Property Easement Agreements: Getting it Right

Easements can be established in numerous ways. Ranging from a handshake understanding between neighbors to a more complicated property use transaction between sophisticated commercial parties, easements are a fundamental part of real estate ownership and use. A discussion of easements and easement agreements is best undertaken by first defining what exactly is an easement is.

Black's Law Dictionary provides the following definitions, which prove useful for this discussion: "A right of use over the property of another," or "An interest which one person has in the land of another…" or "…where [one party] must permit something to be done thereon [by another party]." See Black's Law Dictionary (6^th Ed., West 1990). Easements can be established in various ways, even without the existence of an easement agreement. Indeed, easement rights can be created due to repeated use of certain property, by necessity based on the layout of the property or by implication in a transfer of property. However, our discussion in this article will focus primarily on affirmative easements by grant, or in other words, agreements giving one party the right to use of the real estate of the other party.

Easement agreements can be effective in their goal of granting rights to use property with very little (if any) formal language. However, the concern addressed herein is the need to spell out the details of the agreement, to protect one's rights and avoid potential liability. Addressing these critical components will not only ensure clarity in the parties' understanding, but will also go great lengths toward avoiding disputes, potential litigation and unintended outcomes. The following nine items must be considered and addressed in any easement agreement:

Nine Essential Property Easement Agreement Considerations

1. Legal Description of Properties
2. Depiction of the Easement Area
3. Covenant Not to Disturb the Use of the Easement
4. Determination of Maintenance Obligations
5. Payment of Property Taxes
6. Liability: Indemnification and Exculpation
7. Insurance
8. Default Provisions and Termination
9. Type of Easement: In Gross vs. Appurtenant

1. Legal Description of Properties

It is extremely important that an easement agreement contain a complete and accurate description of each of the affected properties. A full legal description is ideal, but even when this is not available, some description is necessary, even if only described by address, visual depiction or reference to the owners.

2. Depiction of the Easement Area

The easement area (in other words the portion of property to which one party is granted permission to use or access) should be depicted visually. Such a depiction need not be elaborate, but a clear "drawing" of the relevant easement area will help provide clarity and avoid potential disputes. In larger scale matters (or those with a high risk of dispute), a professional survey with an indicated easement area may be advised. However, in smaller-scale situations, even hand-written indications on a previously-prepared survey will likely be sufficient.

3. Covenant Not to Disturb the Use of the Easement

Although it may have a clearly defined right to use the owner's property, the party be granted easement rights (which we will refer to as the "benefited party") must also be sure to that the owner's use of the property will not create practical problems. To this end, the benefited party should insist that the easement agreement include language that protects its right to undisturbed use of the easement. If such language is not included, the owner of the property may have the right to continue to use the property in a fashion that makes the benefited party's use impractical or impossible. A simple covenant not to disturb the benefited party's use of the easement might read as follows: "Party A agrees not to unreasonably interfere with the exercise of the Easement Rights by Party B or its guests, agents, invitees or licensees." Furthermore, if exclusive use of the easement area is desired, this must be explicitly spelled out in the easement agreement.

4. Determination of Maintenance Obligations

Even after rights and non-disturbance issues are clarified, the parties to an easement agreement face the issue of who will take care of that portion of the property, pay for any needed repairs or address related problems that occur. Put simply, the parties must determine who will maintain the easement area. These obligations can be retained by the owner of the property or can be placed upon the benefited party. Maintenance obligations should be clearly spelled out in the easement agreement. Doing so serves three purposes:

1. It raises the issues for discussion between the parties
2. It avoids potential confusion
3. It avoids later dispute or litigation

Possible language could read as follows: "Party A shall maintain the Easement Area in good repair and condition, all at its sole discretion. Nothing contained herein shall create any obligation on the part of Party A to maintain any other portions of the property."

