The guiding principle for determining the ultimate binding effect of a restrictive covenant is that “[i]n the absence of actual notice before or at the time of purchase or of other exceptional circumstances, an owner of land is only bound by restrictions if they appear in some deed of record in the conveyance to [that owner] or [that owner’s] direct predecessors in title.”
In an earlier case we noted that this rule is “implicit in the acts providing for the recording of conveyances.” The recording act (Real Property Law art. 9) was enacted to accomplish a twofold purpose: to protect the rights of innocent purchasers who acquire an interest in property without knowledge of prior encumbrances, and to establish a public record which will furnish potential purchasers with actual or at least constructive notice of previous conveyances and encumbrances that might affect their interests and uses.
The recording statutes in a grantor-grantee indexing system charge a purchaser with notice of matters only in the record of the purchased land’s chain of title back to the original grantor. [Note: “index system” refers to a repository of local public records that document the history of each purchase and sale of land in that locality. In the note above, if W wanted to acquire Blackacre from J, W would search J’s name in the index and discover that J acquired Blackacre from L years earlier; W would repeat this process to ensure that L had validly acquired Blackacre earlier still, and so on back in time for such period as state law requires. This is the essence of a “title search” establishing the “chain of title” that will support W’s ownership of Blackacre]. Our prior cases recognized that a “purchaser is not normally required to search outside the chain of title” to his property, and is not chargeable with constructive notice of conveyances recorded outside of that purchaser’s direct chain of title where the grantor-grantee system of indexing is used. This is true even if covenants are included in a deed to another lot conveyed out by the same grantor.