What are Deed Restrictions in Real Estate?

A deed restriction is a term widely used in real estate to refer to any limitation on a property that affects the ability of the property owner to utilize the property as he wishes. 

As a real estate enthusiast or a potential investor, it is crucial to understand what deed restrictions are and what sort of challenges they pose to property owners before deciding to go on with any real estate transaction. 

In this article, we shall cover everything you need to know about deed restrictions: what they are, how they work, and how to check for them. So, what are deed restrictions?

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What are Deed Restrictions?

Deed restrictions are provisions in a deed that limit how property owners can use their property. These restrictions are rules and regulations that govern the legal use of a property and are usually stated in the property purchase agreement. 

The buyer is expected to be aware of these restrictions before agreeing to them, and once the deal is signed, these terms are legally binding on the buyer.

Deed restrictions are one of the most common types of encumbrance on a property. They usually dictate what can be built on a piece of land or what a property can and can't be used for. They can either apply to one specific property or a subdivision of properties, regardless of who owns them at any point in time.

For example, in a neighborhood of look-alike houses, specific regulations may be set to ensure that every building maintains a particular look, thus limiting homeowners within the area to make any changes to the look of their property. 

How Do Deed Restrictions Work?

Deed restrictions work in the following ways:

• By defining the rules by which property owners must abide 
• By defining what activities can be carried out on a property
• By defining what renovations or constructions can be carried out on a property or a piece of land 

The duration of a deed restriction on a property varies, depending on the source of the restriction. While some stay for only a limited amount of time, others can remain for an unlimited period. These are the two most common sources of deed restrictions on real estate properties:

Covenants, Conditions, and Restrictions (CC&Rs)

Covenants, conditions, and restrictions, also known as CC&Rs, are rules and regulations of a neighborhood -usually a planned community- that govern all activities regarding the homes in the area. 

For example, CC&Rs may state that all cars should be parked inside the garages at all times or that all fences should be painted a particular color. It isn't unusual for CC&Rs to regulate things like the general home appearance, short-term rentals, pets, satellite dishes, parties, business, and trash cans.

Covenants, conditions, and restrictions are considered a type of deed restriction because once these rules are agreed to, they create limitations that impact the day-to-day lives of homeowners and their freedom to use their property as they will. 

The declarations of a neighborhood’s CC&Rs are usually documented in the records of the county within which the neighborhood is located and are legally binding.

Homeowners Association (HOA)

A Homeowners Association is a legal non-profit association in charge of maintaining and managing assets in a community. 

Once a property is purchased in a planned community, the buyer automatically becomes a member of the Homeowners Association and has to abide by the HOA’s governing rules. 

HOAs are the primary enforcers of Covenants, Conditions, and Restrictions. They impose penalties such as fines, lawsuits, and suspension of community privileges for any violations of the Association's governing rules.

What is a Freehold Estate?

A freehold estate refers to a real property whose owner possesses exclusive rights to the property for an undefined period. Simply put, a freehold estate gives its owner full privilege and absolute reign over the land. 

Unlike houses with deed restrictions where limitations restrict a homeowner’s preferences, freehold estate owners are at liberty to decide what to do with their property and what not to. The homeowner can customize the property to their taste without having to answer to anybody.  

In a freehold estate, the owner has a right of title to the land and the property attached to the land. There is no fixed duration for ownership, and ownership can be passed from one person to another without end. 

How to Check if a House Has Deed Restrictions on It

Unless you've always wanted to live in a planned community, purchasing a deed-restricted house could be a problem if you're unaware of the restrictions attached to the property. This is why it is essential to check if a home has deed restrictions before purchasing it. 

Here are two ways through which you can do this:

Title Search Report

A title search report is a document that contains accurate historical and legal descriptions of the transfer of ownership of a property over time. Title search reports also identify limitations or problems that could affect the purchase of the property.

By conducting a title search on a property through public records, it will be easy to find out if there are any deed restrictions on the property, thus preventing any unpleasant surprises much later.

County Clerk Office

Since CC&Rs are also documented in county land records, visiting the county clerk's office can be a great idea when checking for deed restrictions. The county clerk's office will provide you with a deed abstract that lists the encumbrances, rules, and regulations attached to any given property.

Are Deed Restrictions Bad?

There is no doubt that deed restrictions are limitations, but whether they are bad depends on the homeowner's or buyer's preferences. Some individuals enjoy the organized and uniform scenery of planned communities, while others crave the freedom to express their individuality.

Although deed restrictions may be regarded as too exacting, they are effective measures to curb the excesses of homeowners, thus ensuring that the interests of everyone are protected. If you are not a fan of deed restrictions, then the safest thing to do is to search a property’s history before purchasing it. 

Final Thoughts on Deed Restrictions

Deed restrictions are encumbrances that exist as part of real estate contracts known as a deed. These documents outline how a property owner is expected to use a property. By signing this contract, the buyer agrees to abide by the rules guiding the use of the property.

Remember, before making a real estate purchase, it is important to know if any restrictions are attached to the property and how serious or restricting they are.