Covenant In Real Estate

Definition of "Covenant in real estate"

A covenant real estate definition covers covenants in the context of residential real estate, condominiums, neighborhoods, or housing co-ops that are ruled by an agreement of the owner to adhere to certain rules. These rules are commonly stipulated in the CC&R's written by the Homeowners Associations (HOA) or in the purchasing contract.

CC&R stands for Covenants, Conditions & Restrictions that are applied in order to maintain the appearance and regulate the use of properties that pertain to HOAs or other groups of owners like gated communities.

How are real estate covenants applied?

A real estate covenant is legally binding and enforceable by HOAs. There are cases when covenants are not stipulated in the contract or the CC&R but are made between neighbors. Even in that case, they are still binding and can be litigated in court if not respected.

Most commonly, covenants are used by planned developments such as master-planned communities, gated communities, condominiums, or co-ops, where uniformity and a certain level of conformity to order are desired. Many homeowners that live in such planned developments are open, willing, and welcoming to these covenants as they uphold certain standards in the community. That being said, there are positive and negative covenants. But we'll see exactly how they are different.

Positive covenants

Covenants that are considered positive generally require some form of action from the homeowner. They are considered positive because they add value to the property and only concern the current owner. These real estate covenants are not passed along with the deed of the house or transferred to other owners.

Example of a positive covenant:

An HOA can impose a covenant on a homeowner to build a fence on the property. This fence is built at a certain point so there is no need for it to be built by a potential future owner. A fence will also increase the value of the property.

Restrictive covenants

These types of real estate covenants are imposed in order to restrict the way in which a property can be used. They limit some preferences and options a homeowner would otherwise have and they are tied to the land. This means that they are passed along to new owners and, when not respected, they are sanctioned.

Example of a restrictive covenant:

An HOA can demand a homeowner to not own a dog on the premises and can also restrict a homeowner from running a business in their home. Alterations to the home can also be prohibited.

It is important for homeowners to know that covenants can be presented in a way that might confuse them. For instance, a restrictive covenant can be presented as a positive covenant and the opposite.

Any type of real estate covenant can affect the value of a home in a positive or negative way, as well as affect the people living there. This is why real estate agents are important, and a lawyer should be consulted if CC&R's are mentioned or covenants in general.