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Vol. 2010-01-a | January, 2010

Real Property Covenents – CC&R’s

Real estate purchases include specific real property rights and interests; the issue of covenants and restrictions as they affect those rights, are important, and valuable considerations worthy of careful scrutiny by the prudent buyer.

Covenants, collectively grouped as “covenants, conditions, and restrictions” or CC&Rs, is a term commonly found in real estate documents. Since most covenants involve some kind of condition or restriction placed upon the land, “CC&Rs” have become more widely used in recent years to indicate the present or (even) future existence of limitations associated with the use of the land being purchased.

Covenants are rules governing or limiting the use of real property. Commonly, these may also refer to a legally binding promise or agreement, formalized in the deed, concerning the use of the land. One example is where a purchaser of land “covenants” to abide by certain restrictions associated with the use of the land, such as agreeing that no alcoholic beverages shall be sold on the property, or that a converted gasoline station may not be used again for the retail sales of such fuel. Essentially, such covenants are promises made by a prospective purchaser as a condition of purchasing the land in question.

There are legal effects and consequences connected with restrictive covenants. When properly recorded on a deed conveying land, a “restrictive deed covenant” has the legal effect of a binding contract term, and may be enforced. In contrast, when covenants are signed privately among neighbors, as in a mutual compact or agreement, regarding use or access to roads or water, etc., they are still binding upon each of the signatories and, if breached or disregarded, may become the subject of litigation.

Another use of covenants may be found in the development of raw or reutilized land, after demolition of previous structures. Most PUD’s – Planned Unit Developments, such as subdivisions of homes built by a builder, whether gated residential communities, or condominiums, or condominium associations, or housing cooperatives, frequently include covenants for the benefit of all residential owners.

Neighborhoods with properly drafted and enforced covenants and architectural standards, tend to retain property value better than those with poorly stated or enforced covenants or no standards at all. In addition, neighborhoods that follow imposed covenants and standards tend to be safer, look better, and maintain better relationships with local governments. They also tend to retain or increase the homeowners’ investments in their properties.

Zoning ordinances are restrictions between private party and governmental entities. They are unlike covenants, made between between private parties. Accordingly, where a condominium association may enforce a covenant against an individual owner, a municipal subdivision, such as a city or county, may enforce zoning ordinances against private citizen/owners. The important distinction is that zoning ordinances are regulations recorded as local laws, of public record, whereas covenants may be recorded only in individual or private deeds. Further, because covenants are voluntary, they may be even more restrictive that zoning ordinances.

Purchasers of real property must carefully evaluate all of the CC&R’s in the deeds to their proposed purchases, and obtain title insurance coverage. The time for modification, if any is permitted, must be before signing on the dotted line

Be careful reading the fine print. There’s no way you’re going to like it.

AUTHOR / EDITOR: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He is a Mediator, Arbitrator and Litigator with experience in Business, Construction Law, and Public Works, and with additional experience in Real Estate, Construction Attorney (Legal Project and Crisis Management), and as an Expert Witness (Forensic Architect). His office is in Cleveland, Ohio.