Covenants and Conditions in Real Estate Transactions

When purchasing real estate, a buyer should review and understand the restrictive covenants and zoning conditions that affect the property under contract.  The place to begin is with a title examination and title insurance commitment.  The examination should identify any restrictive covenants imposed on the property.  These restrictions can be found in deeds, on subdivision or other recorded plats, or in other instruments, such as declarations, which affect the property.  Covenants range from the straight-forward (e.g. restricting the use of the property to a particular category, such as commercial, industrial or residential) to the sophisticated (e.g. imposing a comprehensive Declaration of Covenants, Conditions and Restrictions on a commercial, industrial or residential development).

Restrictive covenants are generally imposed in order to protect some interest (financial or otherwise) of the seller/developer. They are legal obligations imposed on the owner of a particular property requiring the owner to do or not to do something.  Frequently covenants or restrictions run with the landand are enforceable against subsequent purchasers.   Most of the time, restrictive covenants with clear development standards and appropriate enforcement mechanisms provide a measure of protection for a purchasers investment.  Sometimes, however, a purchaser finds that the restrictions on the property preclude some use or activity to which the purchaser intends to put the property.  And, particularly in the case of residential developments, restrictions can have emotional and not just financial consequences.  A family pet that fails to meet covenant requirements, for example, can be the target of an enforcement action by a property owners association.  Careful review of the restrictions before closing can help a purchaser avoid surprises after closing.

Conditions can also be imposed on properties through zoning ordinances.  Zoning ordinances and government regulations are separate and distinct from restrictive covenants.   Its important to realize that a title examination will not disclose any conditions or limitations on the property resulting from zoning ordinances or government regulations.  A separate search of the jurisdictions ordinances should be made.  Many jurisdictions in southwest Virginia provide on-line access to their ordinances, including their zoning ordinances, making that review easier for a purchaser.  Seeking a written opinion of the Zoning Administrator as to the permitted uses on the property as well as any conditions associated with the property is recommended.  And, upon payment of an additional premium and meeting the requirements of the company, a title insurance policy can be endorsed to provide zoning protection.  Otherwise, title insurance policies do not cover claims based on zoning laws.

Typically, zoning ordinances do not list the conditions associated with a specific property.   If the property has been rezoned so as to allow a particular use or if a special use permit (also called a special exception) has been obtained, conditions have likely been imposed on the property by the governing body. It is important to understand those conditions and to receive written confirmation from the locality that the conditions have not been violated.   If the zoning conditions affecting the property are at variance with the purchasers plans for the property, that needs to be recognized and addressed during the purchasers pre-closing due diligence period.  Likewise, any recorded conditions affecting the property that will disrupt the purchasers plans for the property need to be modified or removed before the purchaser is obligated to close on the contract.  Sometimes title insurance can play a role in limiting the impact of covenants and restrictions.

Too often, purchasers fail to carefully read the instruments identified as exceptions on their title insurance commitment with their intended plans in mind. Too often, purchasers fail to understand the impact of zoning conditions and ordinances on their intended use of the property.  While attorneys and advisors aware of their clients plans should recognize the impact of an adverse covenant or condition, there is no substitute for  the purchasers own review and analysis.

Maryellen Goodlatte is an attorney with Glenn Feldmann Darby & Goodlatte visit to learn more.

Latest Articles

Latest Articles

Related Articles