Buying and Selling Commercial Properties with Easements
You’re ready to open the small family diner of your dreams, and you found the perfect spot. Bad news, though—there’s an easement on the property. The boutique next door has been using the lot in the back for overflow parking for years, and if you purchase the property, you have to continue to allow them access.
What does this mean for you? If you buy the property, will it really be yours, or will you co-own it with the neighboring business? How will this affect you if you try to sell the property sometime in the future?
Easements fall under the broader umbrella of property encumbrances: any limitation on property by someone other than the owner. In general, encumbrances lower the value of a property.
So what is an easement on a property? Simply put, an easement gives someone other than the property owner the legal right to use or enter the property (or a portion of it). It might be agreed upon by the property owner and other party, or it might be granted by a court; it might apply only to the current property owner, or it might be attached to the property.
Easements are not ownership, and they do not give someone unlimited rights to do whatever they want on a property. When and how the property can be accessed depends on the specifics of the easement and what kind it is. Using an easement may even mean paying fees to the property owner.
Different types of easements include:
Easement by Necessity
If part of a property is sold and the other part of the property can only be accessed through the part that was sold, the landlocked property owner may be entitled to an easement by necessity. This just allows them to pass through the property in order to access their own.
Just because a property can’t be reached by public roads does not mean an easement will automatically be granted, though. For example, the state of Texas will not usually grant an easement by necessity if the property was already landlocked when it was purchased, or if there is another way to access the property—even if it’s less convenient.
A property owner can choose to grant or sell an easement for any purpose. Perhaps the previous owner of the diner you’re hoping to buy agreed to allow customers of the boutique to park in their lot because they were friends with the boutique owner, or because they hoped to draw foot traffic from the boutique. Depending on how the original agreement is written, a private easement might apply only to the original property owner, or it may transfer with the property.
A public utility easement grants companies the ability to use land as needed in order to install and maintain utilities like power, water, and Internet cables. This kind of easement is extremely common, since it benefits the neighborhood or community, and generally won’t affect your property value. In addition to giving utility companies access to your property, a utility easement may dictate that you do not interfere with the utilities in question. Usually these restrictions are pretty reasonable—you can’t plant a tree where it will disrupt a power line, for example.
An easement by prescription, by the real estate definition, is when someone other than the property owner gains rights to a property through extended unauthorized use. To put it in common vernacular: “Possession is nine-tenths of the law.” Essentially, if one person openly uses another person’s property without permission for long enough—if the owner of the diner simply ignores the fact that the boutique is using his lot, for example—they can gain legal access to it. It’s important to monitor and challenge unauthorized use of your property to prevent this kind of situation. If a prescriptive easement already exists on the property, it will negatively affect the value and may limit your own use of it.
Most easements involve an agreement between specific parties—a property owner and a neighbor, for example, or a property owner and a utility company—but a public easement, by definition, involves the general public. This may give people the right to visit a lake or beach or a site of historical significance, or to use a privately owned pathway. Such easements may be granted by specific decree, or they might arise as “implied” easements after years of public use.
A commercial property can be a great investment even with an easement on it. Just make sure you understand exactly what it entails and how it will affect the value of the property before you officially commit.