The missing detail on a commercial listing sheet is often the information that matters most. Commercial easements are a prime example. They can impact where a building is placed and how a lender evaluates a loan. Commercial easements are frequently overlooked until late in a transaction, when the pressure to close is already high. Understanding what easements are, how they are identified, and why they are important to a commercial real estate buyer or seller is valuable before negotiating a deal.
What Is an Easement?
An easement is a legal right that allows a person or entity to use a portion of someone else’s property for a specific purpose. It does not transfer ownership; it simply grants defined access or use rights. In commercial real estate, easements can affect everything from where a building can be placed on land to who has the right to cross land. The property that carries the burden of the easement is referred to as the servient estate. The party that benefits from it (whether a neighboring property owner, a utility company or another entity) holds the dominant estate. Understanding which side of the relationship a property sits is an important starting point in a commercial transaction.
Common Types of Easements
Not all easements work the same way, and each type carries different implications for buyers and sellers.
- Easement Appurtenant: This type involves two neighboring parcels, where one property benefits from access across the other. Because it is tied to the land rather than an individual, it typically transfers automatically when the property is sold.
- Easement in Gross: This benefits a specific person or entity rather than a neighboring parcel. Utility companies commonly hold easements in gross to run power lines, water mains, or other infrastructure across private land. These do not automatically transfer with a property sale but can be assigned to a new party.
- Easement by Necessity: When a parcel of land is landlocked with no access to a public road, the law may allow for an implied easement across a neighboring property. The specific requirements vary by state, so understanding local standards is important.
- Utility Easement: Frequently encountered in commercial transactions, utility easements grant access to install and maintain overhead or underground infrastructure. They are often established when land is first platted and may not be prominently documented in later records.
- Private Easement: A property owner may grant another party specific access rights, such as use of a shared driveway or permission for a sewer line to cross the property. Private easements require careful review because they do not always transfer with title and may apply only to a specific individual.
- Prescriptive Easement: Arises through long-term, uninterrupted use of another’s land, typically 20 or more years, rather than a formal agreement. Because prescriptive easements are not recorded, they can be easy to miss without a thorough review.
How Easements Are Identified
A title search is the essential first step in identifying easements on a commercial property. The title team will review public records to confirm ownership and flag any existing easements or other encumbrances that could affect the transfer.
That said, a title search does not always tell the full story. Prescriptive easements, implied easements and some utility easements may not be clearly reflected in recorded documents. A physical inspection of the property and a review of survey records are important supplements, especially in commercial transactions where land use tends to be more complex.
Why Easements Matter to Commercial Buyers
Easements can have real, practical consequences for how a commercial property functions and what it is worth.
- Development and use: An easement running across a key portion of a property may limit where a structure can be built, how parking is configured or how the site is accessed. All of which affect both immediate plans and long-term value.
- Financing: Lenders review title reports carefully before approving commercial loans. An undisclosed easement discovered late in the process can slow or complicate financing if it is not addressed early.
- Ongoing obligations: Some easements require that certain areas be kept clear or accessible. This can affect how tenants use a space and what improvements can be made over time.
Navigating Easements with Confidence
Easements are a normal part of commercial real estate, and identifying them does not have to slow a transaction down. What matters is that they are surfaced early, reviewed carefully and fully understood before closing. In some cases, existing easements may be negotiable. If an easement creates a material issue for the buyer’s intended use, there may be an opportunity to address it before closing day.
The Landmark Title team will identify and resolve commercial easements early on to ensure there are no surprises when it is time to close. If you are buying or selling commercial property and have questions about easements or the title and escrow process, we are here to help. Contact us to get started.