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Restrictive Covenants in Real Estate

March 8, 2016 General

Covenants in Real Estate

In recent years, it’s become a practice for many real estate agreements to contain restrictive covenants—provisions that place limits on the future use of the property. Often, these limitations involve aesthetic matters, such as choice of color for the exterior of a home or the erection of a fence. If the covenant is included in the deed to the property, it may be enforceable against future buyer/owners as what is known as a “covenant running with the land.” Are all restrictive covenants enforceable? What legal prohibitions may be applied to restrictive covenants?

As a general rule, covenants related to real estate are enforceable unless they are what are known as “exclusionary” covenants, designed to prevent people from purchasing real estate because they belong to some protected class—women, minorities, the disabled, etc. Exclusionary covenants were common in the United States in the early 20th century, but were banned by the U.S. Supreme Court in 1949.

In order to be enforceable against subsequent owners of property, a restrictive real estate covenant must meet a number of tests:

  • The covenant must comply with the statute of frauds, which identifies what contracts must be in writing to be enforceable
  • The parties to the original transaction must have intended that all future owners be limited by the covenant
  • The covenant must involve the use or enjoyment of the physical property and cannot relate to any characteristic of the owner
  • Anyone purchasing the property must have been notified of the covenant at the time of purchase

Covenants may prohibit owners from engaging in some action related to the land, such as installing a hot tub, or they may require that property owners take certain actions, including keeping lawn and grounds manicured.

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