Who is a deed restriction applicable to?

A deed restricted community is a development where all property comes with conditions (typically focused on upkeep and usage), put into place and enforced by a homeowners association (HOA). Deed restrictions stipulate, or limit, how homeowners can use their property, based on the official property records of the home.

If you’re looking to buy a home, it’s important to understand whether there are deed restrictions intended to back up restrictive covenants, which limit your property rights and otherwise place conditions on ownership. Such covenants and deed restrictions can impact the home buying process in a couple of ways:

• The rules can be more desirable to some and less desirable to others.
• If a deed restriction acts in any way to favor or exclude groups, there may be issues with getting mortgage financing.

The rest of this article will go over common deed restrictions, along with the pros and cons associated with them, before concluding with an overview of the common issues to be aware of when purchasing in a deed restricted community.

A restrictive covenant is the legal agreement upon which a deed restricted community is made. In terms of the covenants backed by deed restrictions, here are a few of the most common ones:

• Fencing: Approved fencing may need to fall in a certain height range or require the use of a specific list of materials.
• Tree removal: The HOA may reserve the right to prohibit certain trees from removal under beautification requirements.
• Vehicle parking: The most common restriction in this area is that vehicles have to be parked in the driveway, in your garage or in your carport space overnight. Some communities may have restrictions that you can’t have a car up on blocks or otherwise in non-working condition. Be sure you know what the rules are.
• Customized mailboxes: If you want to have a different color for your mailbox, or a stylized number or name on it, it may be prohibited.
• Exterior paint: In communities without an HOA, you can typically let your imagination run wild and paint your house exterior in an Andy Warhol-style pop art color scheme if you want. In a deed restricted community, this may not be allowed.
• Restrictions around pools and property structures: Depending on the restrictions in your community, they may require that you don’t have a pool (or that it must be in-ground). Similarly, you may be limited in your ability to put up a shed or construct an accessory dwelling unit on your property.
• Age restrictions: Certain communities catering to an older population may have an age restriction on who can live in the properties. Typically, these tend to be 55+ communities. In order to get mortgage financing, they have to follow federal housing law. We’ll get into more detail on this later on.

Restrictions can be limiting, but they can come with benefits that are common to HOAs. Here are a few of them:

• Prioritized upkeep: Specific rules around maintenance can mean that people place a priority on getting those tasks done. This could have the effect of helping maintain property values by reducing the likelihood of blight.
• Community amenities: An HOA may grant community members access to certain communal amenities such as pools, clubhouses or tennis courts. They may also be something as simple as communal snow removal or lawn care.
• Sharing of expenses: People don’t have to pay for their own pool, shuffleboard courts, snow removal or lawn care in HOAs that provide these services. Those who would like these items may benefit from the fact that expenses like these are shared across the association.

For some people, the drawbacks of living in a community with deed restrictions may outweigh any benefits. If you’re the type of property owner who chafes at anyone telling you that you can’t paint your house magenta or put up a blowup decoration of Homer Simpson in a Santa outfit during the holidays (or conversely, that you must decorate during the season), the restrictions placed by HOAs may not be for you.

In addition to the limitation of your individual liberties, it can also limit your ability to sell the house to whomever you want in some cases. This is because deed restrictions are considered an encumbrance. An encumbrance is a claim that another person or entity has to your property.

In the case of most deed restrictions enforced by an HOA, new owners have to agree to the rules put in place by the neighborhood or condo association. This may limit the potential pool of people who are willing to buy your property.

In other cases, there may be restrictions regarding who can move in even if they agree to the other rules. The most common example would be 55+ retirement communities, but in some areas, ownership is prohibited based on other characteristics.

Getting a home in a deed restricted community can have a couple of impacts on your home buying process. Let’s run through them.

The most obvious restriction has to do with limitations on being able to do what you want to do with your property. Ideally, you know what those restrictions are well in advance, but if you don’t find out about a deed restriction until the title search, any surprises could dissuade you from getting the property that you would have loved if it weren’t for a particular HOA restriction on the height of hedges, for example.

The second hurdle has to do with financing. If deed restrictions place any limits on who you can sell the property to, you may find that you have a hard time getting a mortgage. The reasoning behind this is that in the event you struggle to make payments, a deed restriction could cause headaches. If you do end up defaulting, the mortgage lender has to sell the house. They won’t want any restrictions on who can move in.

For example, some mortgage lenders won’t fund homes subject to the following deed restrictions:

• Anything related to title transfer limits may affect a mortgage lender’s decision.
• Title provisions for a first right of refusal could impact a decision. A title provision means that anything where the association or other entity has the first option to buy the property won’t be funded.
• Properties located on a Hawaiian Homeland development might be rejected for funding by lenders.
• Properties requiring you to belong to a specific religious order could be ineligible.
• Lenders might not want or be able to fund homes in areas specifically designated only for low-to-moderate income individuals. These homes can fall under affordable housing restrictions, Section 8 housing or inclusionary zoning categories.

