What is a Deed Restriction?
Current Michigan real estate transactions for purchasing both residential and commercial real estate commonly involve restrictive covenants and deed restrictions. A restrictive covenant, or deed restriction, is used to impose limitations and conditions on the owner’s use of the property. They are recorded with the county register of deeds and generally “run with the land”, which means that any rights or restrictions remain with the property even after it’s sold to a different owner.
Property rights and restrictions can include an easement over property as well as restrictions on how a property can be used. Restrictive covenants can be established in a separate agreement that is recorded with the register of deeds and are sometimes referred to as deed restrictions although they are not usually described in a deed.
What Are Deed Restrictions Used for?
You often find restrictive covenants in homeowners associations, condominiums and cooperatives but they can also be found in separate residential properties and can relate to a wide range of issues that impact an owner’s rights. This includes building and use restrictions, architectural guidelines, pets and other animals permitted on the property, construction of addition and whether swimming pools, fences and outbuildings are permitted on the property, just to name a few of the possible restrictions.
What Should I Know as a Buyer?
In order for you to fully understand the meaning of restrictive covenants, deed restrictions and other matters that are attached to a property you are purchasing and how they will affect your ownership, you should talk with a real estate attorney about what to include in your sales contract. For example, a provision that the contract is conditioned on the seller providing you with an owner’s title insurance policy and also a provision that the contract is conditioned on your real estate attorney’s approval of the policy commitment. The owner’s title policy commitment is a preliminary report about the property that discloses important information about any existing restrictive covenants, deed restrictions, mortgages, liens, leases, easements, building and use restrictions, taxes, and other matters that will impact your ownership rights to the property. The title insurance policy commitment also provides the amount of the insurance coverage for the buyer (the sale price), a legal description of the property covered, the requirements for issuing the policy and any exclusions to the insurance coverage.
After approval of the title policy commitment, the actual owners title insurance policy is issued when ownership of the property is conveyed to the buyer with a deed. It is most important for you to have an owners title insurance policy for a property you are purchasing so that the insurance company will cover the costs of any economic damages you incur as a result of the title company failing to disclose information in the title policy commitment about any restrictive covenant, deed restriction, lien, easement or other property right that was recorded in the public records. With the assistance of a real estate attorney, you will have the proper title insurance coverage in place along with an understanding of how your intended use of the property will be impacted by your ownership rights to the property.
Talk With an Experienced Real Estate Attorney
In his law practice at Ager Law Office, Bill Ager assists clients with purchasing and selling real estate from start to finish, including reviewing the owners title policy commitment and all the documents that impact a buyer’s ownership of property. To talk with Bill about his reasonable flat fees, call (734) 649-0784, send an email to bill@agerlawoffice.com or use the online contact form on his web site.