Sometimes, practicing real estate is like living in the TV show The Twilight Zone.
With apologies to Rod Serling . . . Imagine, if you will, the transfer of a farm where the seller will not allow the buyer to raise hogs. A farm with no hogs? Surely, the buyer would be allowed to raise hogs if they chose to! The seller can’t dictate to the buyer what they can and cannot do with the property once closing has occurred and the title has been passed to the buyer, can they? Yes, they can if they are familiar with deed-restricted properties.
Key Takeaways
- Deed restrictions, also called restrictive covenants, are legally binding clauses tied to property deeds that dictate how a property can be used or modified. They can significantly impact real estate transactions and often last indefinitely unless removed by the original grantor or a court.
- Common deed restrictions include use restrictions, architectural design rules, environmental and conservation limitations, maintenance requirements, and time-sensitive conditions. Additionally, HOA-imposed CC&Rs govern community living by regulating activities such as parking, noise, and home appearance.
- Real estate brokers must review documents like title reports and HOA agreements to identify restrictions and advise clients on their implications. Misrepresentation or overlooking these details can lead to legal issues and reputational damage.
- Deed restrictions can preserve neighborhood aesthetics and boost property values but may deter buyers seeking flexibility. Brokers should help clients weigh the benefits and challenges of purchasing deed-restricted properties to make informed decisions.
What is a Deed Restriction?
Deed restrictions are legally binding clauses written into property deeds that dictate specific limitations or requirements for the property. These restrictions can significantly impact how a property is used, maintained, or developed.
How Deed Restrictions Work
As a real estate broker, it’s critical that you understand how deed restrictions work and how they affect your buyer or seller.
Legal foundations and enforceability of deed restrictions in North Carolina
Deed restrictions in North Carolina are often established by developers, homeowners’ associations (HOAs), or prior property owners and are enforceable under state law. They are recorded in public property records and remain attached to the property regardless of ownership changes. Enforcement in North Carolina typically falls to HOAs, neighboring property owners, or entities named in the covenant.
North Carolina law allows property owners to challenge the enforceability of deed restrictions under certain circumstances, such as ambiguity, changed conditions in the neighborhood, or if the limitation violates public policy. However, most restrictions are upheld as long as they are clearly defined and benefit the community.
Common types of deed restrictions in North Carolina
Deed restrictions in North Carolina serve various purposes, from preserving neighborhood aesthetics to protecting the environment. Here are the most common categories:
Use Restrictions
In North Carolina, use restrictions often dictate whether a property can be used for residential, commercial, or mixed purposes. For example, a restriction may prohibit the operation of short-term rental properties like Airbnbs or disallow commercial activities in residential zones. These restrictions are especially common in neighborhoods with HOAs, where maintaining a uniform character is a priority.
Architectural and Design Restrictions
Architectural and design restrictions in North Carolina often focus on maintaining neighborhoods’ visual appeal. Homeowners may be required to follow rules about exterior paint colors, fence styles, roofing materials, or landscaping. For instance, coastal communities in North Carolina might have specific guidelines to ensure structures are resilient to hurricane conditions while blending with local aesthetics.
Environmental and Conservation Restrictions
North Carolina’s diverse geography, from the mountains to the coast, makes environmental and conservation restrictions particularly significant. These restrictions may limit tree removal, regulate building near wetlands, or prohibit development in areas designated for wildlife conservation. For example, in the Outer Banks, restrictions often aim to protect sand dunes and prevent erosion. Similarly, restrictions in mountain regions may protect water sources and scenic views.
Building and Development Restrictions
These restrictions regulate how and what can be built on the property, such as restricting construction to single-family homes only or limiting the maximum number of structures allowed.
Activity Restrictions
These dictate behaviors or activities permitted on the property. Restrictions may include banning outdoor storage of RVs or boats and prohibiting certain pets, such as livestock or exotic animals, or restricting the operation of noisy equipment or businesses.
Maintenance Requirements
These require property owners to maintain their homes and yards to a specific standard.
Time-Sensitive Restrictions
These limit specific property uses for a set period or are tied to particular conditions. For example, a time-sensitive restriction could require land to be used for a specific purpose (e.g., farming) for a fixed number of years or prohibit subdividing the property for a certain period.
Covenants, Conditions, and Restrictions (CC&Rs)
Restrictions set by homeowners’ associations (HOAs) to regulate community living. This may include rules about noise levels, parking, trash disposal, or restrictions on holiday decorations or signage.
FAQ: How long do deed restrictions last?
Deed restrictions last forever—or until the original grantor or a court of law cuts the string. This means any subsequent buyer would also have to abide by the restrictions established by the original grantor.
As a real estate broker, it’s essential to understand that these types of estates do exist and can have serious consequences should a buyer violate the restriction.
FAQ: What’s the difference between a zoning law and a deed restriction?
Zoning laws and deed restrictions both regulate property use, but they differ in scope and enforcement.
Zoning laws are public regulations established by local governments to dictate land use and development within specific zones, such as residential, commercial, or industrial areas. They apply broadly to all properties within a jurisdiction and are enforced by municipal authorities.
In contrast, deed restrictions are private agreements tied to individual properties created by developers, homeowners’ associations (HOAs), or previous owners.
While zoning laws focus on broader community planning and land use, deed restrictions often address specific property features, such as architectural styles or use limitations, and are enforced by private entities or the courts. Both can coexist, with the stricter rule taking precedence.
How Deed Restrictions Affect Property Value
Deed restrictions can both positively and negatively affect property values.
On the positive side, restrictions can help preserve neighborhood aesthetics and desirability, potentially boosting property values.
Conversely, overly stringent restrictions may deter buyers, particularly those looking for flexibility in property use.
Buyers should carefully weigh the potential benefits and drawbacks of purchasing in deed-restricted areas.
Deed Restrictions and Real Estate Transactions
Navigating deed restrictions is a critical aspect of real estate transactions. Real estate brokers have a legal and ethical duty to disclose deed restrictions to their clients. Failing to do so can result in disputes, legal liability, or reputational damage.
Practical tips for real estate brokers navigating deed-restricted properties
Real estate professionals can help their clients confidently navigate the complexities of deed restrictions by proactively addressing the topic. Here’s how to navigate deed restrictions – for real estate brokers.
- Review the documents: To identify deed restrictions, agents should review public property records, HOA documents, and title reports. Be alert to keywords and phrases in the deed such as “Defeasible Fee,” “Fee Simple Determinable,” or “Condition Subsequent.”
- Encourage your clients to review documents: Make sure that clients know the importance of reviewing either the Attorney’s Opinion Letter of Title or the Preliminary Title Report to look for these types of restrictions.
- Clearly explain the consequences of having a restrictive deed: Don’t make misrepresentations to clients that such things are probably not enforceable.
- Consult with an attorney: Brokers should always consult an attorney should they suspect a defeasible estate exists or their seller client wishes to convey property using a defeasible estate.
Terry Wilson, founder and CEO of Wilson Realty Co. LLC, contributed to this blog and shared that deed restrictions have affected past clients.
“The seller indicated to the buyer that they could have a pet pig but were not allowed to raise hogs. Why? Who knows and it’s the seller’s right to place this restriction on the property regardless of how silly it may seem,” Wilson said.
Are you interested in getting your real estate license in North Carolina? Get started today by signing up for pre-licensing classes with the Superior School of Real Estate.
