Introduction:
Real property easements are like giant networks of non-physical, squid-like tentacles: non-visual, silent, and untouchable, yet they have profound implications for ownership, operation, and development potential.
Easements may be below or above ground. Easements (or encumbrances) and how they enhance or prohibit development may have catastrophic consequences, including diminishing and limiting property value or rendering the property economically unfeasible.
Distress Codes Defcon 1, Mayday, and 5150 refer to the emotional outburst when a property owner discovers that a parcel purchased for an extremely high price is severely constricted or unbuildable.
Unbuildable properties are not just a nuisance; they have little or no value. An owner may be required to pay debt service on a loan, property taxes, fencing costs, and liability insurance without any future benefits. Donating to a municipal entity for a public park, which serves as a modern alternative to an unhoused encampment, may be the only viable option.
Understanding real property easements is not just a matter of legal jargon. It's crucial knowledge that empowers property owners, significantly impacting property value and use and giving them more control over their property.
Easements are like a nonpossessory right, like lending your neighbor a cup of sugar. It's a right conveyed from one property owner (#1) to another property owner, public utility company, or government (#2) to use, enter, or cross over a parcel (or a portion) that is owned by the party (#1).
Nonpossessory recorded interests restrict the unrestricted use and are an encumbrance on the properties. The easements are generally recorded against the property in municipal public records and serve to cloud the title.
There are two types of possessory interests: freehold and leasehold estates.
Fee ownership Interests are generally subject to certain easements such as utilities and public rights of way.
A public right-of-way easement gives the public or organization the right to access and use property in specific situations for limited purposes. A right of way is an easement that establishes the freedom to use a pathway or road on another person's property without conferring ownership.
Easements generally run with the land into perpetuity unless they are expired, abandoned, or mutually canceled by the parties. The easements may be expressed or implied by necessity or by prescription.
https://www.forbes.com/advisor/mortgages/what-is-an-easement/
https://www.lorman.com/resources/easements-in-california-creation-of-easements-16986
https://www.clta.org/page/article6/A-Legal-Introduction-to-Easements.htm
https://realestate.usnews.com/real-estate/articles/your-guide-to-property-easements
Conversely, reciprocal easements can be a win-win situation for all parties involved, fostering a sense of mutual benefit, cooperation, and optimism about the potential for shared success.
Reciprocal easements, on the other hand, are like friendly agreements between neighbors. They're a win-win situation for all parties involved, fostering a sense of mutual benefit and cooperation. For property use purposes, they say, 'You scratch my back, and I'll scratch yours,' fostering optimism about the potential for shared success.
https://www.davis-stirling.com/HOME/reciprocal-easements-defined
What agreements allow for reciprocal easements?
https://www.contractscounsel.com/t/us/reciprocal-easement-agreement
One 20,000-square-foot parcel of land has a local grocery store, and the other has a 5,000-square-foot restaurant. The owners structured a reciprocal easement agreement to allow both parcels to provide entry to commercial supply trucks and for parking. With the building footprint, required setbacks, and parking, there is not enough room for large trucks to deliver supplies without overlapping parcels. Mutual benefit was the motive.
What are prescriptive easements, and how do they work? Understanding this concept is like having a legal compass to navigate potential conflicts and litigation. It's a claim of possessory right to pass across another person's real property that was acquired by continued use without permission of the owner for a legally defined period.
Conflicts and litigation may arise to determine which rights to pass over a property can be claimed. A prescriptive easement is a claim of possessory right to pass across another person's real property that was acquired by continued use without permission of the owner for a legally defined period.
A claimant has the burden of proof of the elements necessary to establish that the easement has been created over time by prescription (California Code of Civil Procedures 321). In California, a claimant must demonstrate that they have possessed the prescriptive easement through continuous use for at least five years. Other states have similar regulations.
The statutory time for prescriptive easements varies from state to state. Each claim is fact-specific, with the possibility of winning and losing. Proving the claimant's rights can be time-consuming, potentially leading to litigation and a risk of losing the case. All this frustration could have been avoided with well-documented agreements, which would have provided a sense of security and preparedness.
The issue of exclusive vs. non-exclusive easements must also be proved. Will the easement run with the land and bind all future owners? In California, 2d 872 (2002). California Civil Code 1104 provides that a transfer of real property passes all easements attached to it.
There are many types of easements for dozens of different purposes:
https://en.wikipedia.org/wiki/Easement
- View and public utility easements:
- View easements protect a property owner's views (of water, ocean, city, or valley) from undesired blockage. A written document outlines the terms of the agreement between the parties. After execution, the document is recorded and becomes a matter of public record. The recorded easement for the view becomes an encumbrance that runs with the property's title. Any future recordings are subject to the easement and may not violate its terms.
