This Tricky Legal Agreement Could Turn Your Dream Property Into a Nightmare

Whether purchasing a commercial or residential property, the prevailing law is “buyer beware.”

In other words, as a buyer, you must make appropriate inquiries about the property to discover any important information in order to satisfy yourself that the property is suitable for you.

Particularly in the residential real estate context, there are countless instances where purchasers discover a problem with the property on or just before closing. One such problem is an easement, which can have significant impacts on your use and enjoyment of the property.

What is an Easement?

Simply stated, an easement gives someone the right to use a specific portion of your property for a particular purpose. The most important and potentially troubling aspect of an easement is that it “runs with the land.” This means that an easement is not removed when ownership of the property changes or the property is sold. The easement stays attached to the land itself until it is officially removed from title to the property or the agreement creating the easement has ended.

Given that easements run with the land, you must be vigilant and ensure that you discover and understand the nature and extent of any easements placed on property you intend to purchase.

Where Easements Go Wrong

There are two common scenarios where easements become the subject of a dispute. The first is where the purchaser did not understand the nature and extent of the easement until after closing. The second scenario is where the purchaser did not know the easement existed until after closing.

Whenever an easement is known to exist, it is important to fully understand its characteristics. The most fundamental characteristics include time limitations on the easement, the purpose of the easement, and the people that benefit from the easement.

The purpose of the easement often ends up being the biggest point of debate in these disputes. For example, an easement may be registered on title to your property as a right-of-way permitting your neighbour to use your driveway to access their property. However, in reality, someone may begin to improperly use the easement for drainage pipes for water run-off or as roadway for access to a construction site, mining site, or garbage pickup.

Worse still, you may not know an easement exists in the first place. Many purchasers are unaware of the fact that easements do not need to be registered on title in order to be valid. For example, the seller of the property may enter into a private agreement with a construction developer which provides the developer an “air easement” to operate a crane above the property. If the seller does not register the easement on title, it may go undetected.

How to Avoid Scenarios Where an Easement Negatively Impacts the Purchase

With prudent behaviour, you can avoid or mitigate these scenarios.

Before entering into an agreement of purchase and sale, you should be fully informed about the easement’s actual use, legal description, and the underlying agreement or deed that created it.

Where an easement is registered on title, it is important to inspect or have your lawyer inspect the easement. The deed or instrument that created the easement should be read carefully in order to determine whether the description of the easement corresponds with its actual use. Where it appears that the easement’s actual use does not match with its description, further inquiries should be made.

In addition, it is important that the easement be properly described in your agreement of purchase and sale for the property. This is important because it offers you a clearer path to a remedy before closing if you discover that the easement is being misused.

You should also ensure that the seller has not granted an unregistered easement over the property to any other parties. Where you suspect that there is a formal agreement that gives someone an easement over the property, you should have the seller either provide you with the agreement or state that there are no additional agreements affecting the property.

Why Is All of This Important?

Where the actual use of an easement does not match its legal description, you can make closing conditional on the easement being removed, and a new and properly described easement being registered on title. You may also be entitled to a price reduction or compensation where the seller has stated in the agreement of purchase and sale that no easement exists where one does. In summary, the more specific the agreement of purchase and sale, the clearer your case will be should you need to take legal action.

However, if you do not take steps to determine the existence, nature, and extent of an easement, you may be stuck with it and left with no direct legal remedy. Buyer beware.

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