Purchasing a piece of commercial real estate can be an exciting venture. You may be starting a business or moving your current business to a new location. If it is a piece of commercial land, you may have plans to develop or subdivide the land. Prior to the purchase, it is important to check if any restrictive covenants exist.
Tennessee law allows property owners control over how their real estate is used. This control is exercised using a restrictive covenant. Restrictive covenants are common in commercial real estate and stay in place even if the property changes owners.
Restrictive covenants commonly prohibit, or restrict, the property from being used for certain purposes. For example, they may specify that no agricultural operations take place on the land, or that certain amenities remain on the property.
Therefore, checking for any restrictive covenants prior to purchase is vital. You do not want to find yourself in a situation where you’ve purchased a piece of commercial real estate with a specific purpose in mind, and then find out that a restrictive covenant prohibits that purpose.
Requirements to create a valid restrictive covenant
To qualify as a restrictive covenant, there are several requirements that must be met. First, there must be a privity of estate between the two parties creating the covenant. Privity requires the existence of a legally recognized relationship between the parties.
Next, the covenant must “touch and concern” the land and there must be evidence that the parties intended the covenant to apply to future owners of the property. Finally, the covenant must be in writing.
There are many ways to find out if a piece of commercial real estate has any restrictive covenants. They may be mentioned in documents such as deeds or titles or recorded in publicly available land records.
Researching and learning about any restrictive covenants before a commercial real estate purchase can help prevent future complications or burdens. If any covenants are found, you must consider how they could affect your goals.
