Full question:
If a developer goes out of business (the neighborhood is 20+ years old) does the purchaser of some land in the neighborhood have to abide by the covenants that were set forth by the original developer? I.E. 1 house was to be built on 4.5 +/- acres...the new owner wants to divide and build 3 houses. This is in the state of Alabama. Thanks!
- Category: Real Property
- Subcategory: Homeowner's Association
- Date:
- State: Alabama
Answer:
Restrictive covenants are often used in housing developments to maintain property values. These covenants can limit what homeowners can do, such as preventing unsightly modifications or disruptive activities. Once the developer sells all the plots, they typically lose interest, but the covenants usually remain in effect.
In many cases, these covenants are not time-limited and can be enforced even after the developer is no longer in business. However, enforcement may depend on whether nearby landowners can demonstrate they are affected by any breaches. If the original developer is out of business, enforcing the covenants may be difficult, especially if no one owns adjacent land that benefits from those restrictions.
If you own property with restrictive covenants that seem outdated or unnecessary, the risk of enforcement may be lower if the developer is defunct. You can apply to have obsolete covenants extinguished, but this process can be costly and time-consuming. Alternatively, indemnity insurance may be available to protect against potential claims related to these covenants.
It’s important to note that different rules apply if a landowner sells part of their land and imposes covenants that benefit the land they retain. In such cases, 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.