A covenant (in the context of residential neighborhoods) is a set of rules governing how real property is used. However, it may also refer to a promise or other governing document in a deed involving the use of the land. In this promise, the new property owner "covenants" (agrees) to follow certain restrictions on how the land is used. Essentially, such covenants are promises made by a purchaser as a condition of buying the land in question.
A covenant ("restrictive deed covenant") is a binding legal document. It can be enforced if it is properly recorded on a deed.
If neighbors sign a covenant privately, as in a mutual compact or agreement, only the people who sign it are required to follow it.
Most planned developments (subdivisions of homes built by a particular builder), including closed or gated residential areas and condominium associations, use covenants to benefit all residential owners and their neighbors.
Neighborhoods with properly drafted and enforced covenants have shown to retain property value better than those with poorly enforced use restrictions. Neighborhoods that follow these bylaws tend to be safer, look better, and maintain better relationships with local governments. They also better retain or increase the investments that homeowners have made in their properties.
Covenants differ from zoning ordinances in the following ways
Covenants are often referred to as "covenants, conditions, and restrictions" or CC&Rs, a term commonly found in real estate documents. Most covenants involve some kind of condition or restriction placed upon the buyer, and therefore the collective term "CC&Rs" has been more widely used in recent years. This is done to indicate the existence or future existence of limitations associated with the use of the land.
Many home buyers are so charmed by the appearance of a house for sale that they fail to take the time to read the CC&Rs that comes with the property. They are so pleased with a nice kitchen or a fenced-in back yard that they sign a purchase agreement without realizing that existing CC&Rs may prevent them from keeping their boat or truck on the property or erecting a basketball hoop in the driveway.
Often, title companies will not have copies of the CC&Rs affecting the property until the day of closing, and they are often overlooked at that point. However, you should note that CC&Rs are binding upon the buyer, whether or not they have been reviewed, read, or understood. The general rule of "constructive notice" applies in these cases. Thus, you should always review all the CC&Rs (and zoning laws) affecting the property before signing a real estate contract.
If you plan to buy property in a planned community in which certain actions are either required or prohibited through CC&Rs, it may be best to seek the legal advice of a real estate attorney to help set your mind at ease.