Want to buy a home in an area with a homeowners association (HOA)? Be ready to play by the HOA’s rules, otherwise known as “restrictive covenants.” Understanding restrictive covenants is essential if you’re considering buying a home with an HOA agreement.
We’ll take a closer look at restrictive covenants and go over the different types of covenants you might see. We’ll also go over the benefits and drawbacks of restrictive covenants.
What Is A Restrictive Covenant?
An HOA is a nonprofit organization that upholds area property values. HOAs enforce the community’s covenants and maintain common areas like pools or clubhouses. An HOA might also perform maintenance and safety projects.
A restrictive covenant is an agreement you make with an HOA that limits the way you can use a property. Restrictive covenants are general rules that members of your HOA vote on that all homeowners living in the area must follow. A restrictive covenant may include things that you can’t do with your property, like raise livestock. A restrictive covenant will also include things that you must do, like mow your lawn regularly.
The specific restrictive covenants you need to follow will vary depending on where you live. Some HOA communities have many restrictions, some have only a few and others have none at all. You can read about a development’s restrictive covenants in a document called the “covenants, conditions and restrictions,” or “CC&R” for short. Restrictions can change if your HOA votes to add or remove a rule.
What happens when you don’t follow the covenants? HOA bylaws allow the association to take a wide range of actions to correct a violation. Your HOA can fine you until you address the issue. The HOA also has the right to sue you if you don’t fix the problem or pay your fines. In some extreme cases, an HOA can even force your home into foreclosure for repeated violations. This is why it’s very important to read and understand any restrictive covenants on a home before you buy it.
There are limits on the specific restrictive covenants your HOA can place on the development. An HOA can’t fine or punish you for something that’s not addressed in the list of restrictive covenants you signed when you moved in. Your HOA also can’t engage in “selective enforcement" practices, which is fining you for something that other people who live under your HOA’s rules are doing.
Finally, while your HOA can’t place restrictive covenants that violate state or federal laws, they can still limit your rights within reason. For example, an HOA can’t ban you from displaying an American flag on your property but they can limit the size and placement of your flag.
Types Of Restrictive Covenants
Let’s examine some of the most common types of restrictive covenants you might see when you shop for a home.
Limitations On Property Usage
The most common type of restrictive covenants are limitations on what you can do with your property. These restrictions are set in place to keep homes in the development looking uniform. This uniformity can help maintain property values. Expect to see limitations on how you can use your property as well as what types of design choices are unacceptable.
In addition to rules on what you can’t do with your home, your restrictive covenants can also include things you need to do. Maintenance standards may dictate rules like how often you need to mow your lawn, repaint your home or fix a fence. Depending on your HOA and your agreement, the cost of maintenance might come out of your HOA fees.
What Is The Purpose Of Restrictive Covenants?
Restrictive covenants can offer benefits to homeowners. Restrictive covenants enforce a standard of uniformity across a development. These covenants stop your neighbors from letting their homes fall into decay and lowering your property values. Restrictive covenants also give buyers peace of mind when they purchase a home. This can make your home easier to sell later on.
However, the use of restrictive covenants can be both a benefit and a drawback for homeowners.
Benefits Of Covenants
Let’s take a look at some of the biggest benefits of restrictive covenants.
- Your neighborhood will maintain its look: Restrictive covenants can keep the look and feel of a neighborhood uniform. For example, your neighbor can’t decide to buy goats or chickens or leave trash on their lawn.
- More value protection: Restrictive covenants help retain your home’s value. They can also ease some of the worries potential buyers may have about your home and allow you to sell it with less hassle later on.
- Dispute mediation: CC&R documents clearly lay out what types of behavior are acceptable and unacceptable in your community. For example, if your neighbors decide to throw a wild party at 2 a.m., your HOA will mediate the dispute for you.
Things To Consider Before Being Under A Covenant
Living in a covenant-controlled community isn’t for everyone. We’ll look at some of the drawbacks you need to consider before you buy a home in a community with restrictions.
- You have limited control over your property: Most homeowners don’t like people telling them what they can and can’t do on their own property. However, when you move into a covenant-controlled community, you must follow the rules or you’ll face penalties.
- A CC&R is a binding legal document: Think you’ll just press your luck and ignore the rules you don’t agree with? A CC&R is a legal contract that affords your HOA multiple avenues they can use to correct your violations. An HOA may come onto your property without permission to see if you’re violating a rule and issue you a fine for any discrepancies they find.
- You end up paying for rule enforcement: HOAs get their funding from monthly fees levied on everyone who lives in the community. Your HOA fees can range from a hundred dollars to several thousand dollars a month depending on where you live.
Examples Of Restrictive Covenants
Still not sure what kind of rules you might see when you buy a home with a set of restrictive covenants? Let’s take a look at some of the most common restrictions you might see in your CC&R.
Limitations On Home Color
A restriction included in almost every CC&R, HOAs are very picky about paint color. Most paint limitations specify a list of acceptable home colors and ban all others. Assume your design choices will only be between neutral shades if you’re looking at a home with a covenant on paint colors.
Rent And Lease Restrictions
You’ll have to check your CC&R first if you want to rent out your home. Many HOAs severely limit your ability to rent or lease out your home. You may only be able to rent out your home for a few months of the year or you may not be able to rent your home out at all.
Restrictions On Business Usage
Your CC&R may include a covenant that prohibits you from operating a business out of your home. This covenant can quickly create a big problem if you’re self-employed. While most HOAs won’t care if you turn your spare bedroom into a home office, anything that causes an increase in traffic for your neighbors may set off red flags.
Limitations On Permissible Pets
Some HOAs place limitations on the types of pets you can have on your property. Your CC&R can also put limits on the size of your pets. For example, your HOA could tell you that you can only own a small or medium-sized dog. Your HOA can also put restrictions on the breed of dog you may own. Many covenants ban breeds of dog that some people believe to be more aggressive, like pit bulls and German Shepherds.
The CC&R may also place strict limits on commercial breeding. You might be able to have a pet but you usually can’t breed or sell animals from your residential property under most covenants. Most covenants also ban rearing livestock or owning farm animals as pets.
Requirements For Exterior Maintenance
Your CC&R will likely lay out what type of maintenance you need to perform on your property. You may need to mow your lawn every so often, remove holiday lights after a certain date or only place your trash outside on trash day. The HOA will make sure the exterior of your property is up to code if you live in a development that provides exterior maintenance.
Restrictions On Exterior Constructions
CC&Rs may include restrictions on modifications and buildings you make on your property. You may not be able to build a shed, fence or detached garage without first getting the design approved from the HOA. Some CC&Rs ban additional construction altogether.
You may need to navigate a list of restrictive covenants if you buy a home in a development with a homeowners association (HOA). Restrictive covenants are limitations on how you can use your property. Restrictive covenants include (but aren’t limited to) what you can do on your property, how you manage your lawn and even what color you can paint your home. Covenants may also dictate how you take care of and maintain your property’s exterior.
Some homeowners like restrictive covenants because they help maintain the uniformity and property values of a particular development. Others dislike the power HOAs have over their property. Be sure to ask about covenants before you sign on a home loan. If you violate the covenants you agreed to when you move in, your HOA can fine or sue you to correct the issues.
See What You Qualify For
Condo Vs. Co-op: Similarities, Differences & Financing
Home Buying - 6-minute read
September 17, 2020
Interested in a condo or co-op? We’ll explain how to tease out the differences and provide a quick financing guide.