Local governments, through their police powers, are allowed to establish rules and regulations that limit what and how the owner may improve the property. These rules and regulations are often general statutes that are not specifically recorded against individual titles. These zoning laws and building restrictions are common practice, especially in cities, towns and developing areas.
Occasionally, these regulations are recorded on a property's title as a specific encumbrance , usually in the form of a covenant or restriction. More often than not, however, these restrictions are recorded by developers and current property owners.
Example: Restrictive Covenants
HAL Developers create a planned subdivision community in the suburbs for active seniors. To maintain the wide-open look and expansive design of the community, as well as the value of the individual properties, HAL Developers records a restriction into all of the subdivided parcels: all buildings must be set back at least 100 feet from the street. All future buyers and owners must accept this building restriction.
The law is on the buyer's side with these types of easements. Unless the contract specifically describes the building restriction as an encumbrance, which the buyer must accept, the buyer can reject the title as non-marketable.
Local zoning laws and building codes, on the other hand, are usually not recorded on the title and are usually not considered encumbrances that would make the title non-marketable. The exception to this rule is if the current property violates those zoning laws and building codes. The court tends to consider those violations as defects or encumbrances, even if those violations are not recorded. This same principle applies, even if the property complies with all zoning and building codes, if the property currently violates restrictions recorded against it.
Example: Zoning Violations
Biff owns a parcel, on which he has built a three-unit residential building. Biff was not allowed to do that, as there is a recorded restriction against the property stating that only single-family homes can be built on the land. Biff tries to sell the property to Chuck. When Chuck discovers the restriction on the title and sees the property violations, he realizes that the title is defective and non-marketable.
Buyers should avoid any contract that refers to "restrictions of record," as this would expose the buyer to a wide array of restrictive encumbrances. Strike it from the contract or demand a specific itemization of all restrictions on the title. This is especially important for developers and individuals buying land to be improved. You need to be assured that you will be able to develop or improve the property as you planned.
For more information, please see the "Zoning Laws and Building Codes" article.
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