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Legislative Update: Restrictive Covenants

By Missouri REALTOR Party posted 08-26-2022 11:34 AM

  

Missouri REALTORS®,

"Restrictive Covenants,” which often impede on real property rights, come in many shapes and sizes. Included within a separate recorded document covering an entire subdivision or other development (and/or in a deed of conveyance transferring title to a specific lot), such covenants typically impose restrictions on property use (e.g., prohibitions against use as a business; parking of recreational vehicles; specific size or architectural style) that a subsequent property owner is contractually bound to honor.

Best practice encourages potential purchasers to obtain a copy of all covenants and restrictions that negatively affect a property (if they exist, as they will be referenced in a title commitment), and to review available documents to ensure there are no provisions that will make the desired property unsuitable. The title company will typically make all covenants and restrictions available, possibly for a fee, or the local Recorder of Deeds office will provide them.

While they have their proper place, not all restrictive covenants are enforceable. Restrictive covenants that prohibit a person from owning or occupying property based on race or color have been declared unenforceable by the United States Supreme Court, since its ruling in the landmark case of Shelley v. Kraemer in 1948. In 1968, the Fair Housing Act was enacted to extend protection against discrimination in the sale, rental, and financing of housing based on race, religion, and national origin. Any restrictive covenant which relates to the race, color, religion, or national origin of any person has been specifically deemed “void and unenforceable, and shall be ignored, as if the same never existed” by statute in Missouri since 1993.   

Although they are not enforceable and are prohibited by both Federal and State law, unfortunately, they still exist. Typically found in properties developed prior to 1950, restrictive covenants that claim to limit the sale of a property based on a buyer's race, color, religion, or national origin are particularly offensive. They can cause significant distress to potential purchasers. Recognizing they have no place in modern society, Missouri REALTORS® advocated for the passage of HB 1662. It prohibits any further recording of this type of covenant and provides a method by which to remove them.

Effective August 28, 2022, no deed to be recorded may contain a reference to a restrictive covenant that restricts the ownership or use of real property based upon race, color, religion, or national origin. A Recorder of Deeds may refuse to accept any such deed submitted for recording. HB 1662 also provides a voluntary procedure by which any illegal restrictive covenant of the kind described, which is found to be contained in a deed of record, may be affirmatively removed.

It should also be noted, a current owner of the subject property may release an illegal restrictive covenant by completing and recording a “certificate of release.” This form is provided under subsection 4 of §442.403 RSMo.

We are proud of the efforts by Missouri REALTORS® legislative committees and our advocacy team to get this legislation passed and wanted to be sure our members understood what it was about, why it was passed, and provide a resource to share with clients should they come across these in a deed, or hear about this new law and ask you for guidance. As always, clients should be encouraged to consult with competent legal counsel for specific advice.

Sincerely,

Sam Licklider
Chief Lobbyist, Missouri REALTORS®

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