Full question:
What if covenants have a builders restriction, but the builder is no longer in business? In essence, the entity does not exist.
- Category: Real Property
- Subcategory: Homeowner's Association
- Date:
- State: Minnesota
Answer:
Restrictive covenants are often used in housing developments to maintain property values. These covenants can limit what homeowners can do, such as making certain modifications or running businesses from their homes. Developers typically enforce these restrictions until all properties are sold, at which point they may no longer have an interest in the development.
Once the developer is no longer in business, the enforceability of these covenants may be affected. If the covenants were intended to be enforced only by the developer, they may become unenforceable if the developer is gone. However, if the covenants were part of a 'building scheme,' neighbors may still be able to enforce them against each other.
Old restrictive covenants can sometimes be challenged, especially if the original developers no longer own nearby land that could be impacted by a breach. If you own a property with such covenants and the original developer is out of business, the risk of enforcement is lower. You may also apply to have obsolete covenants extinguished, but this process can be costly and time-consuming.
If these covenants are causing issues for potential buyers, indemnity insurance may be an affordable option. The situation differs if someone sells part of their land and imposes covenants that benefit the land they retain, as those covenants are usually enforceable by subsequent owners.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.