Easements in Industrial Real Estate
It is critical to understand how different types of easements can impact industrial real estate investment and what may be required when selling an asset.
What Are Easements?
It's important to understand how easements work in industrial real estate. An easement defines how others may access your property — or how you may access others' properties.
An easement is, at its core, an legal agreement with the owner of land to permit access under certain circumstances. These are often filed as an appendix to legal documents for real estate, like warranty deeds.
If you sell a property, you are generally required to disclose all pertinent easements. This is because easements have the potential to lower a property's value. Should a seller fail to disclose any easements, a buyer may be able to pursue legal action.
Who Uses Easements?
Utility companies are the most common users of easements. This is because utility providers need access to equipment (like electric wiring or pipes) on private land. As a result, real estate owners grant them easements. It's important to know that easements don't grant a utility company any kind of land ownership. Easements merely give access — which is essential to resolving any infrastructural issue that may arise.
Easements are also often granted to owners or occupiers of adjacent property. This is primarily used if a neighbor needs to cross your property to get to or from theirs. These types of easements provide rights of ingress and egress. That's the legal right to enter and exit another parcel to access otherwise inaccessible buildings.
Two Types of Easements
Easements in gross are a special type of easement which gives the right of access to a specific person or company. These types of easements cannot generally transfer to another party, though exceptions may apply. For example, utility company easements are generally in gross. However, they are generally transferable in the case of, say, a utility merger.
Appurtenant easements, on the other hand, are connected to another property. It's often said this type of easement "runs with the land." Even if a building or its land sells, the easement remains. Examples include most easements granting access to a neighbor for entry or exit. These are particularly common in industrial parks where several buildings may not directly border a public access road.
Ending an Easement
It's important to understand the duration of any easements impacting your property. Many easement documents list an expiration date, or its termination could be connected to the necessity of access to the land. For example, an easement granting a nearby industrial tenant the right to use your truck court as an exit could end after a new access road opens.
If an easement does not carry an expiration date or clause, termination can be a little trickier. The surest way to end an easement is to speak to the other party and agree to release the easement. Once the parties have agreed to a release, note that it is critically important to file a written agreement to the county recorder's office.
Related Questions
What is an easement in industrial real estate?
An easement in industrial real estate is a legal agreement which grants the right to use another entity’s property in a limited, specified capacity. Easements are often used to establish rights of ingress and egress for accessing the commercial property. In cases where a registered easement has not been granted through the local authorities, or where ingress and egress issues are not addressed on a property’s deed, a land-use agreement can be utilized instead.
For more information, please see Ingress and Egress Rights in Commercial Real Estate and Commercial Zoning in Commercial Real Estate.
What are the different types of easements in industrial real estate?
The different types of easements in industrial real estate are typically registered easements or land-use agreements. Registered easements are legal agreements granted by local authorities that grant the right to use another entity’s property in a limited, specified capacity. Land-use agreements are used when a registered easement has not been granted or when ingress and egress issues are not addressed on a property’s deed.
For more information, please see Ingress and Egress Rights in Commercial Real Estate and Industrial Property Loans.
What are the benefits of having an easement in industrial real estate?
Having an easement in industrial real estate can provide a number of benefits. Easements can provide access to the property, allowing for ingress and egress rights. This can be especially beneficial if the property is in a situation where access is limited or restricted. Easements can also provide tax benefits for the owner and their heirs. For instance, if an investor buys a commercial property for $3 million, and its value increases to $4.5 million before the investor passes away, the investor’s beneficiaries will only need to pay taxes on the $1.5 million that the property has appreciated, not the entire $4.5 million sale price. This can save an investor’s heirs hundreds of thousands or even millions of dollars. Ingress and Egress Rights in Commercial Real Estate and The Top 10 Tax Benefits of Investing in Commercial Real Estate.
What are the risks associated with easements in industrial real estate?
Easements in industrial real estate can present a variety of risks. For example, if an easement is granted to a third-party, the owner of the industrial property may not be able to control how the third-party uses the property. This could lead to potential safety hazards, such as blocked access to the property or increased traffic. Additionally, if the easement is not properly documented, the owner may not be able to enforce the terms of the agreement. Finally, restrictive covenants may limit the types of businesses that can be operated on the property, or prevent certain parts of the property from being developed.
For more information, please see the following sources:
How can I protect myself from potential risks associated with easements in industrial real estate?
The best way to protect yourself from potential risks associated with easements in industrial real estate is to thoroughly review the deed of the property and any other relevant documents before purchasing or developing the property. It is important to understand the exact restrictions that the property has, or allowances that the property owner must provide, in order to ensure that you are not taking on any unnecessary risks. Additionally, you may want to consider obtaining an easement from the local authorities or entering into a land-use agreement in order to establish rights of ingress and egress for accessing the commercial property.
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What are the legal implications of easements in industrial real estate?
Easements in industrial real estate are legal agreements that grant the right to use another entity’s property in a limited, specified capacity. This could include granting rights of ingress and egress for accessing the industrial property, or allowing a third-party to use a property for some specific use. Easements are often written into the deed of the property itself, however, they can also be implied by repeated behavior. Restrictive covenants are also written into the deed of an industrial property, and may either last a certain number of years or indefinitely. These covenants may restrict the types of businesses that can be operated on the property, or they might prevent a certain part of the property from being developed. It’s essential to know exactly what restrictions a property has (or allowances that a property owner must provide) before purchasing or developing an industrial property.
For more information, please see the following sources: