Many properties are located in areas that are subject to protective covenants. Protective covenants outline rules and restrictions for the neighborhood or development. The goal of the covenants is to protect the integrity of the neighborhood and to preserve property values.

Covenants are generally recorded at the county courthouse, and everyone who buys property in the neighborhood after the covenants are recorded is subject to the covenants. Developers or neighbors often form homeowners associations to further the goals set out in the covenants, to collect dues from the property owners, to maintain common areas, and to enforce rules and regulations.

At closing, unpaid association dues from previous years are the responsibility of the seller. Association dues for the current year are prorated between the buyer and seller. Future dues are the responsibility of the buyer, and future dues are not typically held by the lender in an escrow account.