The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
When you buy a home in a homeowners association, or HOA, the association has certain rules owners must follow. These rules are called restrictive covenants, and they can make a difference in what you’re allowed to do with your property. Before you buy a home in an association with restrictive covenants, make sure you understand what you’re agreeing to, and how they work.
What is a restrictive covenant?
Restrictive covenant definition
A restrictive covenant is a binding legal agreement that limits what you can do with your property. In general, these covenants are part of the property deed, so when you buy a home in a homeowners association (HOA), you agree to them.
In general, HOAs use restrictive covenants as a way to maintain property values. The idea is that if everyone follows the rules, the neighborhood will retain its appeal and everyone living in the neighborhood can expect to see their home values protected.
In most cases, HOA rules are voted on by residents of the community, so the restrictive covenants can change over time. These rules have to be enforced for everyone, and they also have to adhere to state and federal laws.
Depending on the HOA, a restrictive covenant agreement can require much from a homeowner, or it can be relatively simple. Before closing on your home, it’s important to read the restrictive covenants to determine what actions you might not be able to take as an owner within the association.
In some cases, it’s even possible for the HOA to enforce a penalty, such as a fine, if you don’t adhere to the covenants in the neighborhood. In fact, in some areas, an HOA can sue you or force a foreclosure if you violate the restrictive covenants.
Examples of restrictive covenants
In general, there are two main types of restrictive covenant, although HOA rules are different in various areas.
Property use limitations
A property use limitation is a type of restrictive covenant that limits how you can change your property. The goal is to keep the homes in the association relatively uniform, and in some situations, to protect owners.
There may be property use limits on the types of designs you can use when altering your home, or specifications you have to meet if you remodel your home or add onto it. Depending on the HOA, you may even have to meet certain requirements for colors and materials you use on your property, or limit how you make changes to the interior of your home.
There are also often limitations on the types of pets that are acceptable, and some restrictive covenants set rules regarding specific breeds. Before you move in, make sure your pets are in compliance.
Property use limitations may also limit whether you can put signs on your property, the height of a flag pole or whether you can perform certain business tasks. You may be unable to rent out your home to someone else, depending on the HOA, as well.
Some HOAs also have restrictive covenants that address home maintenance. The idea behind maintenance requirements is to help keep property values from being affected if, say, a neighbor doesn’t mow their lawn or keep their trees trimmed. You might be required to keep your lawn to a certain length or be restricted as to the types of bushes and flowers you can have in your yard.
Holiday lights, when you put your trash out (and retrieve your cans) and even the fence you use might be subject to your HOA’s regulation, too.
If you live in an area with snowfall in the winter, there might be restrictive covenants addressing how quickly you must clear your driveway and walk. However, many HOAs contract with service providers, so you may instead pay a maintenance fee to have your yard taken care of and snow removed.
On top of that, you might be required to keep up with the paint on your home, or there might be restrictions on the number of items you’re allowed to keep on your porch. All of these restrictive covenants are designed to keep the curb appeal of the neighborhood intact.
Should I buy in a community with restrictive covenants?
Whether you want to buy in a community with a restrictive covenant agreement depends on your goals and preferences. Even though some restrictive covenants can seem onerous, there are some benefits that come with living in an HOA:
- While there’s no way to completely protect your home’s value, living in a community with restrictive covenants can provide some value protection, because your property value is less likely to be impacted by someone else’s neglect of their home. Likewise, if you’re concerned about the upkeep of the neighborhood, living in an association may provide some peace of mind.
- Most restrictive covenant agreements have some sort of method for taking care of disputes. You don’t have to confront your neighbor when it comes to their endless string of late-night parties, for instance — the HOA takes care of that. With clear rules, it’s fairly straightforward for community members to know what’s expected of them.
However, you will have less freedom to control what you do with your property. Yes, it’s your home, but when you move into an HOA, you’re agreeing to be bound by the regulations of the community. Additionally, depending on the area, you might have to pay a monthly fee for maintenance and rule enforcement.
When deciding if living in a community with an HOA is right for you, carefully think about whether the benefits of living with a restrictive covenant agreement outweigh the limitations placed on what you can do with your own property, as well as consider HOA fees.
How to find out if your community has restrictive covenants
Before you make an offer on a home, ask if the community has a homeowners association, and ask to see the “covenants, conditions and restrictions” document. This document, also called the CC&R, is usually readily accessible in some way. If there’s a clubhouse or office associated with the community, the CC&R is usually there.
Additionally, many HOAs maintain websites where you can view restrictive covenant information.
Remember, when you buy a home in a community with an HOA and CC&Rs, you’re legally bound by the rules — it’s part of the home’s deed of sale. Carefully read the restrictive covenant information before you move forward in order to avoid surprises later.
Featured image by grandriver of Getty Images.