What Is a Covenant on a Property?

If you’re buying or selling a property, you may see the word “covenant” and be unsure what it means. A property covenant is a legally enforceable contract limiting or dictating how a property is used.

Covenants can affect everything from the types of buildings allowed on the land to aesthetic restrictions like house colors or fencing styles.

For homeowners, buyers, and investors, covenants can affect property rights. They can preserve the character of a neighborhood or, on the flip side, restrict what you can do with your land.

Knowing how these agreements work can help you avoid unexpected legal disputes and ensure your property aligns with your long-term goals.

Types of Property Covenants

Covenants generally fall into two categories: restrictive covenants and positive covenants.

Restrictive Covenants: What You Can’t Do

A restrictive covenant places limitations on how a property can be used. These are common in planned communities or developments where maintaining a specific look or function is important.

For example, restrictive covenants on property might:

• Prohibit commercial activity in a residential area.

• Limit structural changes, such as adding a second story or a separate guesthouse.

• Control property aesthetics, like banning specific exterior paint colors or requiring uniform fencing.

Homeowners' associations (HOAs) frequently enforce restrictive covenants to maintain property values and neighborhood uniformity.

Positive Covenants: What You Must Do

Unlike restrictive covenants, positive covenants require homeowners to take specific actions regarding their property. These often involve shared responsibilities within a community.

For example, a positive covenant might require you to:

• Maintain a shared driveway or private road.

• Pay into a community maintenance fund.

• Keep up landscaping or contribute to neighborhood beautification projects.

These obligations can come with financial commitments, and failing to comply could lead to legal action.

How Covenants Affect Property Ownership

One of the most critical aspects of covenants is that they are attached to the property itself. This means that when you buy a home, any existing covenants remain in place, whether you agree with them or not.

For instance, if a neighborhood has a covenant prohibiting high fences, you cannot install one, even if you dislike the rule. Similarly, if a covenant requires you to maintain a shared garden area, you must comply, even if you were unaware of it at the time of purchase.

Covenants are typically recorded in public property records and outlined in the property’s deed. Because of this, they can significantly impact a property’s value and usability. Ignoring them can lead to legal consequences, such as fines or court orders to reverse unauthorized changes.

Can Property Covenants Be Removed or Changed?

How long do covenants last? While covenants are legally binding, they are not always permanent. There are several ways to challenge, modify, or remove them:

1. Agreement Between Property Owners

If the covenant applies to multiple properties, affected owners may agree to amend or remove it. This process usually requires a formal legal agreement and, in some cases, a vote from an HOA or neighborhood association.

2. Legal Action

Some covenants may be challenged in court, particularly if they are outdated, unreasonable, or difficult to enforce. Courts may remove covenants that no longer serve their intended purpose.

3. Expiration Dates

Some covenants include a time limit and automatically expire after a set number of years. If a covenant does not specify an expiration date, it remains in effect indefinitely unless legally removed.

4. Government Intervention

If a covenant conflicts with new zoning laws or public regulations, local governments may override it. For example, if a city changes zoning rules to allow for multi-family housing in an area previously restricted to single-family homes, any conflicting covenants may be rendered unenforceable.

Why Understanding Covenants Matters

Property covenants are one example of legally binding agreements affecting ownership and usage rights.

In real estate, they help preserve property values and maintain neighborhood integrity. However, failing to review covenants before purchasing a property can lead to costly restrictions or legal battles.

A Real-World Example of Covenants

Imagine buying a home with plans to add a backyard guesthouse for rental income. After closing the deal, you discover a restrictive covenant prohibiting secondary structures.

Your investment plans are in jeopardy, and your only option might be a lengthy legal challenge or selling the property.

This is why due diligence is essential. Before purchasing property, always check for existing covenants in the deed and public records. Hiring a real estate attorney will ensure you fully understand your rights and obligations.

The Broader Connection: Property Covenants vs. Non-Compete Agreements

Interestingly, property covenants in the business world are similar to non-compete agreements. Just as property covenants regulate land use, non-compete agreements limit professional activities after leaving a job.

For example, violating a non-compete agreement in New Jersey can lead to legal consequences, including financial damages or court injunctions. However, courts will only apply these agreements if they meet strict criteria:

• The employer must prove irreparable harm to their business.

• The restriction must be reasonable in scope and timeline.

• The agreement cannot unfairly harm the public (e.g., by restricting access to specialized professionals).

Similar to property covenants, non-compete agreements are designed to protect long-term interests, whether in real estate or business.

Understanding these legal frameworks ensures you make informed decisions whether purchasing a home or signing a job contract.

How to Protect Yourself from Covenant Issues

If you’re buying a property, take these proactive steps to avoid covenant-related surprises:

• Check public records: Review the property deed before purchasing for any covenants that may impact your intended use.

• Consult a real estate attorney: A legal professional can clarify whether a covenant is enforceable or if you have grounds to challenge it.

• Talk to the HOA or property developer: If the property is in an already planned community, verify all rules and restrictions before committing.

• Consider legal action if needed: If a covenant is outdated or unreasonable, explore legal options to modify or remove it.

For business professionals concerned about non-compete agreements:

• Read contracts carefully: Ensure you understand any restrictions before signing an employment contract.

• Negotiate fair terms: Discuss adjustments before agreeing if a non-compete agreement seems too restrictive.

• Seek legal advice if challenged: If an employer tries to enforce an unfair non-compete clause, legal representation can help protect your rights.

Final Thoughts

Property covenants are more than just legal formalities; they can shape what you can and cannot do with your land for years to come.

Understanding these agreements helps homeowners and investors avoid potential legal disputes and financial losses.

Similarly, in the business world, non-compete agreements serve a parallel function by restricting professional activities after leaving a company. Both legal structures aim to protect long-term interests, whether in real estate or employment.

By staying informed and seeking legal guidance when needed, you can confidently navigate property ownership and professional agreements, ensuring that your investments, whether in land or career, align with your long-term goals.