- Each agreement is constructed according to the wishes of the parties. One neighbor (#A) may pay another neighbor (#B) a $100,000-$250,000 fee or offer other considerations as an enticement to sign an easement agreement. This ensures that #B will never block or allow vegetation to block # A's view. Consideration to benefit #B may include adjusting the lot line in favor of #B to gain some amenity value, such as a larger building footprint, improved ingress/egress arrangements, or enhanced views in a different direction.
- A surveyor is needed to chart the identified protections. The document will be recorded with a completed survey and a lawyer-drafted easement agreement executed by the principal parties. A title insurer will issue a policy to protect the encumbrance position.
- Some municipalities have city ordinances to protect views. If a conflict arises, code enforcement may resolve the issue. The local municipality enforces public utility easements, such as tree pruning or removal that is too close to power lines or a street corridor. Another example is the installation of sidewalks and municipal green belts.
- Most planned unit developments with an owner's association provide for the protection of views. Specific language is found in the written covenants, conditions, and restrictions.
- Communicating with the neighbors may resolve most questions and conflicts. Other solutions are approaching the association, city zoning enforcement, or hiring a lawyer to file a civil declaratory relief action.
- https://en.wikipedia.org/wiki/Declaratory_judgment
- Surface and overhead avigation easements
- In real property, air rights are property interests in the space above the earth's surface. The Federal Aviation Administration regulates airspace.
- https://www.faa.gov/uas/getting_started/where_can_i_fly/airspace_101
- https://www.faa.gov/documentLibrary/media/Advisory_Circular/draft-150-5190-4B.pdf
- Are easements transferable from one party to another?
Most easements are recorded and are public records. When a property is transferred to another party, the easements are transferred and remain on the title. An easement generally remains with the property.
https://www.findlaw.com/realestate/land-use-laws/easements-and-transfer-of-land.html
- Why should property owners, real estate brokers, and lenders make such a big deal about easements? What's so important?
- Owners, realtors, and lenders should be aware of the vast reservoir of property limitations caused by easements. Easements limit the usage of a property and reduce its development potential and value.
Easements are clouds on the title.
An easement is an encumbrance against a property, referenced by agreements and claims, that enforces rights and obligations. Whether recorded or not, the easement still reflects a clouded title.
When a realtor or lender drives up to a property, they may admire the beauty and tranquility of the setting. The home elevation, topography, floor plan, panoramic views, and hardscape are outstanding. The property's location is ideal. Selling the sizzle is appropriate but limited to the realtor's spectacular performance and the buyer's immediate response. However, there is a sizable, prohibitive easement for a neighborhood storm drain running across the yard where the purchaser planned to place a lovely swimming pool. The storm drain easement was never disclosed.
https://wylylawfirm.com/what-does-easement-drainage-mean-for-your-property/
Legal risks for an agent may be devastating. I am the buyer's agent. I did not read the preliminary title report, request copies of all easements from the title company, or ask them to chart all easement placements on the property. However, the buyer's confession that they did not read the preliminary title report does suggest a breach of fiduciary duty and constructive fraud. Failure to disclose was felony stupid.
Constructive fraud comprises any act, omission, or concealment involving a breach of legal or equitable duty, trust, or confidence that damages another, even though the conduct is not otherwise fraudulent—Salahuddin vs. Valley of California, Inc. (1994).
Constructive fraud was created because any reasonable real estate fiduciary should possess this knowledge or be aware of these facts/circumstances and the failure to disclose constructive fraud.
What lurks underneath the ground is a web of easements that limit land usage, building size, and economic feasibility, inhibiting overall value. Due to restrictive easements, a 100,000 sq ft parcel may only have 10,000 sq ft of a buildable pad.
A 20,000-square-foot property is worth $100 per square foot, but 80% of it is limited in use due to restrictive easements. Only 20% of the parcel is buildable. A buyer may not be willing to pay $100 per square foot for 20,000 square feet of land when only 4,000 square feet are buildable.
Risk and liability flashes code red for the principal parties and their agents:
Knowledge is the key. On any transaction, the parties should obtain a preliminary title report, obtain written copies of all easements, and request a survey performed by the title company to determine survey boundaries and potential adverse effects on the property. An appraiser will be interested in the results.
Principal buyers and their agents will determine what easements are appropriate and acceptable and which ones are not. Possible options include accepting the property as-is, renegotiating the price, or outright rejecting the purchase.
History:
Many buildings constructed in the earlier part of this century, before the 1960s, lacked adequate parking and, in most cases, lacked formal agreements regarding common on-site usage for ingress and egress, including walking and automobiles. In property law, ingress/egress refers to the rights of a person to pass over a real property for entry, leaving, and return across the property.
