30 Year Housing Clause

[Shawn Sexton]

During a title search, the seller's (wholesaler) attorney informed me that the current deed (from the original seller) has a clause that states the property could only be used for low or very low income households. The house was constructed by Habit for Humanity in 1997 and there is still another eight years left on the original 30 years required to offer this property to those specified households. The inspection period is over and I have money tied up in an earnest money deposit that I would rather not lose. Would this issue make the title unmarketable, thus requiring the return of the deposit? If I rehab and rent the property I would only be able to charge a low end rent that doesn't make much ROI sense. I would have been able to make a much larger profit from the rehab (adding square footage) in the neighborhood.

Any ideas?

[Will Fraser]

Hi Shawn!  One idea here would be to ask the title attorney whether the specific deed restriction is enforceable.  For example, the deed restrictions on a home I bought recently precluded certain races and banned homes "worth less than $2,000" from being built.  One is completely unenforceable, and the other is irrelevant because of the inflation during the 65 years since the restrictions' writing.  I'm curious to if the deed specifies what "low income" is and if that is relevant or enforceable. 

If it is specific and does in fact limit the deed and was not disclosed to you, then that is an encumbrance on the title that might in fact allow you to exit the contract and receive back your deposit.  Your agent should be of great help here, as well as the title attorney.

Best of luck in the journey,

Will