Searching for deed restrictions can be time-consuming and challenging, but the risks an investor assumes by not performing a proper search far outweigh any costs associated with the search.
Common restrictions include limits on exterior building materials, regu- lations against additional structures or exterior improvements, limits on parked vehicles or exterior storage, and even restrictions on what types of pets are allowed in the development. Unlike zoning restrictions, which are created by a public commission and can be changed if the intended use benefits the community, HOAs are not required to consider the benefits of changing restrictions to allow a proj- ect to continue. This means an inves- tor who attempts a project prohibited by an existing restrictive covenant can expect protracted legal action.
previously experienced severe envi- ronmental contamination. Commercial land deed restrictions can be harder to track than resi- dential restrictions, but the savvy investor will do a thorough search of a parcel’s history before planning a potentially prohibited development.
HOWTO FIND DEED RESTRICTIONS
Deed restrictions often span decades and are perpetually
MANAGING DEED RESTRICTION RISK
attached to the land, so discovering the entire list of potential restrictions can be a challenge for any investor. Realtors are generally able to pro- vide information on deed restrictions but may not always have the entire history available. Because deed restrictions are recorded with the deed of sale, or property title, title companies are the strongest resource for determining any potential restrictions for a spe- cific parcel. A title search is gener - ally available for a fee, and the title company will perform it. Investors should note, however, that not all title searches go back far enough in a property’s history and that additional, older restrictions may exist for a parcel as well. For investors performing their own searches, individual counties maintain a record of deeds or make the information available at the county clerk’s office. Although many counties offer this information in a searchable format online, not all deed information is digitized. You may need to seek out older records in person at a county records office. Searching for deed restrictions can be time-consuming and chal- lenging, but the risks an investor assumes by not performing a proper search far outweigh any costs asso- ciated with the search.
Most investors are aware they must perform extensive due dil- igence before purchasing a new property, renovating an existing structure, or revitalizing a failing business. But, deed restrictions are often overlooked as an investor creates a business plan, performs appraisals, and seeks approval from local regulatory committees. Each of those items is undoubted - ly an essential part of the investing process, but it is also necessary to spend sufficient time researching the title history of a property to ensure a smooth road to implementation of the investor’s vision. The last thing any investor wants is to contend with a convoluted and costly legal process to amend or remove a deed restriction that was undiscovered at the time of purchase. Full research on the deed history of the investor’s target property helps to ensure a successful venture and allows the investor to focus energy on achieving their vision. •
COMMERCIAL DEED RESTRICTIONS
Although HOAs and their often- strict restrictions are well known to developers, many investors are unaware that commercial property can also carry significant restrictions. These restrictions are generally instituted to protect a seller’s inter- ests and can limit what commercial ventures are acceptable on a parcel. A seller may, for instance, include a restriction on the sale of the land that disallows the buyer from oper- ating a business that competes with businesses on the seller’s adjacent properties. These restrictions are often vaguely written, and any inves- tor purchasing a deed-restricted commercial property needs to be aware that a broad interpretation of murky restrictions may preclude them from a wide range of busi- ness operations at that location. Commercial deed restrictions are not always written to benefit only a single party, however. Some properties may include restrictions stemming from environmental con- cerns. These restrictions ensure, for instance, that a medical center cannot be constructed on a site that
David Jacobs is a senior project specialist with Owner Builder Advisors. His experience includes construction labor, construction risk management,
and sales. Jacobs leverages his background of both on-site and in-office construction work to better assist OBA clients.
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