Properties that are intended for those aged 55 and over are eligible for financing, but they have to comply with both the Fair Housing Act and the Housing for Older Persons Act.

Now that you know what the rules are for purchasing or refinancing a property with deed restrictions, you can decide whether one is right for you. To find out whether your potential new home has a deed restriction in place, talk with your real estate agent, a representative from the community’s HOA or an agent at the county clerk’s office.

If you’re ready to apply for a mortgage, get started today with Rocket Mortgage®.

Both deed restrictions and conservation easements can be used to restrict the use of land. Each tool is implemented through a written, legal instrument recorded in the public records, and each binds both present and future owners of the land to their terms. However, the two differ significantly in their ability to protect a property’s natural and scenic resources in perpetuity.

A conservation easement has many advantages over a deed restriction in ensuring that land continues to be conserved over time, including but limited to the following:

• A conservation easement and the conservation protection it provides are accorded significantly more respect under Pennsylvania law than a deed restriction. Courts will give greater deference to a conservation easement than to a deed restriction in the event of an argument over the restrictions.
• Every conservation easement has a holder that has the responsibility to monitor compliance with the easement’s restrictions and, if necessary, enforce the easement’s restrictions in court. In contrast, although one or more persons might have the right to enforce a deed restriction, no one has the duty to enforce or even watch to see that the restriction is respected.
• A deed restriction may be vacated—essentially undone—by getting a judge to agree that circumstances have changed and the restriction is no longer appropriate. A judge may or may not do so, but if no one defends the restriction in court, the risk is great. With a conservation easement, the easement holder has an obligation to uphold the easement’s conservation objectives.
• A deed restriction is sometimes simply ignored; no one notices or cares enough to challenge the violation in court or otherwise. In contrast, a conservation easement has a holder that cares about the protections the easement provides to the land and that is tasked with monitoring compliance with the easement’s restrictions.
• Unlike a deed restriction, donation of a conservation easement meeting tax code requirements may be eligible for a federal income tax deduction.

A conservation easement is a property interest conveyed by a landowner to a land trust or government entity—a holder. The holder holds rights in the real estate as described in the easement document, those rights consisting chiefly of the power to block actions inconsistent with the easement’s conservation objectives. A deed restriction, in contrast, is not a property interest; rather, it is a promise to do or not do certain things with the real estate. The implications of this are described in the sections below.

WeConservePA publishes extensive guidance on conservation easements as well as guides about deed restrictions including Using a Deed Restriction to Protect Land: A Path for When Neither a Land Trust Nor Government Can Help and Restricting Development to What Is Approved in a Subdivision and Land Development Plan.

How does the law favor one tool over the other?

Deed restrictions are a creature of our legal system’s common law, which is the record of judge-made decisions (as opposed to legislated or statutory law). Common law disfavors limitations on owners’ use of their property. This leads Pennsylvania courts to resolve ambiguities in interpretation of deed restrictions in a way that favors the less restricted use.

The enactment of the Pennsylvania Conservation and Preservation Easements Act (the “CPEA”; the Act of June 22, 2001, P. L. 390, No. 29; 32 P.S. §§ 5051-5059) was designed to eliminate many of the drawbacks involved in using deed restrictions to preserve open space.  The CPEA codifies that a restriction on land fashioned as a conservation easement is valid even though it has certain features that were disfavored at common law (e.g., it is an easement in gross rather than an easement appurtenant to an adjacent parcel). (See also CPEA §6.)

Section 5(c)(2) of the CPEA also clarifies that:

[A]ny general rule of construction to the contrary notwithstanding, conservation or preservation easements shall be liberally construed in favor of the grants contained therein to effect the purposes of those easements and the policy and purpose of this act.

Who enforces a deed restriction or conservation easement?

Deed restrictions generally are enforceable by individuals with some type of property interest in the land or adjacent property owners who can show that the deed restriction was intended to benefit their properties. Deed restrictions written into planned subdivision documents are enforceable by the homeowners’ association. But unless the document spells out which of these parties may enforce the restrictions, it often is unclear who has legal standing to bring suit. And even if it is clear, that person (or the volunteer-run homeowners association) may not have the will or the financial means to challenge a violation.  

So, with a deed restriction, you are relying on the concern, effort, and finances of some unidentified future person to provide oversight of the property.

Conservation easements, on the other hand, explicitly convey enforcement rights and responsibilities to easement holders and designated beneficiaries, which are non-profit land trusts or government agencies. Many land trusts, in fact, ask easement donors (and others) to make stewardship contributions at the time of an easement’s establishment to help ensure that the organization has the financial resources to enforce easement restrictions in perpetuity.

