Many disputes between Real Estate Owners, Homeowner’s Associations, Condo Associations and Commercial Property Owners Associations (HOAs) involve the enforcement of Restrictive Covenants. Basically, Restrictive Covenants can impose Restrictions on Property Use by Homeowners and Affirmative Obligations on Homeowners to do things such as pay monthly HOA assessments. Restrictive covenants may also have a significant impact on the value of real property. The following information is a general guide to how Restrictive Covenants in Real Property in North Carolina operate and situations where they may arise in HOA disputes. It is important that you seek the advice of a licensed North Carolina Real Estate Attorney at the earliest time possible when dealing with disputes involving Restrictive Covenants and HOAs. This blog is not to be construed as legal advice.
Restrictive Covenants restrain the owner of the servient estate (property encumbered by Restrictive Covenants) from making certain use of his property. Such restraint may not be effectively imposed except by deed or other writing duly registered. David v. Robinson, 189 N.C. 589, 127 S.E. 2d 697 (1925). If the restrictive covenant is contained in a separate instrument or rests in parol and not in a deed in the chain of title and is not referred to in such deed, a purchaser has no constructive notice of it and is not bound. Turner v. Glenn, 220 N.C. 620, 18 S.E. 2d 197, (1942). In other words, valid Restrictive Covenants attach to real property and not to specific owners of real property. A Restrictive Covenant generally must be written in a deed conveying the property to the property owner or in a separate document that is referenced in the deed conveying the property that is recorded in the chain of title for the property in the County Register of Deeds where the property is located to be enforceable against the property owner. A property owner will only be bound to a Restrictive Covenant on their property if the owner had record notice of the Restrictive Covenant when they took title to the property. A purchaser is chargeable with notice of the existence of the restriction only if a proper search of the public records would have revealed it and it is conclusively presumed that he examined each recorded deed or instrument in his line of title and to know its contents. If the Restrictive Covenant is contained in a separate instrument or rests in parol and not in a deed in the chain of title and is not referred to in such deed a purchaser, under our registration law, has no constructive notice of it. Turner v. Glenn, 220 N.C. 620, 18 S.E. 2d 197, (1942). It is important for property owners to review their deeds (preferably before purchasing their property) to check if their deed references a map or plat. A deed which makes reference to a map or plat incorporates such plat for the purpose of more particular description but does not bind the seller, nothing else appearing, to abide by the scheme of division laid down on that map. The purchaser has no right to understand or believe from such reference that the grantor will in his future conveyances abide by such plan of division. Thomas v. Rogers, 191 N.C. 736, 133 S.E. 18 (1926). Thus, the use of and reference to a map or a plat in a deed must provide more detail such as in regards to whether the property owner is bound to abide by a particular scheme or neighborhood plan as provided in the map or plat for example.
A good first step is to ask the HOA of the community where the property is located (provided there is an HOA) to send you a list of their Restrictive Covenants. However, the list provided by the HOA may be incomplete or inadequate to fully inform you of all Restrictive Covenants on the property. If you decide to purchase a property with a mortgage, the law firm that conducts your title search should indicate whether the property is encumbered by any Restrictive Covenants and provide you with some basic information regarding where to locate any Restrictive Covenants (at the Register of Deeds) in their title opinion prepared before closing. You can also have an independent title search performed before you enter into a land sale contract. Remember, there is a legal presumption that you have full knowledge of all properly recorded Restrictive Covenants that encumber a property once you purchase the property. Therefore we strongly encourage you to be aware of all Restrictive Covenants encumbering a property before you enter into a contract to purchase the property. For more information about title searches, contact Biazzo & Panchenko Law, PLLC today.
When purchasing a home, buyers should always look at whether lots in the neighborhood are restricted to residential use through Restrictive Covenants and local zoning ordinances. A buyer, for example may not want to purchase a home where an adjacent lot to the home is not restricted to residential use only, where a high traffic business may be built in the future next to the home. The business may cause disturbances to the occupants of the home and the business may lower the property value of the home. When purchasing commercial property, it is important to ensure that the purchaser’s intended use of property is not restricted by Restrictive Covenants, such as, for example, restrictions that forbid the property owner from parking pick up trucks on the lot.