Walking, bicycling, horseback riding, and horse-drawn carriages were common forms of transportation. Building growth clustered around the center of town was standard. The advancement of the automobile, which made transportation more flexible, had not yet matured, and the need for expanded parking areas had not yet emerged.
In days gone by, two or more property owners might verbally agree to build adjacent buildings and use a small portion of one of the land parcels for ingress and egress, as oral agreements often do. Many old verbal agreements have gone awry, as oral agreements often do. Handshake agreements broke down, and conflicts arose with future ownership. Problems also arose when descendants and partners disagreed with the interpretation and or benefits of the original verbal easement agreement.
https://www.findlaw.com/realestate/land-use-laws/express-and-implied-easements.html
Municipalities, property owners, and lawyers began memorializing the agreements in written form. At the same time, municipal planning departments and zoning ordinances were created. Owners were required to hire civil engineers to draft a written placement of physical easements and obtain approval from the municipality. Hiring a land planning lawyer to handle the application process for various approvals with the city planning department became standard practice.
Upon approval by the city, the agreements and drawings of the physical placement of the easements encumbering the property were generally recorded in public records. The objective was for the recorded agreements to provide public notice that the easement existed and would bind all future owners in perpetuity.
Many older structures were built before building and zoning ordinances were created and enforced. Zoning ordinances were adopted in California as early as the 1920s and have continued to evolve. Prohibitions related to setbacks, height and density restrictions, floor area ratios, required parking, deed restrictions, necessary amenities, and acceptable building materials have occurred. Laws that now control aspects of ownership have been passed.
Real estate development patterns on a going-forward basis:
Laws have changed, sometimes dramatically, as we have experienced in California. California leadership has recently passed multiple laws to modify the nature of public housing occupancy, including urban and suburban housing. The goal is to replace single-family homes with high-density, stack-and-pack cluster apartments. Parking requirements and setbacks have been reduced and eliminated to accommodate more vehicles.
Many developers prefer high-density or cluster zoning and housing to maximize density, space, and profits. Cluster housing was initially defined as housing placement near each other, reducing individual land parcels and yard space to increase open and common area amenities. Larger open space areas within the development form a buffer for adjacent land uses. Additionally, cluster housing with homeowner associations would maintain the facilities.
There is a distinction between the written physical layouts or placements of easements and written usage agreements that memorialize the rights and responsibilities between the parties. A well-written agreement is designed to understand and enforce the terms and conditions among the parties.
A part of centralized development planning is determining the need and locations of property usage easements. These easements will be plotted and engineered as part of the approval and development process.
Suburban areas have historically consisted primarily of low-density residential, commercial, and industrial communities away from urban areas but within commuting distance for employment. Suburban communities have jurisdictions for political and governmental services.
Populations grew in the suburbs because people sought autonomy from the tightly controlled rules and hectic, congested lifestyles in densely populated urban settings. Suburbs typically offer a higher standard of living for a comparable income compared to the metro or urban lifestyle. Traffic congestion, commercial corridors, shopping, schooling, environmental issues, and freedoms that go with more land and open space make it worth the cost for people to commute into a city for work.
Former President Obama issued a regulation known as AFFH (Affirmatively Furthering Fair Housing). The objective is to create progressive mini-urban cities within the suburbs. The purpose was to have suburbs swallowed up by larger cities. These new mini-cities would be subject to federal regulations and mandates, which would take control of zoning and development. This includes eliminating single-family zoning and requiring the construction of medium- to high-density, low-income housing, thereby creating mini-urban-styled downtowns.
Eliminating local government control is the plan to destroy the suburban lifestyle.
Affirmatively Furthering Fair Housing (AFFH) operates by holding the development process accountable to the U.S. Department of Housing and Urban Development's (HUD) Community Development Block Grants and federal planning requirements. Suburbs will be prohibited from receiving millions of dollars in HUD grants unless they eliminate single-family zoning, install low and moderate-cost housing, and consolidate and densify commercial and residential districts into stack-and-pack neighborhoods. Highway funds are also planned to be withheld for non-compliance.
Any objections by a local municipality could result in the suburbs' municipal leaders being sued by civil rights groups and the federal government for discrimination.
The current administration has reactivated and prioritized Obama's AFFH strategy.
Eminent domain actions frequently force property owners to sell or allow specified easements, which I call easement by extortion.
Municipalities commonly use eminent domain to acquire easements on specifically targeted properties. When the owner applies to process a tentative tract map, city planners frequently condition the approval to include easements that offer little or no benefit to the property owner. In many cases, property owners are even required to pay for the improvements.
