When you dream about buying a home, whether it’s your first home or not, you start thinking of your ideal home and how it’d look. You might think of the colors, the landscaping, the decor and the neighborhood. You may also be brainstorming fun things you can do with the backyard, such as creating an outdoor yoga space, cozy firepit, or even a golf putting green! However, it may come as a surprise to learn that depending on where you buy your home, you may not be allowed to do these things.
This is called a Deed Restricted Community.
There are an incredible number of deed-restricted communities in Florida. So no doubt, if you are looking to buy a house in Florida you will stumble across these neighborhoods. In many cases, you will find that deed restrictions control the extent to which you can make changes to your home. Unfortunately, while deed-restricted communities are commonplace today, many people do not understand them. Below, we help you understand everything you need to know about deed-restricted communities and what you need to consider before you buy a deed-restricted property.
What is a Deed Restricted Community?
To understand deed-restricted communities, you need to understand deed restriction.
A deed restriction is alternatively known as a restrictive covenant. Restrictive covenants are put in place to limit how much a homeowner can adjust their property. These are usually created when homes are sold with specific restrictions. There is a registry of deeds where the restrictions are recorded, and the deed will legally bind the current and all future property owners. The terms of a deed restriction can only be changed by the HOA that created it.
Usually, these restrictions are found in neighborhoods with a homeowners association; in such cases, the associations are generally the ones who create the deed. In other cases, these deed-restricted neighborhoods exist in historic urban communities and may have been in place for years. Yet another possibility could be in the rural settings where there may be two neighboring farms whose owners made a deal years ago, and the deed is still in force. In Florida, deed restrictions expire after 30 years, according to the 1956 Marketable Record Title Act.
Note that these restrictions “run the land,” a phrase that means that it applies to the current property owner and all the future ones. The scope of the limitations within the deed limits can be varied and might shock you. However, you may not do much in many cases, as changing these provisions may imply legal costs, time, and effort.
Examples of Deed Restrictions
Deed restrictions limit what you can and cannot do to a particular property. We give examples of the most common deed restrictions below so you can understand them better:
If you would like structures such as detached garden sheds, detached workshops, pools, and garages, it would be beneficial to find out whether there is a deed restriction in the area because these are controlled and, in some cases, completely forbidden.
Many deed restrictions for adjacent structures would expect you to follow a particular design and dimensions and even specify the structure’s location on your property. The deed may also contain restrictions on what portion of your property you can build. However, some conditions can feel outrageous. For example, it may feel unfair if the homeowners association in your area insists that you disassemble a tree house.
If you come across a deed restriction with a clause on fences, it will likely be about the acceptable types of fences. For example, tall privacy and chain link fences are usually restricted. Additionally, the deed may state that the front yard fence should not be more than 4 feet and the back one not more than 6 feet.
Fences may not look like a big deal as most people feel that the more significant chunk of the work is in the building of the house. However, it would help if you looked into this as sometimes fence restrictions on a deed may affect the quality of life. For example, if you cannot erect tall fences, you may not enjoy sunbathing, and if you cannot use chain links, you may have trouble confining your pets.
In some cases, deed restrictions may prevent you from removing a percentage or all of the trees in your compound. Neighborhoods with such restrictions do this to preserve the area’s residential look or keep the community environmentally friendly.
Interestingly, this restriction is common in larger developments and suburban neighborhoods but can also be found in rural places.
Obstruction of Views
Some deed restrictions may limit you from obstructing a neighbor’s view, which is quite understandable as it would be unfair for a neighbor to come in and build a three-story house that will block the view from the surrounding homes.
You may find a deed that has existed for decades with this kind of agreement, especially in resort and vacation destination cities where a view of the beach or the mountain is crucial. It can also be expected in places with lakes, golf courses, and distant mountains.
Some of these restrictions may affect the dimensions of your house, making it crucial that you check if there is a deed restriction with this specific restriction.
Some deed restrictions may affect your color choice. They can even provide a list of the approved or non-approved colors.
However, the restrictions do not end here. Some others may come in the form of stone or brick choice. These usually go into detail. For example, a certain percentage of your house’s exterior may need to be built with a particular stone.
Pros and Cons of a Deed Restricted Community
While you need to exercise a high level of caution before choosing a neighborhood with deed restrictions, it’s not all gloom and doom, as living in such restricted communities has some benefits. Below, we explain both the advantages and disadvantages of a deed restriction to help you make an informed choice:
Benefits of Living in a Deed Restricted Community
Deed-restricted communities tend to come with facilities and amenities that improve the quality of life. They include gyms, swimming pools, clubhouses, and parks with limited access to outsiders.
