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For Sale By Owner - FSBO Multiple Listing Service

We send out FREE Real Estate articles about twice each month.  It covers things we see currently happening in the market, creative and useful things we see people doing, and ideas that have worked for sellers and buyers.  You can receive them if you like.   Sign-up

 

Protective Covenants - Concern For The Home Buyer?

In addition to zoning, some properties have covenants recorded at the courthouse that "run with the land." These "protective covenants" can put a serious pinch in your plans for a piece of property.

Protective Covenants

A protective covenant remains in effect as the property is sold from owner to owner. The covenants are designed to maintain a certain aspect of the area in question. The covenants may require a particular architectural style or use for the land to mention only a couple of areas of restriction.

Land in a scenic area may have a protective covenant that prevents certain types of development for the land or construction on it. Importantly, these restrictions may not show up in the zoning laws, so make sure you research the issues before buying. Let's consider an example of a great buy gone wrong because of a protective covenant.

A protective covenant may restrict the number of parcels into which the property can be subdivided. Thus, you could find yourself in a situation in which you buy a one hundred acre parcel with an eye toward subdividing it. Upon researching the issues, you discover the zoning laws allow the parcel to be cut into quarter acre lots. Visions of profit swirl before your eyes. Your development dreams, however, could turn to nightmares if there is a protective covenant.

Assume you go ahead and purchase the parcel. While showing it to a friend, a neighbor from down the road walks up and introduces himself. You excitedly explain you plans for subdividing only to be shocked when he tells you there is a protective covenant that prevents the creation of any lots under ten acres.

What if the covenant restricts ANY subdividing of the parcels? That great deal you got on the parcel may not look so hot when the protective covenant is factored in.

Dealing With Protective Covenants 

First, you should ask the seller whether any exists for the property.  Second, make sure you buy title insurance as the title company will certainly look for any protective covenants before issuing a policy.  Thirdly, if you suspect your intended use could be thwarted, write your contract offer subject to there being no protective covenants which would prevent your intended use and have the situation checked out before closing on the property.

Look before you leap!

Raynor James

We send out FREE Real Estate articles about twice each month.  It covers things we see currently happening in the market, creative and useful things we see people doing, and ideas that have worked for sellers and buyers.  You can receive them if you like.   Sign-up

 



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