In many cases, multiple parties who own adjacent properties, such as shopping centers, retail centers, industrial sites, and historic registry facades, all require written easement agreements to protect all participants' mutual benefits and interests. Examples include easements for parking, reciprocal access to ingress and egress corridors, access for the installation and maintenance of utilities, and the operation and management of common areas.
https://www.nps.gov/tps/tax-incentives/taxdocs/easements-historic-properties.pdf
- Case studies:
- a)Two adjacent property owners who were friends owned and occupied two separate contiguous industrial parcels. The property is in Gardena, CA. Each land parcel was 40 ft wide by 100 ft deep. The property owner on the right side wanted to build a zero-lot-line building structure that was 40 feet in width. A zero lot line means the property was initially built up to the property line with no setbacks. The left-side property owner agreed to construct his building only 30 feet wide, ensuring 10 feet of space would be available for the ingress and egress of automobiles for use by both properties. The actual location for ingress/egress was only 10 feet from the left-side property. The right-side property had no other method of entry except through its left neighbor's property. No written agreements existed, but merely two good old boys who agreed with a handshake and, hopefully, an occasional cold beer at the local Kelsey's bar.
- An argument and litigation for a prescriptive easement right would be justified since the buildings were built in the 1960s. The original and subsequent owners have operated in this manner ever since.
The right-side property owner owned his property free and clear, while the left-side property owner had the first lien of $300,000. A lender suggested that the property owners hire a civil engineer and a lawyer to draft a reciprocal easement for ingress and egress. The owners must submit the plans and agreement to the building and planning department for approval. Upon city approval, the reciprocal easement agreement could be recorded. Once the contract was signed and recorded, the easement would remain on the property title.
The solution to the problem was that the newly drafted easement would be recorded in the first lien position on the right-side property but as a second lien position on the left-side property. The left-side property's recorded easement would be in a second lien position behind a $300,000 first trust deed lender. If the borrower on the left side defaulted on his loan and the property was lost in foreclosure, the recorded usage easement would be foreclosed, extinguished, or ceased. Subsequent owners would be damaged and have no right of access. Lack of access to automobile ingress and egress would drastically diminish functionality and desirability, and the value would be severely affected.
b)An auto body and fender shop fronted on a busy street but had no direct access to the auto storage yard. Entry into the repair shop was available only through an alleyway. All the properties along the street have the same issue and potential risk.
The lender's task in processing and underwriting a requested loan was to verify that the alley right-of-way was either a publicly owned street or a written reciprocal easement agreement signed and approved by the property owners who required continued access through the alleyway. The recorded easement was verified to exist and run with the land. Risk abated.
- c)A barbershop operator had the chance to purchase the real property at the location of his operating business. The area was an A+ at the entry to a regional shopping mall. Part of the lender's processing and underwriting staff's task was to verify a reciprocal parking easement agreement for all the tenants in the shopping center and the inline retail shops near the entry. The recorded easement was verified and found to be a part of the land. Risk abated.
- d)A small shopping center owner and an adjacent church struck an informal deal to use each other's parking. An informal letter arrangement was signed between two property owners, who mutually benefited from being able to use each other's parking. The informal agreement does not run with the land and is cancellable with 30, 60, or 90 days' notice. Sunday mornings were problematic; the large church occupied one side of the street, with marginally adequate parking. Church attendees can use the parking across the street for Sunday services. The shopping center across the street has semi-adequate parking, although parking is particularly problematic on Saturdays.
- There are risks because of the informal nature of the agreement and its cancelability.
- e)Land loan. A lender made a commercial loan on a vacant parcel adjacent to a large shopping center. The parcel was located strategically at the most prominent entry to the shopping center.
- An appraisal was obtained that reflected the values of a developed small commercial for a drive-through fast food or coffee establishment.
The parcels necessitated every square inch for development with little flexibility. Parking was adequate as it was conveniently located adjacent to the large shopping center, and there were no restrictions on the number of available spaces. There were no parking easements, but there was also no prohibition against parking.
- The borrower's attorneys drafted an agreement. The principal property owner made a deal with the largest shopping center tenant to place prominent entrance monument signage on the subject parcel without the knowledge of the land lenders. The property owner/borrower attempted to strong-arm the land lender into signing the subordination agreement, making the land lender's first lien junior to the signage easement.
- What a preposterous and foolish request! However, the borrower/owner of the property was seeking a foolhardy lender. How about a massive unforeseen risk for a lender? The lender rightly refused the request.
- If the lender had agreed to sign the subordination and allowed a colossal monument sign in the middle of the vacant commercial parcel, the parcel value would have plummeted to a small park to donate to the local municipality as a feel-good exercise.
Understanding easements related to real estate ownership and development involves complex legal issues. Civil engineers and land planning lawyers specializing in this area of real estate law should assist in drawing property boundaries, alignments, and applications for municipal approvals. Work with a title company to have the easements recorded and insured. Assess the benefits and risks. Please don't do not use best practices.