What is the purpose of covenants in real estate?

Covenants in real estate serve the essential function of providing certain promises and assurances regarding the use and maintenance of a property. They are legally binding agreements written into property deeds or leases that obligate the property owner to adhere to specific conditions or restrictions. These can include guidelines about how a property can be developed or maintained, which helps to preserve the character of a neighborhood and protect property values.

For example, a covenant might stipulate that a property owner must maintain their lawn in a certain manner, or it may prohibit certain types of structures from being built on the property. This ensures a level of consistency and predictability for all property owners in the community, fostering a harmonious environment. Unlike bidding wars or limiting property values, covenants do not aim to create competitive conditions or decrease market rates; instead, they focus on upholding standards that benefit the community as a whole. They also do not eliminate tenant rights, as tenant rights are a separate legal consideration that pertains to the relationship between landlords and tenants rather than property use covenants.