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Giving Notice of Implied Covenant

In property law, the existence of a common plan can give lot buyers notice that a covenant burdens the lot and that all the other lot owners have the right to enforce the covenant.

When a covenant is implied rather than express, a buyer obviously can’t discover the covenant from a title search. If the seller didn’t tell the buyer about the covenant, the buyer might claim she didn’t have notice, actual or constructive. In that case, the recording acts and the requirements for enforcement in equity would prevent enforcement of the covenant against her.

But the common plan comes to the rescue, making the covenant enforceable after all. If the common plan is sufficiently evident to the buyer, the buyer has constructive notice of whatever she could discover by making a reasonable inquiry. If she asked neighbors, asked the developer, or even searched the title to other properties, she might discover the existence of a common scheme of covenants.

It may be a difficult factual question whether a common plan is sufficiently evident to prompt a reasonable buyer to investigate further. It usually requires that there are a significant number of lots developed and being used in compliance with the covenants, revealing a pattern of use that might suggest the existence of common covenants.

That alone probably isn’t enough to reveal a common plan but would have to be combined with a substantial number of express covenants recorded on other lots or knowledge of representations by the developer.

The common plan is like the Swiss Army knife of covenant law; it can do almost anything. The existence of a common plan can imply the existence of a covenant in the first place. It also can satisfy most of the requirements for the covenant to run at law or in equity. It can prove intent to run and give notice of the covenant.

The common plan also can prove that the covenant touches and concerns the burdened and the benefited land. The uniform covenant scheme is intended to create a neighborhood of a certain character, restricting activities on each lot so that all the lots will enjoy the resulting benefits. The covenants aren’t to benefit specific people but to make the properties more useable and enjoyable for their planned purposes.

Furthermore, even though the common plan itself doesn’t prove horizontal privity, a covenant that’s part of a common plan would exist only in circumstances where the original parties have horizontal privity: when the common owner sells the burdened land to a lot buyer. So the only thing a common plan can’t do is establish vertical privity.

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