Owning property doesn’t necessarily mean having the freedom to do whatever you want with your land. When my wife and I were in the process of buying our first house, we knew right away that nearly two-thirds of the land we were about to purchase was unusable because the house sat on a ravine lot.
In many cases, however, it may not be obvious that the land may have restrictions, like easements.
An easement is permission to use someone else’s land for a particular reason, such as accessing a shared driveway or for utility lines. While easements are often viewed as restrictive by property owners, they can also offer advantages that may lead to an increase in property value. ‘Beneficial’ easements, for example, could protect a property’s view from being obstructed by future developments.
In Ontario, we commonly see:
- Right-of-way easements, allowing passage across land,
- Utility easements for services like electricity and water,
- Conservation easements to protect natural resources.
Easements are transferred automatically to new owners when a property is sold, hence the saying ‘easements run with the land’.
Being unaware of easements can lead to unpleasant surprises down the road. Often, these easements come to light during the closing of the deal, by which time it might be too late to withdraw from the purchase. Even more challenging is discovering them post-closing, like when a new homeowner realizes they can’t build a pool or an addition due to easements. This scenario is common in new subdivisions where utility companies might have easements along a property’s side or through the middle of the backyard. Adding to the peril, title insurance often provides no coverage for issues related to registered easements.
According to 2023 LawPro Real Estate Claims Fact Sheet, almost 40% of common malpractice errors for real estate lawyers were due to miscommunication, including failures such as:
- Not informing clients about land use restrictions in subdivision agreements.
- Overlooking survey reviews and discussions about potential risks.
- Neglecting to learn about the client’s future property plans, which could be hindered by easements.
Takeaways
In my experience, I have observed that clients tend to file complaints or take legal action against their advisors not primarily over financial loss, but rather due to unexpected outcomes that catch them off guard. There is no such thing as a “pleasant surprise” when it comes to real estate transactions. It is the element of surprise that often prompts these reactions.
Real estate agents can play an important role in ensuring their clients’ interests are protected by conducting due diligence before any offers are made on a property. By collaborating with a real estate lawyer, agents could review title searches and communicate any findings related to easements, restrictions, or other title issues to their clients. This could prevent scenarios where clients are unable to back out of a deal, after the offer has been accepted, resulting in delayed closings, increased legal fees, or even transaction failure. Furthermore, early due diligence not only protects client interests but also strengthens the client relationship and enhances the agent’s reputation.