Understanding Restrictive Covenant in Real Estate

Restrictive covenants are important elements in the landscape of real estate, influencing how properties are used and developed. Whether you are a prospective buyer or a current property owner, understanding restrictive covenants is essential to ensure smooth transactions and avoid potential legal disputes.

What is a Restrictive Covenant?

A restrictive covenant, also known as a negative covenant, imposes specific limitations on how a property owner can use their land, generally to protect the value or enhance the enjoyment of neighbouring properties. They are legally binding, and are typically established through agreements involving property owners, developers, and municipalities, to control and regulate development and enforce standards and uniformity across development.

Restrictive covenants “run with the land,” meaning they bind all current and future property owners to comply with the restriction, and the covenant remains in effect regardless of ownership changes. Therefore, potential buyers must understand any existing restrictive covenants before purchasing a property, as these restrictions can significantly impact their intended land use.

Who Establishes Restrictive Covenants?

Restrictive covenants are established through a legal process involving the property owners and often another interested party, such as a developers and municipalities.

• Developers: In new developments, developers often create restrictive covenants to maintain a certain aesthetic, ensure uniformity, and protect property values within the community.

• Municipalities: Local governments may enforce restrictive covenants as part of zoning and land use planning. These covenants help municipalities control development patterns and ensure compliance with local ordinances and comprehensive plans.

• Private Parties: Individual landowners can also establish restrictive covenants when selling or transferring property. For example, a property owner might impose a covenant to prevent the new owner from engaging in activities that could negatively impact their adjacent property.

Types of Restrictive Covenants:

Here are some common types of restrictive covenants:

• Restriction on Use: One of the most common restrictive covenants limits how a property canbe used. These covenants may prohibit certain activities or businesses, such as operating a home-based business, keeping livestock, or running a commercial enterprise in a residential area.

• Restriction on Leasing: Some covenants restrict the owner’s ability to rent or lease the property or parts of it. These restrictions may help maintain the character of a community by preventing short-term rentals or limiting the number of rental properties in a neighbourhood.

• Restriction on Architecture: Architectural covenants control the property’s size, style, and appearance. They can mandate specific styles, colours, or materials for construction and renovations. These covenants may regulate the overall design to ensure a cohesive look within the community, including type and height of fences for example.

• Maintenance Requirements: Maintenance covenants obligate homeowners to maintain their properties to a specific standard. These requirements help preserve the community’s appearance and property values by ensuring that all properties are well-kept and aesthetically pleasing. Examples include trimming your trees and lawn regularly, fixing broken fences, etc.

Pros and Cons of Restrictive Covenants

Restrictive covenants help keep property values up by ensuring homes are well-maintained, making it easier to sell and assuring buyers. However, these covenants also limit homeowners; freedom regarding what they can do with their property and how they can use it. Since these covenants are legally binding, non-compliance can result in fines until the issue is resolved, or even legal action.

Modifying or Removing a Restrictive Covenant

In some cases, homeowners may seek to modify or remove restrictive covenants. This can be a complex process, often requiring agreement from a significant portion of the affected community and, in some cases, court approval. Understanding restrictive covenants is an essential step towards informed decision-making and effective property management. Consulting with a lawyer can provide guidance in navigating the complexities of restrictive covenants, ensuring compliance, and protecting your property rights.

If you have any questions related to a restrictive covenant, contact us here!

Authors:

Jennifer Park

Partner

e: jpark@realtycarelaw.com

Kyra Kim

Summer Intern