The principle of caveat emptor (“buyer beware”) makes site inspections an essential part of the due diligence process for acquisitions of development sites. Not only are site inspections the only way to find out certain types of information about a property, more often than not they also reveal information that should be discoverable through other means, but, for one reason or another, does not come to light until much later (sometimes too late). The list of things about a property that could be discovered through a physical inspection is endless. For the purposes of this article, we will focus on easements and the most common issues to look out for ‘on the ground’. But first, a bit of background:
What is an easement?
Easements are rights enjoyed by one piece of land (“dominant land“) over another piece of land (“servient land“). Common examples include rights of access and of passage of services. Subject to some very limited exceptions, easements ‘run with the land’ meaning that the dominant land will continue to have the benefit of the right and the servient land will continue to be subject to the right notwithstanding a change in the ownership.
If an easement is interfered with, the dominant landowner may have recourse to a number of remedies against the servient land owner. These may have an adverse impact on any proposed development of the servient land, most notably:
- obtaining an injunction to prevent the action giving rise to the interference, e.g. building works;
- claiming damages to compensate any loss suffered; and/or
- seeking to stop the interference, e.g. by physically preventing the obstruction, thus delaying the construction process on the servient land.
This demonstrates why it is important to know exactly what easements affect a development site.
How is an easement created?
An easement can be created in a number of ways:
- By deed – easements are often granted to a buyer or tenant on the transfer or grant of a lease of a property. However, easements need not be granted as part of a larger transaction and could also be granted in a standalone deed of easement.
- By implication – easements that have not been expressly granted could be implied in certain circumstances, such as:
- By necessity, e.g. where part of a larger property is disposed of and the retained land by necessity, e.g. where part of a larger property is disposed of and the retained land has no means of access except over the land that has been disposed of, a right of way may be implied.
- By common intention, e.g. where a plot of land is disposed of and it is the intention of the parties that a new house is to be built on that plot, an easement to connect to services may be implied.
- The rule in Wheeldon v Burrows (1879) 12 Ch D 31 – where part of a larger property is disposed of and prior to the disposition that parcel enjoyed rights over the wider site that are (a) necessary for the reasonable enjoyment of the land, (b) are used at the time of the disposition, and (c) are continuous and apparent.
- By prescription – if a right is exercised over land without force, secrecy, and permission, for a period of at least 20 years, it may become a legal easement.
- By statute – statutes could confer express rights to certain entities, e.g. utility companies.
What is the extent of the easement?
The extent of an expressly granted easement is usually, but not always, obvious from the deed that created it. The extent of easements acquired by implication or prescription is often not as clear and the circumstances surrounding the exercise of the easement should be considered carefully to establish its parameters. This is where a site inspection can help.
One issue that often arises in the context of a development site is the concept of excessive user, i.e. if an easement has been granted or acquired for a particular purpose, it will not necessarily extend to other uses or even more intensive uses. For example, an easement benefitting a parcel of land with a single house on it may not benefit the same property once it is redeveloped into 100 houses or an easement that allows agricultural vehicles to use a roadway may not be worded sufficiently wide enough to allow people to access a housing development.
In addition, an easement only benefits the land as stated at the time it was granted or the land which acquired the right. The easement does not normally extend to neighbouring properties. For example, if a right to drain onto neighbouring land benefits one parcel of land and a further parcel of land is acquired, it is not necessarily the case that the second parcel of land can also use the drain.
How is an easement terminated?
An easement can be terminated or extinguished as follows:
- By deed – an easement can be terminated by express agreement in a deed. It is important to ensure that all parties with the benefit of an easement release it.
- By implication – an easement could be terminated where an intention to terminate can be inferred from the conduct of the parties. For example, where the dominant landowner consents for something to be done on the servient land which will prevent the easement from being exercised by the dominant land owner. Or perhaps the dominant landowner has stopped exercising the easement for a long time and does not intend to use it in the future.
- By operation of law – an easement could come to an end where the dominant and servient land are owned by the same person (“unity of ownership”) or where the easement was granted for a limited period of time that has now expired. Statutes also contain provisions for extinguishing easements.
We set out below some examples of what to look out for when carrying out a site inspection, although this is not an exhaustive list, to help a prospective purchaser of a development site consider whether there could be any easements which could hinder a proposed development:
- Is there anything to suggest that rights may be exercised over the property, e.g. tracks and paths or where an adjoining property has a gate that allows access over the property;
- Look up! Are there any cables on the property and are they where you were expecting them to be;
- Look down! Does it look like any ground has been dug up or removed, perhaps to install something, e.g. pipes;
- Are there any features on the property which are used by or jointly with other properties, e.g. service media;
- Are there any features on an adjoining property that can only be accessed via the property or otherwise require rights over the property;
- Does the property require any rights over other properties, e.g. to access certain areas that could not be accessed without entry onto neighbouring land.
- If easements have been revealed as part of the due diligence:
- are the dominant and servient land as described or have they changed in any way;
- is the easement exercised over the same route over which it was originally granted;
- are there any signs, fencing, or other features intended to prevent the use of an easement;
- does an easement that was supposed to have expired still appear to be exercised;
- is an easement exercised in practice? If an easement that may otherwise prevent a proposed development is not exercised, indemnity insurance may be available so as to mitigate against the risk of a third party seeking to prevent the development in the future on the basis that it will interfere with the easement.
- The principle of caveat emptor puts the onus on the buyer to discover all relevant information about a property.
- Site inspections can reveal valuable information about a property that is often not discoverable in any other way.
- A buyer should be mindful that easements can be created without express agreement. Such an implied easement could hinder a potential development of a property.
- If a buyer intends to rely on an easement that benefits the potential development site, further analysis should be carried out to check the easement is sufficient for the current or even intended future use of the property.
- If an easement that would otherwise prevent a proposed development is not exercised, indemnity insurance may be available to mitigate against the risk of a third party seeking to prevent the development in the future.