Inferring Covenants from a Common Development Plan - dummies

Inferring Covenants from a Common Development Plan

By Alan R. Romero

Covenants, in property law, generally must satisfy the statute of frauds, meaning there must be signed, written evidence of a covenant in order to enforce it. However, when a developer of land creates a uniform scheme of covenants that restrict and benefit a group of subdivided lots, the circumstances may imply the creation of covenants. Such implied covenants are enforceable even though they’re unwritten.

A covenant is implied when two things are true:

  • A single owner divides her land and sells multiple lots.

  • The owner sells those lots subject to a common plan of development that includes uniform covenants intended to burden and benefit each of the lots.

Of course, if each of those sales is accomplished by a deed that expressly creates the covenants and says they’ll burden and benefit all the owners in the subdivision, then there’s no need to imply a covenant because all the covenants are express. But if the parties aren’t so clear about their intentions, courts will nevertheless infer the creation of such covenants that benefit and burden each subdivided lot.

It’s easy to tell when a single owner subdivides her land; the hard part is figuring out when the owner does so with a common plan of development. The following types of evidence may prove the existence of a common plan:

  • Previous sales subject to covenants: The primary evidence of a common plan is that the common owner has sold a significant number of lots subject to the uniform covenants. A single sale, or even a few sales, generally won’t prove a common plan for all the lots to be subject to the covenants.

    But if combined with other evidence of a common plan, they may confirm the existence of a common plan. And if later on, other lots are sold subject to the uniform covenants, courts tend to take that as further proof that a common plan existed earlier.

    The covenants don’t have to be identical in order to establish a common plan, but they must be generally the same. Nor do the covenants have to apply to every lot in order for a common plan to exist. For example, a residential subdivision may have some lots that are planned for other uses, such as parks or schools.

  • Compliance with the common plan: The actual development and use of lots in compliance with the common plan is important to establish that such a plan existed. Although there may be some departures or violations, the actual use of the land must generally comply with the common plan in order for such a plan to exist.

  • Representations: The developer may tell prospective buyers, whether directly or through sales agents and marketing materials, that all the lots will be subject to a common set of covenants. Such representations support a finding of a common plan.