September 28, 2018
Author: Kellee P. Dunn-Walters
Organization: Lathrop & Gage LLP
A. Necessary elements.
There is no "form" of an easement, and each carries with it particular issues and considerations. Often our clients are presented with "take it or leave it" easements from utility companies and cities, but don't be afraid to say NO – the alternative is condemnation, which currently has fallen out of favor, so we, as lawyers, have leverage in crafting the language of the easement. There are a number of issues to consider in drafting (or negotiating) an easement, depending on its intended purpose, but at a minimum, you should consider the following when drafting.
1. The Grantor. The name of the grantor should be the same as the name indicated on the last deed. If the grantor is married, it is prudent to include the spouse. It is remarkable how many owners do not know how they hold property, so it is always best to confirm ownership and spellings through a recorded deed or title insurance policy.
2. The Grantee. Precision in the name of the grantee is equally important, particularly if you represent the grantor; trying to sue a non-existent entity for breach of the terms of an easement can lead to some real headaches (and potential liability).
3. Dominant/Servient Tenements. Obviously, the easement area should be legally described in the easement. If the request of the grantee is to define the easement area after improvements are made (such as installing a water line), at least place in the easement parameters (within the south 40 feet of Lot 1, and 5 feet either side of the water line to be installed) and define the easement with precision after the improvement is made. If the easement is appurtenant to other property owned by the grantee, it is essential to describe the appurtenant property; you will also need to address what will happen if a portion of the appurtenant property is sold, whether the easement is personal to the owner of the appurtenant property, etc. It is also wise to attach a depiction of the easement area by a licensed engineer; it is very difficult to decipher metes and bounds legal descriptions, and often a picture is worth a thousand words.
4. Duration. Is the easement perpetual, limited in time, or limited to the duration of use? It is critical to address duration with as much clarity as possible – otherwise the grantee will have a perpetual easement by default.
A common mistake occurs in the drafting of temporary construction easements. The easement will state that it ends "one year after the improvements are completed". What that means is anyone's guess. Who decides when the improvements are completed? How is that decision made public? A good practitioner will always add an outside termination date – "one year after the improvements are completed and accepted by the City of X, however in no event later than December 31, 2014". Without that limitation, the easement could well be perpetual. Easement can also be limited to the lifetime of a person; if that is the case, make sure a death certificate is recorded upon the death of the grantee.
5. Use or Purpose. Barring a specific restriction in the easement, the grantee of an easement may use it for whatever purposes the grantee desires. The courts generally will try to determine the intent of the parties in easements that are not specific in use, but generally the grantor winds up the loser. Precision is the key, and in drafting an easement for a grantor, be sure to add to the purpose description "and no other use" – at least that way the grantor has express the intent to limit use to what appears in the document. Never, never put in an easement "and other similar uses". Also address the intensity of use – for access easements, limit the size and number of vehicles; for utility easements, limit how many pipes, cables and lines can be installed. Be creative and always assume that the grantee is going to maximize use of the easement area.
6. Appurtenant or "In Gross". If the easement is "in gross", the easement encumbers the property but there is no dominant estate. The identity of the grantee to whom the easement is conveyed is important, and the easement document should define whether the easement continues to run in favor of that grantee's heirs or successors, whether it is assignable, and the extent of any limitation on these conditions.
7. Maintenance. Who maintains the easement area? If it is the grantee, specify how maintenance is to be performed and what happens if the grantee fails to maintain.
8. Improvements. What improvements will the grantee make and when must they be completed? Remember that the owner can grant a simple easement, such as drainage or access easement, and the grantee is not obligated to construct such improvement unless required by the easement agreement.
9. Indemnities and Insurance. Protection of the owner is a must in any easement. Insurance requirements will vary with the easement use, but insurance must be required; the owner should be listed as an additional insured and loss payee in all policies. Indemnification is also very important, and if the grantee is a dry LLC or corporation, providing for the members or stockholders to backstop the indemnity is a good idea.
10. Financial Strength. If significant maintenance is required in the easement, the financial strength of the grantee may be important. Ask for continuing financial reports or a guarantee from a substantial guarantor.
