United States: Developers: Be Wary Of Utility Company Easement Forms

A utility company that provides service to an owner's property usually requests the owner to sign a standard form of easement that is intended to allow the utility company to enter onto the owner's property in order to install and service its utility lines. These forms vary from one utility company to the next, but they typically contain a number of customary terms that many developers and builders do not bother to negotiate even though some of them can be problematic.

Many easement forms are "blanket" in nature, meaning that they do not describe a particular easement area where the utility lines are to be located, but allow the utility to place lines anywhere on the property. This may be fine if the property is being used for agricultural purposes (and many utility company easement forms were created with that scenario in mind), but for a property that is to be developed for commercial or residential purposes, a blanket easement presents problems. It gives the utility company the legal right to require the removal of any improvements on the property that would unreasonably interfere with the utility company's ability to place, access or maintain its lines. While the utility company may install its lines in locations that do not interfere with improvements, it need not do so. Blanket easements are therefore objectionable to purchasers and mortgage lenders because they may interfere with the ability of the owner to maintain improvements it has built on the property.  One way to avoid this problem is to negotiate a provision into the easement that the lines will be installed only at mutually agreeable locations, and limit the easement area to a specific width wherever the lines are installed (such as five feet on either side of the lines).   However, this still does not specify where the lines will be. A better option is to create a specific sketch and legal description of the easement area.  In both of these cases, the owner should make sure that the locations do not include any building footprints or other areas where vertical improvements are intended to be constructed.

Another "blanket" right that many utility company easement forms usually contain is the right of the utility company to access its lines on the property with vehicles and equipment. This can allow utility company trucks, bobcats and backhoes to drive across and around the owner's property, wrecking grass and landscaping. Accordingly, the easement should provide that vehicular access to the easement area will be limited to the drives, roads, and parking areas constructed on the property to the maximum extent practicable.

Many utility company easement forms prohibit the owner from installing any improvements whatsoever in the easement area. Others severely limit the types of improvements that an owner can be install. If the easement is silent on this subject (which few are), an owner has the right to install any improvements that do not unreasonably interfere with the easement holder's rights. If the easement contains prohibitions on improvements, an owner should consider specifying what types of improvements it reserves the right to install in the easement area. This usually consists of so-called "horizontal" infrastructure improvements like pavement, curbing, sidewalks, landscaping and other improvements that do not unreasonably interfere with the utility company's ability to access and service its lines.

Even if the owner has the right to install improvements in the easement area, the utility company still has the right to access and service its lines, which means that the utility company can remove or disturb those improvements. Under Florida common law, the utility company will not have a legal obligation to restore them when it is done, unless the easement provides that it must do so. It is therefore important to negotiate a provision into the easement that requires the utility company to restore the surface of the easement area to as near as practicable the condition which existed prior to its activities that disturbed the easement area.  Absent such a provision, the owner would have to do this and bear the cost.

Consideration also should be given to whether the utility company should be required to install its lines underground. Without such a requirement in the easement, it need not do so.

An owner should also consider whether to limit the types of lines a utility company can install pursuant to an easement. It is not unusual for electric and telephone company easements to provide that the utility company can install not only electric or phone lines, but also lines for cable television, internet access and telecommunications services. This allows the utility company to let other companies "piggyback" onto the utility company's easement rights (for a fee, of course), and use the easement area as an assignee of the utility company. The way to avoid this is to specify in the easement that the lines can only be for the specific purpose initially intended by the utility company (such as electric or phone service).

Finally, an owner should always require that the utility company indemnify the owner against any liability for personal injuries, death, or property damage, and any other loss or damage (including the owner's attorneys' fees), which arise out of the utility company's exercise of its easement rights, except for loss or damage which results from the willful or negligent acts of the owner or its agents, contractors or employees. 

Utility companies will usually negotiate in good faith to address an owner's reasonable concerns with their easement forms, and it is not unusual to get them to agree to these types or provisions in an addendum to the easement; however, there will be some lead time required since it will usually require the involvement of their legal department. The bottom line is that developers and builders who are presented with utility company easement forms should not just sign them, but think about the kinds of issues they can present. It is easier to negotiate these concessions up front before the lines go in, than to ask the utility company to amend its easement later.

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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