Common examples of Restrictive Covenants include restrictions on land use, lease restrictions and architectural review requirements. An example of a lease restriction would be a Restrictive Covenant forbidding property owners in a community from leasing their property for terms less than six months. These communities may be concerned with the devaluation of property values by short-term tenants who don’t properly maintain properties such as those who may rent a home through programs like Airbnb. An example of an architectural review requirement includes a Restrictive Covenant that requires that any new construction or modifications to existing structures on your property adhere to restrictions found in the community Restrictive Covenants and will likely require approval in advance of any new construction or improvements. Other Restrictive Covenants may exist like paint color limitations, safety requirements and landscaping requirements.
To distinguish between Restrictive Covenants and Zoning Ordinances, remember, generally, Restrictive Covenants are created privately and recorded by original owners of property with the County Register of Deeds where the property is located. For example, real estate developers frequently acquire large parcels of land and subdivide the land into hundreds of small residential lots to create subdivisions where the developers bind the small residential lots to Restrictive Covenants. Other residents bound by the same covenants are frequently permitted by the covenants to sue other property owners that are in violation of the covenants to enforce the covenants or an HOA is established for the subdivision that is vested with authority to enforce the covenants through monetary fines and civil remedies acquired through lawsuits in court. In regards to Zoning Ordinances, generally, elected local officials create zoning ordinances, such as the Mecklenburg Board of County Commissioners. N.C.G.S. § 153A-123 empowers County Zoning Ordinance Enforcement officials with certain criminal and civil remedies that they may pursue in court.
Conflicts may arise between Restrictive Covenants and Zoning Ordinances, for example, where a Zoning Ordinance permits you to use your property for your intended purpose, but a Restrictive Covenant forbids you from using your property for your intended purpose. As a general rule of thumb, always comply with the most restrictive regulation. Generally, in the aforementioned conflict scenario, the Restrictive Covenant would be controlling because it is the most restrictive out of the two regulations. On the flipside, if the Zoning Ordinance is more restrictive than the Restrictive Covenant, the Zoning Ordinance will be the controlling regulation.
As previously mentioned, Restrictive Covenants may typically be enforced by individuals who reside in a community bound by Restrictive Covenants against other residents who violate the covenants. In communities with Restrictive Covenants, but no HOA, enforcement is usually solely up to the property owners in the community, where a property owner must sue an offending property owner to get an injunction from a court to prevent the offending property owner from violating or threatening to violate a Restrictive Covenant. For example, a property owner may sue another property owner to prevent the other property owner from building a structure that violates a Restrictive Covenant or from operating a commercial enterprise on their property that violates a Restrictive Covenant. HOAs typically enforce Restrictive Covenants in HOA communities but many of those communities also permit private covenant enforcement by property owners. The North Carolina Condominium Act, N.C.G.S. § 47C and the North Carolina Planned Community Act, N.C.G.S. § 47F, have vested authority in HOAs to use several means to enforce Restrictive Covenants. Generally, the HOA must provide an offending property owner with a written notice of an alleged violation of a Restrictive Covenant and a due process opportunity to be heard by the HOA or an adjudicatory panel appointed by the HOA, where the HOA or panel may levy fines against the property owner of up to $100 a day and may suspend certain community privileges, such as use of the community clubhouse, pool, parks, tennis court, etc. If a property owner fails to pay HOA assessments (typically monthly and other HOA fees required to be paid by property owners) and fines, the HOA may file for a lien against the owner’s property and may ultimately foreclose on the owner’s property to enforce the lien. Please be aware that these enforcement provisions are applicable to both residential and commercial communities governed by owners associations.
We strongly encourage you to seek the advice of a licensed North Carolina Real Estate Attorney if you are facing issues with an Owner’s Association or Restrictive Covenants or would like to enforce a Restrictive Covenant. To schedule a consultation today, contact Biazzo & Panchenko Law, PLLC. This blog is not to be construed as legal advice.