11. Real Estate Taxes and Assessments. Who pays them? What if the use of the easement area triggers a reassessment or reclassification of the property?
12. Termination. It is prudent to give the owner the right to terminate the easement before its term expires upon certain conditions. The obvious ones are failure to maintain, exceeding the purpose of the easement, failure to maintain insurance – but depending on the purpose of the easement, the list can get quite lengthy. Be sure to place provisions in the easement to allow for public notice of the termination, such as allowing the owner to record a statement of termination if appropriate – otherwise, the public and title insurance companies will not know the easement has been terminated.
13. Restoration. Particularly with temporary construction easements, it is vital to address restoration of the property. Most temporary easements state that the property will be restored to its "original condition" or "same condition" – that may work in most cases, but what if the temporary easement area was heavily excavated? Prudence would dictate that the grantee grade to a specific slope and compact the soil to specified density. It is important to also consider whether or not the grantee must remove all personal property and fixtures at the end of the easement – no one wants an old, unused phone pole in the front yard.
14. Consideration. Being an interest in land, an easement should be granted for significant consideration. It may be helpful to retain an appraiser in cases of large utility easements or public works projects. Depending on the intensity of use, the consideration may approach the full, fee value of the property.
15. Sky's the Limit. Did you know that, unless limited, the use rights of an easement will go from the center of the earth to the nearest planet? If the utility wants to lay an underground line, specify its depth and prohibit any use by the utility of the surface of the land; if the utility wants an overhead power line easement, prohibit use of the surface of the land, and reserve the right to use the surface (driveways, parking lots, gardens, etc.). Don't let the utility specify that the line will be buried below "plow depth" – I have never met anyone who knows what that means.
16. Access. How is the grantee going to get to the easement? If the owner does not specify, the courts will permit the grantee any form of reasonable access.
17. Condemnation. What happens if the easement area is condemned? Who gets the proceeds of the condemnation? Do the parties want to move the easement area to another location?
18. Exclusivity. Rarely are exclusive easements given, but this is an issue that should always be addressed. It will prevent potential conflicts later.
19. Assignment or "subletting". An owner should always retain the right to approve an assignment of easement rights, whether partial or full, particularly if the integrity or financial ability of the grantee is an issue. Recently, we have seen more and more attempts to multi-task easements through the use of "subletting" or "co-location". A power company with an overhead easement will "rent" space on a power pole to a fiber optic or cable company. The owner should prohibit this activity without the right to approve (and get additional consideration).
20. "Negative" Covenants. Easements can contain negative covenants as well as the positive grant of rights. For example, an easement can be given that states that the owner will not block the view of the adjacent property owner/easement holder.
21. Notices, Governing Law, Other Provisions. The easement should contain provisions on legal notices, the governing law, successors and assigns, and other "miscellaneous" clauses.
22. Signature of Parties. It is recommended that the grantor and grantee sign the easement agreement, since certain conditions may be imposed on the grantee and they will be unenforceable without a signature.
23. Acknowledgments. An acknowledgement signed by a notary public is required for recording.
B. Priority Issues.
In less populated states, such as Missouri and Kansas, there are vast distances between cities, and decades ago utility companies were forced to run utility lines for miles to service those cities. In addition, there are a significant number of large pipeline companies that have utility easements extending through our area which date back to the 1950's.
Easements for these lines were mostly acquired when the tracts were being used for agricultural purposes. A general condition of the easements were to allow the owner to use the easement area for crops and maintaining a fence, but no structure could be built within the easement area. To compound the issue, many of the easements were "blanket" easements describing entire sections as the easement areas.
After the 1950s, cities expanded to accommodate new residential subdivisions. Plats would be filed on these tracts. In some cases, the plat would place the term "public utility easement" overlapping the existing utility easement. Most attorneys would stop at review of the plat and not read the old utility easements or documents.
It is critical to read these old utility easements to determine if there are any restrictions on the use of the easement area. These easements have priority over the public utility easements designated on the plat.
The general rule is that the easement filed first in time would have priority over subsequent easements and plats. As a rule, the holder of a junior easement must not unreasonably interfere with the enjoyment of the prior easement (Laws of Easements and Licenses in Land, Sec. 8.33.)
