are you planning to buy or sell a home? If so, it’s smart to research any deed restrictions on the property well before the sale. There are several ways you can do this.

First, you can ask your real estate agent to access property records and look for any deed restrictions indicated in prior listings.

“It’s a good idea to ask your agent upfront about this early in the process. Usually, a buyer has the restrictions disclosed to them once they have an accepted offer,” notes Georgiades.

In addition, you can visit the website or office of your municipal or county clerk and search historical records related to your property.

If it’s a newly built home in a subdivision or planned development, ask the developer or builder if any deed restrictions apply.

What’s more, experts highly recommend hiring a title company before closing. Most deed restrictions come up during title search by the title company.

“The title company will alert you of any deed restrictions in the chain of title,” says Narut.

Note that most lenders require you to buy title insurance in the form of a lender’s policy to protect their interests. You should also purchase an owner’s policy to safeguard your interests.

>> Related: Title insurance and owner’s title insurance explained

“Say your title company fails to disclose prior deed restrictions,” Narut explains. “Then, the owner’s policy of title insurance provided by your seller will cover the costs associated if someone attempts to enforce a deed restriction you didn’t know about after purchasing the home.”

The consequences of ignoring deed restrictions

You don’t want to overlook or ignore deed restrictions.

“The person who created the deed restriction — or their heirs — can seek to enforce it by filing a lawsuit to take the property back,” says Narut.

“Depending on how aggressive people want to be about enforcing it, the consequences can range anywhere from a notice to fix whatever rule you violated, to a fine. If you don’t pay the fines or fix the problem, things can escalate to foreclosure,” Georgiades says.

Or, “you may end up having to sell your property and buy elsewhere,” says Realtor and attorney Bruce Ailion.

In some cases, the passage of time limits the right to enforce a deed restriction.

Ailion says ignorance of a deed restriction is usually not legally excusable.

“In most jurisdictions, the rule of ‘buyer beware’ applies. You need to fully investigate potential deed restrictions way ahead of time,” says Ailion.

How to fight a deed restriction

If you have owner’s policy title insurance, your title company will solve a deed restriction problem on your behalf.

Alternatively, you can ask whoever placed the restriction on your property to lift it.

“For instance, in the case of an HOA, you can ask for a vote to change that part of the bylaws. Or you can talk to your city council about restrictions imposed by the city,” says Georgiades.

“But sometimes it may be very difficult to remove a restriction, such as changing a law or code. You may have to prove in court that your deed restriction creates an undue hardship.”

Laws in some states permit homeowners to modify restrictive covenants if they take particular steps.

“If in doubt, get the help of an attorney,” Ailion says.