By Jones Osborn II

Sometimes they are called "deed restrictions." Sometimes they are referred to as a "declaration of covenants, conditions, and restrictions." Sometimes they are just called "CC&R's." The law calls them "covenants running with the land." For purposes of this memo, we'll call them "deed restrictions," even though there is often no deed involved. Whatever you call them, they are the same thing.

In essence, a deed restriction is an obligation or benefit that attaches to a parcel of real estate which is enforceable by or against future owners. Over the years, nearly every piece of urban real estate has been subject to at least one set of deed restrictions. They can be of substantial benefit and can impose substantial burdens on property. It therefore pays to understand what they are and how they work.

Enforceability. To be enforceable, a deed restriction must have four characteristics:

(a) It must be in writing.

(b) There must be an expressed intention that it "run with the land" and bind future owners. Obligations set forth in deeds are sometimes held to be personal contracts between the parties to the deed if it is not clear that the obligation is intended to bind future owners. For example, if the deed merely states that the grantee cannot use the property for a specific purpose, or that the property is conveyed "subject to" some kind of restriction, the covenant probably will not bind future owners. The deed must specifically state that the restriction runs with the land and binds future owners.

(c) It must touch and concern the land, which normally means that it must relate to the use of the land itself.

(d) There must be privity of estate, which means essentially that there must be an unbroken chain of title between the parties for the deed restrictions to be enforceable by one owner against another. Someone outside the chain of title cannot sue to enforce deed restrictions.

Deed restrictions are usually set forth in a recorded deed, declaration, or other instrument. However, recordation is not a requirement for enforceability--they just have to be in writing. On the other hand, if someone buys property not knowing of the restrictions, he is not bound by them if they're not recorded. Consequently, it is essential to record them if you want to bind future owners who might not otherwise know about them.

Under Arizona law, a provision in a deed restriction which prohibits solar panels is unenforceable.

Three Types. In order to be enforceable, the courts have held that the deed restrictions must be one of three types. The first kind is where a general scheme of development is laid out for a large parcel of land by its owner before it is subdivided and developed. This is the type of deed restriction normally used for planned communities, subdivisions, and condominium or townhouse developments. Each owner has the right to enforce the covenants against any other owner. Sometimes an owners association is set up, and it usually has the right to enforce the restrictions also.

The second kind is where the grantor of property places a condition or limitation on land that he deeds to another in order to benefit land that the grantor retains. If properly worded, the grantor and future owners of his land may enforce the restriction against the grantee and all future owners of the grantee's land.

The third kind is where adjoining landowners place restrictions on their lands for their mutual benefit. Again, if properly worded, the future owners of each parcel can enforce the restrictions against the future owners of the other parcel.

Amendment. Unless the deed restrictions themselves provide for a means of amendment, they can normally be amended only by the unanimous consent of the property owners. If there are encumbrances against the property, it may be necessary to obtain the consent of the lienholders as well.

Deed restrictions for subdivisions and other developments usually contain provisions allowing amendment by majority vote, or in some cases, a specified supermajority. However, the courts have imposed an important limitation on the amendment of deed restrictions. If the amendment affects lots non-uniformly, the amendment must be unanimously approved by the lot owners even if the deed restrictions themselves say that they can be amended by a majority vote. For example, suppose the deed restrictions in a residential subdivision provide that lots may be used only for single family homes. Further suppose that a group of owners wants to amend them to provide that an office building may be constructed on certain lots which border a busy street because these lots are no longer suitable for housing. Or suppose certain owners want to remove the restrictions from those lots so they're no longer restricted at all. This sort of situation often occurs when a developer is doing an assemblage of residential lots for a commercial development. In such a case, every single lot owner would have to approve of the amendment, even if the deed restrictions provide that they can be amended by majority vote, because the change does not affect all lots uniformly. Although this might seem undemocratic and contrary to the intent of the deed restrictions, it does keep a majority of the lot owners from ganging up on the minority for their own benefit.

Zoning. It is often thought that zoning overrules private deed restrictions. For example, it is sometimes claimed that if property is rezoned for commercial purposes, it may be used for business purposes regardless of deed restrictions limiting its use to a single family home. This is a misconception. Deed restrictions and zoning ordinances are completely independent of one another. Both must be complied with. If the deed restrictions prohibit one use, and the zoning ordinances prohibit another, they both apply and the property can't be used for either purpose.

Abandonment. Deed restrictions can become unenforceable through abandonment. This occurs when the neighborhood changes in such a way that there are numerous violations of the restrictions. For example, a restriction against business uses can be deemed abandoned if a large number of the lots are converted to business use and no enforcement action is taken. Or, a restriction against wooden fences in a subdivision can be deemed abandoned after a large number of owners construct wooden fences in violation of the restriction. However, several violations are not enough. The number of violations must be large enough, all things considered, to evidence a general disregard and abandonment of the restrictions. In addition, the restrictions are deemed abandoned only as to the specific kind of violation. Widespread violations of a prohibition on wooden fences, for example, would have no effect on provisions prohibiting commercial uses, and vice versa.

Conclusion. Deed restrictions are now so common that it is scarcely possible to buy a piece of urban property that is not subject to at least one set of restrictions. Review them carefully, because they can have a major effect on the value and utility of your property. They may prohibit certain kinds of uses, or may place liens against the property for owners association dues or assessments. If you desire to impose deed restrictions of your own, or if you desire to amend existing restrictions, be sure to meet the requirements set forth above so that they will be enforceable against future owners. Consultation with legal counsel is usually advisable.