Most utility companies will cooperate to "define" or "confine" ancient legal descriptions to the actual area needed for their lines – in most cases, that will eliminate the priority conflict. Another problem area is underground natural gas storage easements; about a century ago, gas companies acquired square miles of easements to allow the storage of natural gas beneath the owner's property. The storage areas are several hundred feet below the surface. Since these easements remain in use today, how do you develop land encumbered by them? Obviously, they have priority over any subsequent use, and most of the easements are vague and state that the land's surface can be used for extraction of the gas. The solution is to get the grantee to "confine" the easement to at least 75 feet below the surface of the land; this will permit development of the surface.
C. Special Issues in Cross-Easement Agreements
Most easements involve the granting of the easement from one party to another. Some easements, however, affect and encumber many properties and benefit many landowners, such as where a residential or commercial development covers a wide area in a subdivision community or an industrial or warehouse park. These kinds of agreements require special consideration.
These easement agreements may be imposed at the beginning of the development by a single developer or grantor in favor of itself and all future owners, or may arise later when there are several property owners who wish to submit their properties to a common regime. Therefore, the granting language may read something like this:
__________________, a _________________________, hereby grants to each individual person, partnership, joint venture, corporation, limited liability company, trust, unincorporated association, governmental agency or other business entity now or hereafter holding an ownership interest in fee in all or any portion of the real property hereafter described (which persons are hereinafter singularly called an “Owner” and collectively called the “Owners”) all of the following described easements….. Then, the easement document will undoubtedly call for ingress and egress easements for pedestrian and vehicular purposes across the private roadways in the development. Such language might describe these easements as follows:
Nonexclusive easements for the purpose of pedestrian travel and vehicular traffic between the lots, parcels or tracts of land constituting portions of the Property, and the streets and alleys designed for public use which are now and hereafter abutting or located on any portion of the Property. These nonexclusive easements, however, are limited to those portions of the Property which are improved by the Developer thereof from time to time for vehicular access ways as such portions may be reduced, increased or relocated from time to time by such Developer. Such areas may be reduced, increased or relocated from time to time by Developer, and the easements herein granted shall be correspondingly reduced, increased or relocated from time to time, so that the easements herein granted correspond to the areas of the properties which are improved by the Developer for vehicular use and made available for general use.
The latter language is particularly important to give the developer of the project the flexibility to change the easement areas from time to time as future development may dictate. Rarely does a developer know exactly how all of the ingress and egress routes and common areas are going to come into being as future development occurs.
Finally, whether the cross-easement agreement is being entered into for an existing development or a new one, everybody understands that the utility company may well “miss the easements” in the process of constructing the facilities. Therefore, many practitioners believe it is a good idea to include encroachment easements up front, even though no encroachments may then exist. Of course, you want to make sure that such language does not expose an owner to the possibility of losing title by adverse possession or losing a permanent easement interest by prescription.
To accommodate any building or improvements which may be inadvertently located by an owner over the boundary line between its property and the property of another owner, each owner grants to the owner of any such encroaching improvement an easement, not to exceed a maximum lateral distance of ________________ inches, along the common boundary between such properties, for the existence, maintenance and replacement of such improvement. Notwithstanding this grant of an easement, however, any such improvement which is removed and replaced shall, if at all possible, be replaced solely upon the owner’s property, and in such event the easement for that particular encroachment will expire. This grant of an encroachment easement shall not operate as an estoppel, waiver or other hindrance of the right of the party whose property has been the subject of the encroachment to maintain such legal action and seek such remedies to which it may be entitled, against the encroaching party.
Cross-easement agreements may also involve many other issues, such as maintenance of the easements, indemnities among the parties, insurance coverages, expiration and termination of the easements, and remedies of the complying owners should one or more other owners breach the agreement. A form of cross easement is attached to these materials for your consideration.
EXHIBIT
CROSS EASEMENT AGREEMENT
THIS CROSS EASEMENT AGREEMENT is made as of this ____ day of ___________, 20____, among _______________________________ (hereinafter “ABC”) and ____________________________________ (hereinafter “ALB”). ABC and ALB are sometimes referred to herein as an “Owner” or, collectively, as “Owners”).