5. Payment of Property Taxes

The owner of the property is typically responsible for the payment of all applicable real estate taxes and real property assessments. However, the parties to an easement agreement may want to consider re-allocating this responsibility, especially in the event of an exclusive easement over large portion of the subject property. For example, if Owner A grants easement rights to Owner B who owns the neighboring parcel, giving Owner B the exclusive right to use half of Owner A's property for a period of five years as a parking lot, Owner A should strongly consider forcing Owner B to foot the bill on at least a portion of the applicable real estate taxes. Simple language might read as follows: "Owner B shall be responsible for the payment of one-half (1/2) of all real property taxes and/or assessments levied against Property A during the period of its easement rights. The payment of such taxes shall be made by Owner B to Owner A within thirty (30) days of notice of such taxes and/or assessments." Conversely, if the benefited party will not be responsible for any portion of real estate taxes, this should be clearly stated, in order to avoid potential disputes. A simple statement such as the following might be used: "Grantee shall have no obligation to pay any taxes, assessments or other charges or fees applicable or chargeable to the Easement Property or the owner(s) thereof."

6. Liability: Indemnification and Exculpation

In any easement agreement, there arises the very serious consideration of potential liability for the behavior or acts of the other party with respect to the portion of property that is essentially being shared for a period. Even in seemingly simple easement scenarios, the parties must consider their potential liabilities with respect to their ownership or use of the property. The following provisions will prove beneficial in protecting a Grantor from the acts of the other party, and can be readily adapted to similarly protect a Grantee:

"Grantee shall indemnify, defend and hold the Grantor, its heirs, representations, agents, employees, successors and assigns, harmless from any and all costs, liabilities, damages, losses, claims, actions or proceedings whatsoever, including, without limitation, for injury to persons (including death) which may be claimed to have arisen out of (i) any damage, accident, injury or other similar occurrences in the Easement Area due to Grantee's negligence or misconduct; or (ii) the use, maintenance or repair of the Easement Area by Grantee, its guests, invitees, agents, or contractors. It is expressly understood and agreed that, notwithstanding anything in this Agreement to the contrary, the liability of Grantor hereunder, to the extent any exists, shall be limited solely and exclusively to the interest of Grantor in and to the Grantor Property, and neither Grantor, nor any of its heirs, representatives, successors, employees, affiliates or agents, shall have any personal liability for any claim arising hereunder and Grantee hereby expressly waives and releases Grantor and such heirs, representatives, successors, employees, affiliates and agents from any and all personal liability."

7. Insurance

Similar to the tax payment issue discussed above, an easement agreement needs to clearly state any obligations of the parties to maintain any forms of insurance. Considerations would obviously include property insurance, but may also include other coverage as well, as dictated by the circumstances. For example, the owner of the property may want the benefited party to pay for insurance for the portion of the property being used via the easement rights.

8. Default Provisions and Termination

Some consideration must be made for events or behavior on the part of either party that will terminate the easement. A property owner may want to include certain activities (including failure to make any required payments) that will result in termination of the easement. Conversely, the benefited party will want to clarify that breaches (or at least certain breaches) of the agreement explicitly do not result in termination of its easement rights. Possible considerations should include failure to make requirement payments to the property owner, failure to fulfill any maintenance obligations, failure to pay any required taxes or insurance premiums, and any other matters that are deemed relevant by the parties. Much of the detail with respect to default and termination will be dependant upon the unique nature of each situation.

9. Type of Easement: In Gross vs. Appurtenant

These seemingly daunting legal terms represent very simple concepts. There are essentially two types of easement rights that can be granted to the benefited party. An "in gross" easement is granted to an individual or entity, and them only. If they sell or otherwise dispose of the property, they retain the rights granted by the easement agreement. Accordingly, future property owners are not benefited by this type of easement. Put simply, it is an agreement applicable only to the parties that have entered into that agreement—a personal right to use of the property. An "appurtenant" easement is an easement that essentially attaches to the relevant properties or "runs with the land." In the event a property owner sells its property, the easement rights ‘survive' that sale and will benefit the future owner. This distinction is critical in any easement agreement and should be addressed squarely. Simple language is sufficient, such as the following: "This easement shall be an appurtenant easement and shall benefit future owners of the properties," or "This easement shall be in gross for the benefit of Party B and Party B only and shall not be deemed to run with the land."

*Jim Schleiffarth practices in the areas of real estate and land use law, specializing in land use agreements, sale contracts, leasing, financing, zoning matters and all types of investment, development and management transactions. Mr. Schleiffarth's practice emphasizes superior client service, straightforward legal counsel and reasonable fees.

This article is for informational purposes only and should not be construed as legal advice with respect to any particular party, property, transaction or circumstances. For additional information, please contact Jim Schleiffarth, Schleiffarth Law Firm LLC, St. Louis, MO, (314) 315-4117, [email protected].