Since homeowners associations are usually present in places with deed restrictions, you get the added benefit of conflict resolution in case you get into a disagreement with your neighbors. Furthermore, the chances of disputes are low because there will be guidelines for most issues that would cause conflicts.
Many homeowner associations will provide property maintenance services for properties under deed restrictions. Therefore, you may not have to worry about snow removal in the winter or landscape maintenance. An added benefit is that such properties tend to have better aesthetics as maximum uniformity leads to better curb appeal.
While each of the points we mentioned above is worthy on its own, specific rules mean that a neighborhood will always be well kept, reducing blight likelihood and maintaining the property’s value.
Drawbacks of Deed Restricted Communities
Limited Freedom on the Use of Property
From the examples of restrictions we have given above, it is clear to see that one of the most significant drawbacks of living within such communities is that you are limited on how you can adjust or use the property. Depending on your homeowners association, you might also be required to mow your lawn regularly.
Difficulties Selling the Property
It can be challenging to sell your investment property if you live in a deed-restricted area. For starters, many people do not like to feel like their options are limited, especially when buying a home. Furthermore, some specific restrictions may limit the pool of potential buyers.
Deed-restricted communities impose penalties for violations when homeowners act contrary to the deed restriction. In extreme cases, the association can foreclose your home.
Why are There So Many Deed Restricted Communities in Florida?
You may have lived in a state where deed restrictions are rare. However, deed restrictions are not new in Florida and have been continuously becoming popular in the US since the 1970s. Today, Florida is one of the states with the largest HOA communities. This popularity is primarily due to private companies and developers entering the area.
Each community has deed restrictions that favor its objectives and can be found in manufactured homes, neighborhoods with homes for sale, home sites, and lots. The most common ones will determine the dog breed and the number of pets you can keep in the house, state of repairs in the community, paint colors, common area rules, lawn maintenance, whether you can rent the property, and the uses of the property.
What is a Homeowners Association? (HOA)
A homeowners association is a self-governed organization. These are found in common-interest communities such as deed-restricted developments, where homeowners collectively pay fees for neighborhood maintenance. HOAs are run by unpaid volunteers who are usually resident homeowners. They often elect a board of directors that will run the HOA.
Usually, the responsibilities of an HOA will depend on the type of property and these properties will be guided by rules and bylaws enforced by the association. Property owners will be required to pay HOA fees to cover the maintenance and use of common areas. HOA fees also commonly act as reserve funds.
How Much are HOA Fees?
This can vary widely depending on the neighborhood. As a homeowner, if you buy into an older neighborhood without a lot of community amenities, then you could pay as low as $50 per year. However, many HOA fees fall into the range between $200 and $5000 annually for assessments, fees, and costs.
The amounts may vary depending on the amenities offered by the community. However, the most common costs you expect to pay will cover garbage pickup, landscaping and pest control, common areas, and safety and security fees.
You can expect that neighborhoods with extensive amenities will charge more than those with fewer restrictions. In addition, you may have to pay assessment fees occasionally, for example, in cases where an unanticipated problem or natural disaster results in the need for significant repair. The HOA is given the power to levy a one-time special fee to cover the costs. These can be minimal, or they can be a sizable chunk of money if it is a large repair – such as repaving roads in the neighborhood!
You must factor the effect of a community’s HOA into your overall finances as you begin your home-buying journey. Even the banks will consider the monthly HOA fees when deciding the fate of your mortgage application and how much they will give you. In some cases, you may be left with a smaller approved amount to spend if you choose a property with higher HOA fees than one with lower or no HOA fees.
Not All Deed Restricted Communities are the Same!
Deed restrictions are generally meant to keep up specific standards for the community, which will help keep up property values in the area. However, this does not necessarily mean that all deed restrictions are identical. In fact, restrictions differ widely from community to community.
Therefore, you must find out whether the place you intend to buy a house has deed restrictions and then determine whether you can live by those rules. You may find that some communities have just basic restrictions that you feel you would have no problem living with. However, you could also find a community with a lengthy list of rules and restrictions and who are extremely strict about enforcing them!
Some home buyers might not like the specific restrictions in a community. And since all neighborhoods can vary in what they restrict, it’s extremely important to review all the details ahead of time.
You Must Budget for HOA Fees & Assessments
In many cases, HOA fees are paid monthly. However, in other cases, there may be quarterly and annual payments, and the association can levy special assessments when reserve funds cannot cover a major repair such as road or roof repairs. These fees vary widely depending on the community, property, amenities, and facilities. As we mentioned earlier, the budget may be between $200 and $5000+. However, the more the amenities and facilities, the higher the fees you should expect to pay.