Recitals of Fact
A. ABC owns fee title to a tract of real property which is legally described on
Exhibit “A” attached hereto and made a part hereof by this reference (the “ABC Property”).
B. ALB owns fee title to a tract of real property which is legally described on
Exhibit “B” attached hereto and made a part hereof by this reference (the “ALB Property”).
The ABC Property and the ALB Property are hereinafter collectively the “Properties”.
C. ABC and ALB desire to create a mutual cross easement for access between the
ABC Property and the ALB Property in an effort to facilitate the development and utility of both properties as a whole.
Agreement
NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable considerations, it is hereby agreed as follows:
1. Mutual Grant of Driveway Easement.
ABC and the ALB hereby grant each to the other and to each individual partnership, joint venture, corporation, limited liability company, trust, unincorporated association, governmental agency or other business entity now or hereafter holding an ownership interest in fee in all or any portion of the ABC Property or the ALB Property (which persons are hereinafter singularly called an “Owner” and collectively called the “Owners”) a nonexclusive mutual easement for the purpose of customer vehicular and pedestrian traffic between the ABC Property and the ALB Property. No use by commercial trucks shall be permitted. This easement shall be over the driveway area which is approximately shown on the site plan attached hereto as page 1 of Exhibit “C” and incorporated herein by this reference.
The parties agree that a full legal description of the driveway area, showing the access points shall be prepared at the cost of ALB by a competent land surveyor licensed in the State of Missouri, and shall be submitted to both parties within thirty (30) days of the date of this Agreement for approval. The legal description, including access points and the exact location of the driveway, shall be subject to the prior approval of ABC, which approval shall not be unreasonably withheld, delayed or conditioned so long as the legal description is in general accordance with the site plan attached as page 1 of Exhibit “C”. If ABC does not respond to ALB’s submission of the proposed legal description within the thirty (30)-day time period, ABC will be deemed to have approved the legal description. The legal description as so approved shall be attached to this Agreement as page 2 of Exhibit “C” and shall be incorporated herein and become a part hereof as though fully set forth. Once attached, the legal description shall have precedence and priority over the site plan attached as page 1 of Exhibit “C”, in the event of
any conflict between the two. The easement area as defined by such legal description is hereinafter called the “Driveway Area”.
2. Construction of Driveway. Once the legal description of the Driveway Area is approved by both parties and attached here, as set forth above, ALB shall at its cost do the following: (a) have any further plans for the construction of the driveway drawn and prepared, (b) hire a qualified contractor for the performance of the work, (c) obtain any and all required building permits or other governmental permits for the construction of the driveway, and (d) have the work prepared in accordance with the plans. The plans shall meet all requirements of the Missouri Department of Transportation and any other applicable governmental authorities.
The plans shall be subject to the prior approval of ABC, which approval shall not be unreasonably withheld, delayed or conditioned. If ABC does not respond to ALB’s submission of the proposed plans within thirty (30) days after the plans are submitted, ABC will be deemed to have approved the plans (provided that they meet all other requirements set forth herein). ALB agrees that construction will not occur between September 1 of any year and January 1 of the following year.
3. Unimpeded Access. Owners agree that no barricade or other divider will be constructed on or over the Driveway Area and that Owners will do nothing to prohibit or discourage the free and uninterrupted flow of vehicular and pedestrian traffic on the Driveway Area.
4. Use of Easement. Subject to the reasonable rules and regulations adopted for the use of each Owner’s tract by the Owner thereof, the use of the Driveway Area will be nonexclusive and shall exist for the use and benefit of the Owners, their respective successors, assigns, and such agents, customers, invitees, licensees, employees, servants, contractors, mortgagees, tenants and tenants’ customers, invitees, employees, servants, licensees, contractors and agents as might be designated by each Owner from time to time (all of which persons are hereafter called “Permittees”). Each Owner specifically reserves the right, at any time, and from time to time, to promulgate such rules and regulations applicable to the Owner’s real property as might be reasonably imposed to promote the health, safety, welfare and security of such real property, the improvements located thereon and the Permittees of such Owner. Each Owner may, at any time and from time to time, remove, exclude and restrain any person from the use, occupancy or enjoyment of the Driveway Area for failure to observe the reasonable rules and regulations established as provided herein.
