Bar News - May 17, 2017
Real Property Law: How Appurtenant Easements Can Threaten Commercial Projects
By: Roberta Baker
Few things are more important to the success of a commercial project than a careful analysis of title to the real estate. Problems affecting title can result in the total failure of a project or inability to develop the land in the full manner desired. In addition to the primary development, easement rights over abutting lands are often integral to a successful result.
An appurtenant easement is generally defined as a nonpossessory right to use the land of another, according to the NH Supreme Court in Arcidi v. Town of Rye (2004). A dominant or benefited estate and a servient or burdened estate are created either by a separate easement agreement or by a reservation in a conveyancing instrument.
Residential easements are most often reserved in a deed. NH RSA 477:26 provides appurtenances run with the land whether or not they are carried forward in the language of future recorded instruments. Parties may avoid the result by expressly stating their intent not to include the appurtenant interest. Reserved easements are common in creating access rights for residential use and are generally sufficient for those purposes. There are, however, many additional considerations when a commercial project is involved.
Understanding the Client’s Needs
An analysis of the current and future use of the property and any engineering that needs to take place is important in determining the adequacy of the appurtenant easements that serve the property. Some common examples of project needs are: support easements (retaining walls), temporary construction easements over abutting lands, drainage, ditch, culvert, slope and embankment, utilities facilities, mixed use, parking and reciprocal easement agreements for shared parking, access and other purposes.
Now that the client’s project is understood, it is time to analyze the adequacy of the existing easements.
Existing Easement Examination
Does the easement allow for all required purposes? Is the language creating and describing the easement sufficient to define its future use? If the language is ambiguous, a court may be the one to determine the intent of the parties in light of surrounding circumstances at the time of the grant of the easement (Arcidi).
Are there issues of overburdening the easement? Is an easement extended by adding additional parcels of land to the project not previously benefited by the easement?
A new project may result in increased vehicles or heavier commercial traffic. Challenges to the use of an easement are often successful if a new use creates unforeseen burdens that were not contemplated at the time the easement was created.
Additional land added to the project may also overburden an easement if it creates an “unreasonable burden” on the servient estate (Ettinger v. Pomeroy, 2014).
Does the search of the servient tenement or burdened land reflect areas of concern? Is there merger of title resulting from easements being granted by the owner of both the servient and dominant estates?
One cannot convey an easement to oneself. An owner cannot hold both the fee and easement interest as the easement merges into the greater fee estate. The easement would need to be re-created if such common ownership exists.
Are there mortgages with priority over an existing easement that could wipe out the easement in a foreclosure? Did all required parties sign the Easement Agreement?
Authority of signers on behalf of entities and the timing of the execution and recording of an appurtenant easement should always be examined for defects that could give rise to defenses to its exercise.
Is the easement vague or not located within the described easement area? Is the easement shown on a plan but not created?
A plan alone is insufficient to create an easement (Soukup v. Brooks, 2009). It is not unusual to discover easements created only by dedication on plans prior to the Soukup decision.
Any one of these issues may result in the need for confirmatory, amended or new easements for adequate servicing of the project.
New Easement Creation
In addition to the issues explored above, drafting of new or amended easements should take into account the following:
- Is the easement exclusive? Does it need to be?
- Is it drafted to be fully assignable?
- Does it touch and concern the land?
- Does it contain adequate maintenance and repair provisions?
- Is there a temporary construction component that needs addressing either in the new easement or in a temporary standalone easement?
- Is the easement adequately located?
- Does it need to be relocated?
- Is the new location shown on surveys of the main parcel of the project?
- Will a new easement result in the necessity of new curb cut permissions and driveway permits?
Lenders providing financing for a project will require title insurance to protect the loan. A savvy attorney will be looking to fully protect the client owner as well.
The best way to insure an appurtenant easement in the title insurance policy is to treat it as a separate insured parcel.
There are also title insurance endorsements designed specifically to insure appurtenant easements. Be aware that there will be underwriting requirements including adequate surveys depicting the easements. Here are some of the relevant insurance endorsements:
ALTA 17 (direct) and ALTA 17.1 (indirect) are the endorsements addressing the vehicular and pedestrian access to the Land and the access to public streets that are open and maintained with existing curb cuts.
ALTA 17.2 (utility access) addresses a lack of access to utility services, water, electric, natural gas, sanitary sewer, telephone, storm water drainage or any other services negotiated and included in the endorsement.
ALTA 18.1 (paragraph 2) addresses the risk resulting from an easement being cutoff or disturbed by the non-payment of real estate taxes or assessments on the servient estate. Of course the current taxes must be paid on the servient estate and the underwriter may require an escrow of funds for second half taxes in the first half of the tax year. The first half taxes are an estimate only and the taxes are a priority lien from April 1.
ALTA 19.2 addresses the risk of gaps or gores existing between the easement and the project land it serves.
Due diligence in the creation of easements and attention to title insurance protections can make all the difference in assuring the success of a commercial project and, most importantly, a satisfied commercial client.
Roberta Baker is vice president and New Hampshire State Counsel for the Fidelity Family of title insurance underwriters (Commonwealth Land Title, Chicago Title and Fidelity National Title). She is a member and past chair of the NH Bar Association Real Property Section and past president of the New England Land Title Association.