Title company flagged a deed restriction from 1987 and called it "informational only

Question

That phrase has done real work in killing deals. A restriction that runs with the land does not become informational because the title company calls it that, and a title policy will often carve out restrictions that appear in the chain of title as known encumbrances, meaning the buyer holds the paper but not the coverage. The question worth asking before close is whether the restriction is enforceable, who holds the right to enforce it, and whether any prior use already constitutes a violation that transfers with the deed. Those are three different legal questions and only one of them gets answered by reading the restriction itself. Has anyone had counsel weigh in on a flagged restriction before close, and did the analysis actually change what you paid or whether you closed?

reba_finch09 · Answer

The carve-out point is the one that matters most in practice. Title insurance covers what it insures, and a restriction flagged as "informational only" is the company's way of telling you it is not covering that item, so the policy looks clean while the exposure sits on the buyer's side of the ledger.

The enforceability question is where the analysis earns its money. A 1987 restriction could be unenforceable for several reasons: the original benefiting parcel may have been sold and the benefit not explicitly transferred, the restriction may lack a termination date in a state that applies a statutory sunset to private land use restrictions, or prior use by a predecessor owner may have already triggered a waiver that a court would recognize. None of that shows up in the restriction document itself, and a title officer reading for chain-of-title completeness is not doing that analysis.

On the pricing side, say a restriction limits commercial use on a parcel you are buying partly for its mixed-use zoning value. If counsel concludes the restriction is likely enforceable and the enforcing party is identifiable, that is not a negotiating footnote, that is a reunderwriting of the deal, and a five to eight percent haircut on the income assumption may still leave you short of where the number needs to land. What did the 1987 restriction actually restrict, and is the current intended use inside or outside that language?

emmett_boyle · Answer

The enforceability question is often the one that moves price, because a 1987 restriction tied to a homeowners association that dissolved or a grantor whose heirs have no standing to enforce can be negotiated down to a title endorsement rather than a price cut. Get a real estate attorney in the jurisdiction to run the chain and confirm whether enforcement rights survived, then ask the title company specifically whether an endorsement is available and at what cost, because that answer tells you how the underwriter is actually pricing the risk.

What type of restriction is it, use, architectural, or something else?

polly_ashworth · Answer

Who holds enforcement rights is genuinely murky when the original developer dissolved decades ago.

kvolkova · Answer

Had exactly this on a fourplex in Lakewood, Ohio, 2021. Restriction from 1974 said no more than one dwelling unit per parcel, which was obviously dead on arrival against a property that had been a legal four-unit for forty years, but the title company still marked it informational and excluded it from coverage. Attorney came in at $800 flat, wrote a two-page opinion saying prior continuous nonconforming use and zero evidence of any entity with standing to enforce, and the seller knocked $4k off because they wanted the deal to close clean rather than sit with that letter floating around. So yes, the analysis moved money.

What I did not know until that deal was that the restriction in my case had been placed by a developer who dissolved in 1989, which killed the enforcement question outright because there was no successor entity and the municipality had never adopted it. That is the fact pattern that actually changes whether you close versus whether you just negotiate. Who placed the restriction and what happened to them afterward is the thing I would run down before I paid for a full legal opinion, because half the time the answer is sitting in a thirty-second secretary of state lookup.

What is the restriction in your deal actually prohibiting?

devon_pierce · Answer

A real attorney opinion on enforceability, not a title commitment review, is what the analysis actually requires here.

The assumption doing the most work in treating this as "informational" is that no one with standing still exists to enforce it, but 1987 is recent enough that a homeowners association, a neighboring parcel with express enforcement rights, or a municipality with a reverter clause could all still be active, and none of those show up in the restriction language itself.

What did the restriction actually prohibit?

Title company flagged a deed restriction from 1987 and called it "informational only

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