Protective Covenants - Home Buyer Beware
In addition to zoning, some properties have covenants recorded
at the courthouse that "run with the land." These "protective
covenants" can put a serious pinch in your plans for a piece of
property.
Protective Covenants
A protective covenant remains in effect as the property is sold
from owner to owner. The covenants are designed to maintain a
certain aspect of the area in question. The covenants may
require a particular architectural style or use for the land to
mention only a few areas of restriction.
Land in a scenic area may have a protective covenant that
prevents certain types of development for the land or properties
on it. Importantly, these restrictions may not show up in the
zoning laws, so make sure you research the issues before buying.
Let's consider an example of a great buy gone wrong because of a
protective covenant.
A protective covenant may restrict the number of parcels into
which the property can be subdivided. Thus, you could find
yourself in a situation in which you buy a one hundred acre
parcel with an eye toward subdividing it. Upon researching the
issues, you discover the zoning laws allow the parcel to be cut
into quarter acre lots. Visions of profit swirl before your
eyes. Your development dreams, however, could turn to nightmares
if there is a protective covenant.
Assume you go ahead and purchase the parcel. While showing it to
a friend, a neighbor from down the road walks up and introduces
himself. You excitedly explain you plans for subdividing only to
be shocked when he tells you there is a protective covenant that
prevents the creation of any lots under ten acres. What if the
covenant restricts ANY subdividing of the parcels? That great
deal you got on the parcel may not look so hot when the
protective covenant is factored in.
So, how should you deal with protective covenants? First, you
should ask the seller whether any exists for the property.
Second, make sure you buy title insurance as the title company
will certainly look for any protective covenants before issuing
a policy.