New Zealand: Buying commercial property: 5 useful things to know about easements!

In simple terms easements are formal legal documents registered on the title to a property setting out the rights you have over neighbouring properties as landowners, or rights neighbouring property owners have over your property. Utility providers and Councils frequently register easements over property in order to provide services. For example, an easement in favour of Chorus New Zealand Limited to allow them to convey telecommunications and computer media over an area on the title. Other examples of easements in favour of Councils or neighbours are rights of way and rights to drain water and sewage.

When buying a commercial property it is important to thoroughly investigate any easements on the title so that the likely impact on your future use and/or value of the property can be fully understood.

Easement Area

This is an identified area on the title plan of the property over which neighbouring property owners or utility providers/Council have rights. You cannot restrict or prevent access to these areas by constructing a building or landscaping. This will impact not just on any planned development but on the use you can make of this area of the property. The neighbouring property owner or utility provider will have a right of entry (after reasonable notice) onto your property to access the easement area and carry out required work (e.g. new drain pipe).

Maintenance Obligations

The parties who benefit from an easement have maintenance obligations and the starting point is the easement document itself in terms of each parties obligations. If the document does not set out the rules adequately, then there are a number of obligations implied by statute. The relevant statute will be determined by when the easement was granted and registered. The two main provisions that can apply are :

  1. Clause 11 Schedule 4 of The Land Transfer Regulations 2002 default position is that each party benefiting from the easement contributes equally to repair and maintenance costs; and
  2. With regard to driveways Clause 2 (d) of Schedule 5 of the Property Law Act 2007 provides that each party makes a reasonable contribution towards the costs of establishment, maintenance upkeep and repair of a driveway to a reasonable standard.

Often these obligations are varied on title so that each party pays in proportion to their use. So if there is a shared driveway and front property owner will only pay towards the maintenance of the small area they use to access their property while the back property owner will pay the majority. However if repair is required because damage is caused by one party then that party is responsible for the full cost of repair. So for example if the right of way is damaged by your heavy trucks you alone would be responsible for the cost of repair.

Commercial Activities

Often easements (such as right of way easements) contain rules and restrictions. For example, it is really important to check whether the easements could have an impact on your planned use of the property. Continuing with the above example, is your planned use by heavy trucks 24 hours a day permitted by the terms of the easement? Are there time limits on hours of use?

Sufficient Services

Are the services sufficient for your planned use of the property? One particularly important issue in this digital world is access to telecommunications/computer media. How is data conveyed onto the property and how many neighbours need to be liaised with to upgrade to the ultra-fast broadband?

Utility Providers

Easements in favour of utility companies (e.g. drainage and power companies) usually have wide ranging rights of entry once they give notice to you, including the ability to come on to your property for an unspecified time to upgrade facilities. Will this potentially disrupt your business?

Due Diligence in purchasing a commercial property is the best insurance against making decisions you later regret. Investigating every easement fully will inform you as to what easements are currently in place and their likely impact on you, as well as confirm that all the necessary easements are in existence to operate your business from the property.

We at Cavell Leitch have considerable experience in this area and would be very keen to assist you with your next commercial property investment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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