These holders and beneficiaries must sign and record an acceptance of the enforcement right before they can exercise these rights.

Are there limits on who can enforce?

Deed restrictions traditionally were not treated as permanent by the courts unless they were appurtenant to adjacent or nearby property. The restriction had to benefit a nearby lot and be included in the title to both lots. Otherwise, it would be considered a restriction in gross that was personal to the grantee and would be non-assignable and enforceable only while the grantee was alive. A 1956 Pennsylvania Superior Court decision (see Appeal of J.C. Grille) brought an end to this rule in Pennsylvania. As noted in WeConservePA’s guide The Nature of the Conservation Easement and the Document Granting It:

The general rule in Pennsylvania [now] is that a covenant may run to anyone intended to be benefited by it. The common law rule that restrictive covenants only run to the benefit of adjoining landowners (the privity of estate requirement) was discarded…. [A] result of that decision is that there is no clarity under Pennsylvania law as to the universe of persons who may claim that they are intended beneficiaries of a restrictive covenant [i.e., a deed restriction]. That is true as a general rule but, as to conservation easements, the CPEA limits beneficiaries (those eligible to hold third-party enforcement rights) to land trusts and government.  

The CPEA also makes clear that neighbors and other parties without a property interest in the eased land do not have standing to sue to enforce the easement. (See CPEA §5(a).)

How can violations be uncovered?

Someone who wants to determine if a deed restriction provision is being complied with (e.g., is the wetland buffer of sufficient size?) does not have an automatic right to enter the property to determine compliance unless the deed restriction expressly provides this right. Many loosely drafted deed restrictions fail to do so.

Conservation easements, by contrast, are as a practice drafted to grant the easement holder the right to monitor the property for compliance (which they usually do at least once a year in accord with Land Trust Standards and Practices). See, for example, WeConservePA’s Model Grant of Conservation Easement and Declaration of Covenants §5.02 (a), (b).

How easy is it to modify or extinguish a deed restriction or conservation easement?

Without an entity that has clear responsibility for upholding the terms of a deed restriction in perpetuity, vacating a deed restriction may be a simple matter of arguing “changed circumstances” before a judge. The person seeking to terminate or modify the restriction may claim that the surrounding area or even economic circumstances have changed so much that the restrictions can no longer fulfill their original purposes. A judge may or may not agree with this argument, but if no one defends the deed restriction in court, the risk is great. With a conservation easement, on the other hand, the easement holder has an obligation to defend against such court challenges. The stewardship funds collected by the land trust or the tax resources of local government (if a municipality is the holder) assures that the private or public holder has the resources to protect the integrity of the easement.

A well-drafted conservation easement will address the issues of modification or termination and provide appropriate disincentives and remedies. See, for example, the Model Grant of Conservation Easement and Declaration of Covenants §6.04 and §7.10 (d), (e). A conservation easement following the WeConservePA model also will contain easement holder covenants that safeguard the perpetual nature of the easement grant (such as requiring subsequent any transfers to be only to other land trusts or government entities; covenanting that the holder will take action to block uses and activities inconsistent with the easement’s conservation objectives; addressing compensation in the event of condemnation or taking; and requiring any amendments to be consistent with the easement’s conservation purposes). See the section “Covenants Running with Holder’s Interest in the Land” in WeConservePA’s The Nature of the Conservation Easement and the Document Granting It.

Is there a financial advantage in using a conservation easement rather than a deed restriction?

A landowner cannot claim a charitable tax deduction for a loss in market value due to placing a deed restriction on a property. That same diminution in value from donating or bargain-selling an easement on the property may be eligible for federal tax benefits.

If a property owner inserts a deed restriction into their property before donating the property to a land trust or municipality, the value of the gift for tax purposes is only the property’s restricted value. If, on the other hand, the owner places the land under conservation easement and then donates the property to a municipality or land trust, they can potentially secure a tax deduction for the property’s full value: a charitable deduction for the conservation easement plus a deduction for the value of the underlying fee interest.

What about deed restrictions in property conveyed to municipalities?

It is not uncommon for a deed restriction to be recorded when an individual donates or bargain-sells property to a local government to provide parkland or other public benefit. This can help establish that the municipality accepted the property in trust for the public, with use of the property restricted to the purposes for which it was conveyed. (See Pennsylvania’s Donated or Dedicated Property Act, the Act of December 15, 1959, P.L. 1772, 53 P.S. §§3381- 3386, as well as the guide Parks in Perpetuity.)

WeConservePA’s Model Declaration of Public Trust can be used to further ensure that properties conveyed to local government for public recreation or other conservation benefits will continue to serve those purposes. Local governments use the tool to permanently dedicate land to the public purposes set forth in the declaration.

Deed restrictions relating to subdivision and land development plans are addressed in the guide Restricting Development to What Is Approved in a Subdivision and Land Development Plan.