You must budget for HOA fees and assessments before settling for a house. The last thing you want is to buy a home and then realize all the additional fees for the HOA are causing you to have a tighter budget than you anticipated.
What is a CDD Fee & Is It Different Than an HOA Fee?
CDD stands for community development district. This government entity is created when an extensive land tract developer requests one. Then they are tasked with planning, constructing, financing, maintaining, and operating infrastructure and amenities in the development area. Finally, the CDD assesses community members’ fees for amenities and infrastructure.
However, CDD and HOA fees differ because the former is incorporated into the annual property tax bills, while HOA fees may be paid monthly, quarterly, or yearly to maintain the community.
CDD will cover general maintenance, infrastructure, community amenities, and water and sewer and is standard in developments built post-2003. Typically, these fees will vary by the type of development. They are also determined by the loan taken from the county. This amount is divided by the number of homes that repay the loan. The fees take up to 30 years to pay. Therefore, if you move to a community that is five years old, you can expect to pay the fee for 25 more years until the loan is done.
The county will typically add CDD fees to your property tax yearly and are tax-deductible like property taxes. The costs of improvements will not be included in the initial house sale price. Mandatory disclosure in the purchase contract will let buyers know if the property they buy is part of a CDD. When you are searching for a home, be sure to ask if there is a CDD and obtain the details on those specific costs so you can factor it into your annual budget as well.
Many of the newest master-planned developments around Florida have CDD fees. This includes popular areas of southwest Florida such as Lakewood Ranch and Wellen Park!
You May Need HOA Board Approval to Buy a Home in a Deed Restricted Community!
In Florida, HOAs have legal rights to decide who can rent or buy a home within their communities. Therefore, it is not uncommon to find the HOA requesting that you submit an application that they will review. Since these communities have criteria outlined in their governing documents that you must meet, they can accept or deny your application. However, their decision should be in line with the Fair Housing Act and should not be discriminatory based on sex, color, race, disability, religion, or status.
If your application is denied, the HOA must disclose its screening process according to its governing documents and explain the reasons for rejection. If this does not happen, it is well within the rejected buyer’s rights to pursue a discrimination lawsuit against the HOA.
Some of the common reasons why applications are denied include;
- Predisposition to violation of rules and regulations, especially if the applicant was a former renter that has violated the rules before.
- The applicant violated one of the rules in the HOA’s governing documents.
- Misrepresentation of the applicant’s application, such as hiding a criminal history
- Conviction of a felony
Tips for Buying a Home or Condo in a Deed Restricted Community with an HOA
Check the Covenants, Conditions, and Restrictions before Buying
One of the essential pieces of advice you can get before settling in a deed-restricted area is to read the fine print carefully and understand them because you will need to comply once you buy the house. Consider whether any of the terms may affect your lifestyle or if there is a particular one you do not like. You can research the deed restrictions in the community you are interested in, although they will likely reveal it before you make an offer. Talk to your real estate agent to confirm details about any restrictions before moving forward with purchase plans.
Ensure that You Can Pay Additional Assessments and Fees
You need to understand how much the HOA fees are and what they are for. You also need to know how often you will pay the fees and the penalties for late payments. Do not be afraid to dive into questions such as whether the association has scheduled to raise the HOA fees and ensure that you can keep up with the budget.
Check If there are On-Going Disputes
It pays to know whether the HOA has disputes with homeowners. In many cases, you will find uncomplicated issues such as parking violations, and rarely will you find serious ones such as the embezzlement of HOA fees. In addition, you can check social media groups and pages to ensure there are no public complaints or significant lawsuits.
Do The Rules Align with Your Goals and Values?
Paying HOA fees is excellent if you will be making use of the facilities in the community. It is still okay if you will not be utilizing one or two. However, you need to ensure that the money you are paying works for you, so you are not wasting money. Furthermore, you must ensure that your community’s rules align with your goals and values and that you will be happy living in the community.
Is Buying a House in a Deed Restricted Community in Florida Right For You?
Living in a deed-restricted neighborhood is an excellent way to maintain property values and keep the community or development appealing. Especially here in Florida where there are some truly gorgeous resort-style developments that make you feel like you are on vacation every day!
If the association works well, you will enjoy high-quality life. However, it would help if you were sure the community you are getting into aligns with your values, so you enjoy living there. You also need to ensure that you can pay the fees without strain on your budget and check for any disputes between the HOA and homeowners.