A residential property is located in a subdivision governed by covenants, conditions, and restrictions (CC&Rs) recorded in 1985. One CC&R prohibits detached accessory structures over 12 feet in height. The property currently has a 14-foot-tall detached garage built in 2012. No enforcement action has been taken. How should the appraiser reflect this violation in the appraisal report?
Correct Answer
D) Note the violation in the report and analyze its effect on marketability, insurability, and potential enforcement risk per USPAP Standards Rule 1-2
CC&Rs are equitable servitudes that run with the land and remain enforceable unless extinguished by law (e.g., abandonment, laches, or statutory expiration — none indicated here). USPAP Standards Rule 1-2(a) mandates identification and analysis of all relevant property rights and encumbrances, including private land-use controls. A violation creates legal risk (e.g., mandatory removal, fines, title defects) that affects marketability and buyer perception — thus value. Calling it 'nonconforming' (A) applies to zoning, not CC&Rs; 'encroachment' (C) refers to physical trespass onto another’s land, not a violation of restrictive covenants.
Why This Is the Correct Answer
Option D is correct because the appraiser's obligation is to identify the characteristics of the property relevant to the assignment, including private restrictions, then disclose the violation and analyze its effect. That analysis reaches marketability, since informed buyers may discount for the risk or demand escrow protection, insurability, and the practical exposure to enforcement. The appraiser can note that no action has been taken to date while making clear that non-enforcement does not confirm the covenant is unenforceable. Where the outcome genuinely cannot be determined, a clearly disclosed extraordinary assumption is the appropriate tool.
Why the Other Options Are Wrong
Option A: Treat the garage as legally nonconforming and apply a functional obsolescence adjustment
Legal nonconformity is a zoning concept, describing a use or structure that was lawful when built and is protected as grandfathered after the ordinance changed. Nothing comparable applies here, because the covenant predates the garage by decades and the structure violated it from the day it was built. Labeling it legally nonconforming would tell the reader the structure is protected when it is exposed.
Option B: Disregard the CC&R because it is over 30 years old and unenforced
Age alone does not extinguish a recorded covenant, and neither does a history of non-enforcement; the doctrines that can defeat one, such as abandonment or changed conditions, require facts and a legal determination that the appraiser is not qualified to make. Disregarding the restriction would also leave a known risk out of the report. The safe and correct course is to disclose and analyze rather than to assume the covenant has lapsed.
Option C: Classify the garage as an encroachment and require a surveyor’s verification before valuing
An encroachment is a physical intrusion across a boundary line, and nothing here crosses a boundary; the garage stands on the subject's own land and simply exceeds a height limit. A surveyor measures boundaries and locations and would not resolve a covenant compliance question. Requiring a survey would address the wrong issue and delay the assignment without producing relevant information.
Unenforced is not unenforceable
A sleeping covenant is still a live covenant. Years of quiet mean nobody has complained yet, not that nobody can. Disclose the risk and let the market price it.
How to use: When a stem stresses that no enforcement action has been taken, treat that as bait. The correct answer will disclose and analyze rather than treat the passage of time as a cure.
Exam Tip
Keep private and public controls in separate mental boxes. Nonconforming use, variance, and special exception belong to zoning, while violation, enforcement, and abandonment belong to covenants.
Common Mistakes to Avoid
- -Applying zoning vocabulary such as legally nonconforming to covenant violations
- -Concluding a covenant lapsed because it has not been enforced
- -Opining on the legal enforceability of a private restriction
- -Analyzing zoning compliance only and never reviewing recorded CC&Rs
Concept Deep Dive
Analysis
This tests private land use controls and the appraiser's duty when an improvement violates one. Covenants, conditions, and restrictions are equitable servitudes recorded against the land, and they bind successive owners regardless of who is enforcing them at the moment. Non-enforcement is not extinguishment: a covenant may be lost through abandonment, waiver, changed conditions, or the running of a statutory period in some states, but the mere passage of years without a complaint does not accomplish that, and the analysis is a legal question outside appraisal competence. A 14-foot garage under a 12-foot limit therefore remains in violation, exposing the owner to enforcement by the association or by benefited neighbors, potentially including forced modification or removal. The appraiser identifies the condition, discloses it, and analyzes its effect on marketability, insurability, and value, without predicting how a court would rule.
Background Knowledge
You need to know that CC&Rs are private, recorded restrictions enforceable by an association or benefited owners, that they run with the land, and that they operate alongside rather than instead of public zoning. You also need the USPAP requirement to identify the characteristics of the property relevant to the assignment, including its legal attributes, and the rule that where zoning and private restrictions differ, the more restrictive controls in practice.
Real-World Application
You appraise a home whose oversized detached garage exceeds the subdivision's height covenant. You describe the structure, disclose the violation, note that no enforcement action appears in the records you reviewed, and analyze whether local buyers discount for the risk, recommending the client obtain a legal opinion or an estoppel letter from the association.
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