Covenant Controlled Communities

Buying in a Covenant-Controlled Community

Many subdivisions are covenant-controlled with limits on the use of property. Once you buy in a controlled community, you automatically become a member of the homeowners’ association and must abide by the covenants. Compliance with the covenants is mandatory. Covenants detail each owner’s property rights, the conditions on the use of property and the rights and obligations in the community association. Bylaws establish rules for the operation of the association through officers, a board of directors, committees and membership meetings.

Before signing a binding agreement, read the legal documents and make sure you understand them. Determine what the homeowner’s assessment covers. Does it cover exterior maintenance of your unit, maintenance of private streets, trash collection and snow removal? Assessments can be the same amount for every unit or can vary according to the size or value of the unit. Assessments are collected monthly, quarterly or annually and are not voluntary. Failure to pay may result in a lien against your property and may mean that your property could be sold to satisfy the debt. If you are buying vacant land, are there time limits for building a home? Must the home be in a certain style? .

When a person looks at a home in a covenant-controlled community, the licensed real-estate broker is required to point out The Declaration of Covenants, Conditions and Restrictions. If a person signs a contract for the purchase of property, the contract has a provision for review of the covenants. If the prospective purchaser does not agree to the covenants, he or she has the opportunity to void the contract.
Then, when a loan is made by a lender for any property in a covenant-controlled community, there is a rider attached (that the mortgagor signs) which states that there are covenants, and that the purchaser agrees to abide by those covenants.
At closing, the purchaser(s) must sign a document agreeing to pay assessments when due and to follow the covenants, rules and regulations of the community.

A new Colorado law (SB-05-100) requires that the seller provide the buyer with a statement that the buyer has received and understands the bylaws, rules and regulations of the community and that the buyer will pay the dues and/or assessments. Additionally, the seller must provide the buyer with a copy of the minutes of the most recent annual owners’ meeting and directors’ meeting. It is important to keep any correspondence from your homeowners’ association. It is expensive and time consuming to gather the necessary documents when you need them.

Community-association living is not the choice for every individual. Prospective purchasers are encouraged and afforded the opportunity to review the “standards of living” before their purchase commitment.