What are restrictive covenants in real estate?

Restrictive covenants in real estate are conditions included in property deeds that dictate how the property can be used. They are designed to maintain a certain standard within a community and can limit various aspects of property usage, such as the type of structures that can be built, the purposes for which a property may be used, or modifications to existing buildings. These covenants are essential tools for homeowners associations and developers to ensure that the character and aesthetics of a neighborhood are preserved.

For example, a restrictive covenant may prohibit homeowners from running a business out of their residence or require that any new constructions adhere to specific architectural styles. This enforcement helps protect property values by ensuring that all properties within a development uphold the same standards, benefiting the entire community.

The other options focus on aspects not related to the concept of restrictive covenants. Legal limitations on property taxes pertain to taxation laws and regulations rather than property use. Agreements between lenders and buyers refer to financing arrangements, and requirements for physically improving properties involve construction and renovation obligations, which are outside the scope of what restrictive covenants are intended to address. Therefore, the focus of restrictive covenants specifically on limiting property use is what makes the correct choice accurate.