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Neighborhood covenants usually require owners to obtain architectural approval before building new structures or modifying existing structures. The courts have repeatedly held that such architectural restrictions are fully enforceable. But we all know that not everyone follows the covenants. What happens if an owner makes unapproved changes and then sells the property before the violation is corrected? Does the violation continue so that the new owner is responsible for correcting it?

The Georgia Supreme Court, in a case called Prime Bank v. Galler, concluded, yes, the new owner is responsible for the violation. In that case, neighborhood covenants required all house plans to be approved by an architectural control committee (ACC) before construction. The covenants also provided approval could be obtained by default if submitted plans were not rejected 45 days from the date of submission to the ACC. An owner, Robert Carpenter, submitted plans to the ACC, and after 45 days of no decision by the ACC, the plans were approved by default. Mr. Carpenter thereafter submitted the plans to Prime Bank for a construction loan with a notation that he planned to build a “mirror image” of the plans. He had simply taken the plans that were approved by default by the ACC and reversed them. The lots in the neighborhood were relatively small, and the houses had been designed so that the windows of each house would face the wall of the neighbor’s house to create courtyards. The mirrored house of Mr. Carpenter’s resulted in the windows facing each other to eliminate the courtyard. Mr. Carpenter then died, and Prime Bank became the owner of the house through a foreclosure sale.

Mr. Galler owned the neighboring lot and was not at all pleased with the backward house next door. He eventually sued Prime Bank contending that Mr. Carpenter changed the plans of the house after the original design was approved by the ACC in breach of the covenants. The trial court agreed with Mr. Galler that the house violated the covenants and that Prime Bank was responsible for the violation.

Prime Bank appealed to the Georgia Supreme Court that it was not responsible for the violation of the prior owner. The Court responded, however, that the violation was not one that occurred at a single point in time prior to Prime Bank’s acquisition of the property. Instead, the violation was a continuing violation of building the house according to plans not approved by the ACC and that the violation continued from Mr. Carpenter’s ownership to Prime Bank’s ownership. The Court concluded that Prime Bank’s argument that it was not responsible for its predecessor’s errors was without merit and that Prime Bank was deemed under the law to have notice of the existence of the recorded protective covenants. Prime Bank was thus responsible for the previous owner’s covenant violation because, as the Court explained, the violation continued to exist, even though there has been a change in ownership of the property.

It is not possible to predict whether the same conclusion would apply to all violations that continue from one owner to the next. In the Prime Bank case, for instance, the plans that Mr. Carpenter submitted to Prime Bank had a notation about being a “mirror image” of the house. The Court did not discuss whether or not it took into account that Prime Bank knew about the “mirror image” on the plans. Nevertheless, in an abundance of caution, your board might wish to consider a plan of informing possible new owners of any ongoing covenant violation. An effective way to do so is to record a notice of the violation in the county land records. But before you do, make sure your covenants permit that action. If they do not, then an amendment to the covenants should be considered to allow for such a notice.