Does Foreclosure Erase Deed Restrictions

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Visitor Question: If a piece of undeveloped rural property had deed restrictions placed on it and was then foreclosed on and later re-sold, are the deed restrictions erased due to the foreclosure or does the new owner still have to abide by deed restrictions prior to the foreclosure?

Editors Reply: No, the deed restrictions are not erased just because there has been a foreclosure at some time since the restrictions were imposed.

Sometimes people think that the sole purpose of deed restrictions is to enforce the will and ways of a developer, and that somehow once that person is out of the picture, the deed restrictions have no relevance.

However, that is far from the truth. Deed restrictions are imposed so that forever afterward, future owners of a property are bound to wishes of the person who writes in the restrictions. This is true whether that person sells the property of his or her own free will, or whether a bank or other mortgage holder forces the issue.

A property could have changed hands once or fifty times since the deed restriction was imposed, but it doesn't matter, because the restriction is permanent unless (a) state law says otherwise, or (b) an amendment process is successfully followed according to the procedures set forth in a master deed or other document that contains the restrictions.

Massachusetts is the U.S. state that has the most clear-cut sunset provision for deed restrictions. Almost everywhere else, you're pretty much stuck with them.

Now one thing that could happen is that if you could find the original property owner, who lost the property through foreclosure, and then convince him or her to do so, that person could modify or remove the restrictions. That may or may not be emotionally very appealing, depending on the circumstances, but it is certainly a possibility.

This suggestion also might not work in a particular state, but we haven't heard of any states that try to restrict those rights. Before investing a lot of time, money, and effort in finding and persuading the person who lost the property to foreclosure, you may want to research the possibility that some state had passed a law removing the rights that that owner would have had otherwise to change the deed restriction.

The mental state of business persons who have been through foreclosure varies widely. Some might not be cooperative just because the whole experience was so negative, and they don't want to be reminded of it. Others would reason that since they are not involved any more, there is no reason to cling to that deed restriction that once seemed important to them. So this isn't a sure bet, even if you can find the person, but it's worth some thought.

Just last week we had a question from someone who wanted to change a restriction imposed by someone who lost the property to foreclosure, but that person also has died now. So it's too late for them to have the simple way out, but it might work for you.

We hope this is helpful. This advice is the same, by the way, whether or not the property in question was rural or urban, undeveloped or developed.

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