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A covenant is a promise contained in deeds or other legal contracts where parties agree to either perform or not perform certain actions on the property in question.
One of the most common covenants is the covenant not to compete.
This contract provision is often observed in the sale of businesses where the buyer intends to prevent the seller from starting a new similar business to compete with the one he just sold.
Or in a typical lease contract between a shopping mall and retailers, preventing the landlord from building a competing shopping center in the vicinity that competes directly with the current one. Sort of like a reverse radius clause.
Restrictive covenants can also be written into deeds dictating what types of uses are prohibited on the land.
- Only allowing commercial use
- Strict adherence to architectural and design conformity
- Prohibition of vice-related activities
Otherwise, a covenant that runs with the land, specifies that restrictions and limitations continue to remain active even when a property is sold and ownership transferred to a new party.
In this case, a prospective buyer shouldn’t buy a property unless he is willing to agree and accept the covenant present.
Sometimes, we might even run into the phrase “with the usual covenants”.
This basically refers to a general warranty deed with the typical covenants for:
- Right to convey
- Quiet enjoy
When in doubt about covenants regarding property, do consult the expert advice of a real estate lawyer for more clarity.