BIC TIP #1203: Placing Deed Restrictions Before the Sale
Does your seller want to put some restrictions on that land before it changes hands? Stephen Long, The Notorious BIC, has seen this situation cause real issues. His advice: get those deed restrictions in place, or at least in writing, before going under contract, because they are a material fact the buyer needs to know about.
Why Sellers Add Restrictions
Sellers sometimes want to control what happens to land after they sell it. They may want to limit the type of structures that can be built, prevent certain uses, or protect the character of neighboring property they are keeping.
Those are legitimate goals. The problem comes when the restrictions show up late in the process, after a buyer has already committed to the purchase.
Ideally, Do It Before Contract
Stephen’s first recommendation is that if the seller intends to place deed restrictions on the land, it is ideal to do it prior to contract. When the restrictions are already recorded, they are part of the property’s record, and buyers and their agents can review them during their research.
The seller should work with a real estate attorney to draft and record the restrictions properly.
At Minimum, Put It in Writing
If the restrictions are not recorded before the property hits the market, the seller should at least have them written out so they can be shared with a buyer in writing before the buyer goes under contract.
Here is why. Whether the restrictions are already in place or not, they will be in place by closing. That makes them a material fact. Both the broker and the seller have to disclose it, and a buyer who learns about restrictions after signing has every reason to be upset. A surprise like that can derail a closing or lead to a dispute.
The Practical Takeaway
When a land seller mentions restrictions, start the conversation early. Encourage them to record the restrictions before listing if possible, and if not, to have them in writing so you can disclose them to buyers before contract. Clear disclosure keeps your seller protected, your buyer informed, and your deal on track.
