Let's Talk About Covenants

It is not uncommon for me to hear from a buyer that they want to purchase a home or land “without covenants.” This request has seemed to increase lately with the rise of buyers looking to purchase in Montana from out of state. Why are buyers looking for property without covenants? Is that a feature they really need? To be able to answer both, you need to understand what restrictive covenants on real property are.

Covenants are rules and restrictions over land that essentially layout what can and can’t be done on the property. Covenants “run with the land” – meaning they stay in effect over the property even if it sells or transfers to a new owner. Covenants typically include architectural and design guidelines as well as land use restrictions. Land use restrictions can address a variety of topics and will usually be specific to the area. For instance, in Montana you often see wording that prohibits hunting. That’s a big topic of discussion here, but it’s probably not something that needs to be addressed in more urban areas.

On the flip side, covenants can also include items or actions that homeowners have to do. For example, many covenants in newer developments require a certain number of trees be planted and require you to stain your fence a certain color.

Who enforces covenants?

This is a question I get asked often. Buyers might read something in the covenants they aren’t thrilled about (perhaps the neighborhood doesn’t allow you to park a camper in your driveway) and they wonder what will happen if they ignore the covenants and do it anyways. Most often, a Homeowner’s Association (HOA) is formed at the time a subdivision is created. The HOA will have a board and regular meetings to address neighborhood issues and maintenance. The covenants and/or bylaws will lay out what authority the HOA has to enforce the covenants.

Likely this means that the HOA can charge fines to homeowner’s not in compliance. So let’s say you go ahead and park your camper in the driveway – after multiple notices from the HOA they will fine you a certain amount. If you don’t move it by a specific date they might even have the ability to increase the fine or have the camper removed. Unpaid dues and fines can become liens on the property that have to be paid before a property is sold.

Covenants are beneficial to property owners - they protect property values and help manage homeowner expectations. Having restrictive covenants in place gives you more assurance that the neighbor a few houses down won’t put up a neon sign and start running a small bar out of their garage by stating that no commercial operations are allowed. If you’re purchasing in a development that allows livestock, it’s great to know up front what types and how many animals are permitted. Perhaps you’re okay living near horses but don’t want to live near cows. If that’s the case, purchasing property with covenants that prohibit cows gives you some assurance that your neighbors won’t raise cows at any time – even if the property sells or transfers.

Covenants can also help ensure that all the home exteriors are kept in decent condition as many HOA’s will send out notices to homeowners when there is visible deferred maintenance. Understandably, it can be frustrating to receive one of these notices as a homeowner – but your neighbor down the street trying to sell their house will be very appreciative. And you will be too if/when you decide to sell your property.

Buyers have come to expect restrictive covenants in large subdivisions close to town, yet are often surprised when covenants exist for properties with more acreage out of town. If you think about it though, the same benefits still apply regardless of property size and location.

As mentioned above - covenants are beneficial to protect land owner’s value and expectations. When land is subdivided and developed, covenants are created to protect current and future land owners. The farmer or rancher that initially developed the land wants to ensure that it’s not used for something they don’t agree to or might negatively impact the landscape– for instance, a commercial strip mall or gas station. Even if land is further out of town or subdivided into larger acreage, property owner’s benefit from knowing what to expect from their neighbors.

In most cases, no.  So what’s the big deal about covenants - why are buyers looking for property without covenants and why do you often see “NO COVENANTS” on listings as a selling point?

The short answer is people don’t want someone else to be able to tell them what they can and cannot do on their property. However, as mentioned, covenants actually benefit the homeowner in most cases. I believe that you don’t necessarily need to look for property without covenants - you just need to find a property with covenants that allow the specific items or activities you’re interested in.

The covenants and/or bylaws are something you should read through BEFORE you purchase a property. Your agent or the title company will be able to provide you with a copy of the covenants. They aren’t always the most thrilling reading; however, I recommend that you take the time to read through the entire thing. When reading through, you want to get a basic understanding of what requirements the neighborhood has as well as what items or activities are prohibited. How awful would it be if you purchase a new condo only to find out that they don’t allow dogs over 45 pounds and you have a 60 pound lab – what a horrible situation to find yourself in! (If that happens, keep the dog and call me to help you find a new place.)

If you are buying a lot and plan to build, make sure you pay attention to house size and material requirements to ensure that your dream home is permitted in this neighborhood. Some covenants also include a timeframe they expect projects to be complete; discuss this with your builder to make sure they can accommodate the timeframe (for instance 18 months once construction begins). 

Covenants are not the enemy. Work with an agent that understands your needs and will help find a property that works for you – whether that means there are covenants or not. If you have any questions or great HOA stories to share, don’t hesitate to reach out! I’ve got a few of my own J