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How will deed restrictions affect your commercial property?

| Apr 19, 2021 | Commercial Real Estate |

Purchasing property for commercial use involves compliance with federal, state and local laws and ordinances. You may already know the restrictions in place by your industry, the environmental concerns your business may raise, and the zoning ordinances you must understand and respect or work to change. However, it may not be easy to determine if the property under consideration includes deed restrictions. 

Deed restrictions are not the same as zoning laws or easements. Once there is a deed restriction with the property, it remains with it no matter how many times the property changes hands. If the property you are considering for your business has these restrictions, you would be wise to understand how they may affect your business and your use of the land as well as knowing the process for having a deed restriction removed from the property 

What kinds of restrictions can I expect? 

In many cases, deed restrictions, or restrictive covenants, are in place to protect the value of the property or to safeguard the interests of other businesses in the area. Owners of a California property may add a restrictive covenant to the deed of a property as a condition for selling the property. Once the restriction is with the deed, it remains part of the property and can be very difficult to remove. Common restrictions include the following: 

  • Prohibiting competing businesses from moving onto the property 
  • Prohibiting businesses that may attract certain clientele 
  • Limiting the size or design of the buildings you can put on the property 
  • Prohibiting certain types of commercial buildings, such as restaurants or residential units, on property previously contaminated 

If you are a commercial developer selling lotsa buyer may want to have deed restrictions placed on your land to prevent his or her competition from moving in next door.  

How do I get rid of a deed restriction? 

Unfortunately, deed restrictions were not always about protecting businesses and property values. Restrictive covenants at one time enforced racial discrimination by prohibiting the sale of property to minorities. You may even find discriminatory restrictions on an old property, but they are not enforceable and easy to remove. 

You may be looking at a property that has a deed restriction that may not be relevant to your business. However, you never know how it may affect you in the future, such as when you decide to sell the property. If you would like the restriction removed, you will have to obtain the agreement of everyone whom the restrictions affect. In rare cases, the court will remove deed restrictions, especially if the judge determines they are unfair.