5. Maintenance of Driveway Area. ALB will be responsible for all maintenance and repair costs of the Driveway Area and the improvements thereon, and will keep the Driveway Area in good and sound operating condition suitable for pedestrian and vehicular use.
6. Duration.
This Agreement shall continue for so long as the ALB Property is used for purposes of a ___________________________. If the ALB Property is ever discontinued for use as a _______________________ store or similar uses, ALB shall attempt to relet or sell the ALB Property for retail uses, and this Agreement shall continue during the time period when the property is being marketed for such uses. If a purchaser or lessee is obtained who will use the ALB Property for retail uses, this Agreement shall continue as provided above. If, however, a purchaser or lessee is obtained who will not use the ALB Property for retail uses, then ABC shall have the right to notify ALB in writing, and ALB shall have thirty (30) days thereafter within which to cure the situation or enter into a written agreement with ABC that is satisfactory to both parties. If neither of such events occurs, then ABC shall have the right to terminate this Agreement by written notice to ALB.
Except as set forth above, this Agreement shall be perpetual unless terminated by the mutual agreement of the Owners.
7. Appurtenant Easement; Runs With the Land; Successors Bound. The mutual easement created by this Agreement is appurtenant to both the ABC Property and the ALB Property and may not be transferred, assigned or encumbered except as an appurtenance to such properties. This Agreement constitutes a covenant running with the land with respect to both Properties. This Agreement shall bind every Owner now having or hereafter acquiring an interest in either of the Properties, and will inure to the benefit of each Owner and each Owner’s successors, assigns and mortgagees. Each Owner agrees that on conveyance of all or any part of the property affected hereby, the grantee, by accepting such conveyance, will thereby become a new party to and be bound by this Agreement.
8. No Dedication. Nothing contained in this Agreement will be deemed to constitute a gift, grant or dedication of any portion of the ABC Property or the ALB Property to the general public or for any public purpose whatsoever, it being the intention of the Owners that this Agreement will be strictly limited to the private use of the Owners and their respective Permittees. This Agreement is intended to benefit the Owners and their respective successors, assigns and mortgagees and is not intended to constitute any person which is not an Owner a third party beneficiary hereunder or to give any such person any rights hereunder.
9. Amendment. This Agreement and any provision herein contained may be terminated, extended, modified or amended only with the express written consent of all of the Owners of the Properties. No tenant, licensee or other person having only a possessory interest in the improvements constructed on a Property will be required to join in the execution of or consent to any action of the Owners taken pursuant to this Agreement.
10. Condemnation. In the event the whole, or any part, of any Driveway Area affected hereby is taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, an Owner benefited by an easement created by this Agreement will not share in any award, compensation or other payment made by reason of the taking of a portion of any such Property which is subject to such easement. The award, compensation or other payment will belong entirely to the Owner of that portion of the Driveway Area which is taken, and such Owner will have no further liability to any other Owner for the loss of the Driveway Area, or portion thereof, located on the property so taken.
11. No Partnership. Nothing contained in this Agreement and no action by the Owners will be deemed or construed by the Owners or by any third person to create the relationship of principal and agent, or a partnership, or a joint venture, or any other association between or among any or all of the Owners.
12. Miscellaneous.
If any provision of this Agreement is, to any extent, declared by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement (or the application of such provision to persons or circumstances other than those in respect of which the determination of invalidity or unenforceability was made) will not be affected thereby and each provision of this Agreement will be valid and enforceable to the fullest extent permitted by law. This Agreement will be construed in accordance with the laws of the State of Missouri.
The captions of the Sections of this Agreement are for convenience only and are not intended to affect the interpretation or construction of the provisions herein contained and shall not affect the interpretation or construction of the provisions herein contained. Time is of the essence of this Agreement. IN WITNESS WHEREOF, this instrument has been executed effective as if the date first above written.