This article appeared in the winter issue of Urban Land on page 82.
As land for new housing in urban and suburban areas becomes scarce, developers push their activities closer to existing industrial, mining, rail, and other nonresidential uses, resulting in major battles over the development approvals. Housing proposals that do get approved frequently result in future conflicts between the new residents and the existing users, followed by political battles and litigation. The challenge for all parties is to find strategies that allow construction of more housing while protecting existing users.
The collaborative use of simple easements can allow new housing development to be approved, existing uses to be protected, and written rules of future engagement to be established.
Examples of Clashes
In all the following real-world examples, the existing uses were fully permitted and were not nuisances to surrounding property owners and users. But the approach of new housing—whose occupants are deemed “sensitive receptors,” that is, people, things, or uses that are likely to be affected by environmental factors—may have resulted in the recharacterization of these existing uses as nuisances.
- Noise, dust, and vibrations from an operating gravel quarry have not affected the surrounding ranches, but a housing developer sought land use entitlements to build single-family houses on the lip of the quarry.
- Noise, dust, and illumination from a port offloading facility had never been a problem for the surrounding industries, but a live/work developer filed an application to convert the adjacent building to residential lofts.
- Odors, lighting, and nighttime traffic at a large around-the-clock seafood processing plant caused no problems for the adjacent golf course, but the course owner planned to close the facility and build a large apartment complex.
- Evening traffic, noise, and lighting at a sports park was not a problem for the neighboring retail strip center, but a developer sought entitlements to convert that center to residential condominiums.
Housing developers typically argue that there would be no future conflict because the new owners and tenants will have full advance knowledge of the existing uses. However, the new residents, eventually and inevitably, complain loudly to the existing users, news outlets, and the local government. That results in significant political turmoil and litigation, with heavy costs to the local government, the developer, the existing users, and the residents. Whatever the outcome, everyone is unhappy.
How can communities expand the housing envelope while protecting existing uses?
The Collaborative Easement Strategy
In the four situations described here, the existing user took the initiative and convinced the developer and the local government that their collective self-interest was best served by participating in a collaborative easement strategy. The following are the key characteristics:
- The existing user and the developer entered into a simple easement agreement granting the existing user the affirmative right to pass noise, dust, odors, vibration, and illumination (or some combination thereof) across the proposed development site.
- The existing user and the developer also agreed to a disclosure statement describing in detail the impacts of the existing use and the legal effect of the easement. The easement agreement expressly required that the developer (and all future titleholders) provide this disclosure form to all prospective buyers and tenants and obtain a written acknowledgment of receipt.
- The existing user agreed not to take any action to defeat the developer’s application for housing entitlements and, in fact, went on the public record as not opposing the project.
- The local government approved the housing development application with conditions of approval requiring the use of both the disclosure form and the easement, as well as the recording of the easement in county land records.
- The developer recorded the easement agreement and the mandatory disclosure form (not just a memorandum of agreement) against the development site before the recording of the subdivision map so that the easement would run with the land and appear on all future title reports.
One should note that this strategy involved no monetary compensation. The reciprocal promises of the developer and the existing user provided the contractual consideration.
How did this joint strategy benefit the three major actors—the existing land users, the developer, and the local government?
- The existing users found a way to deal with the inexorable approach of housing development while securing the right to continue their existing uses.
- The developers embraced this strategy as a way to eliminate opposition, get their projects approved, properly inform prospective buyers and tenants, and protect the developer from liability to future buyers and tenants.
- Local government officials and staff saw this joint strategy as a way to add housing, ensure that future buyers and tenants receive full disclosures, and minimize current and future conflicts among their constituents.
Other remedies and workarounds are sometimes used, but they often do not provide the level of protection offered by collaborative easements.
Deed restrictions can include disclosures of existing uses and easement language, but almost invariably the language is not sufficiently comprehensive. Also, the brief language is buried in the deed and is not flagged by future title searches. By contrast, a collaborative easement, as an independent and separately recorded document, is always flagged as an exception in title reports and attracts the appropriate attention, particularly if it is given a graphic title such as “Noise, Dust, Vibration, and Illumination Easement.”
Covenants, conditions, and restrictions (CC&Rs) are common and can incorporate lengthy disclosures and provisions regarding existing uses. However, as with deed restrictions, the disclosures and treatment of legal rights are buried in a larger document and this issue is not separately flagged in title searches.
State and local governments sometimes require that residential sales documents disclose the proximity of a wide range of uses, such as industry, mining, cemeteries, and airports. While these disclosures do inform buyers and tenants, the protection of the existing uses is not directly addressed.
“Right to operate” laws in many states and localities now protect certain types of uses. For example, as housing spread closer to active farming and ranches, many local governments responded with “right to farm” ordinances to protect existing farms. And mining interests often are protected in a variety of ways by state statutes. These ordinances and laws are very helpful in preserving existing industries, but their adoption can take a long time and the enacted law or ordinance is generic and not customized to the particulars of a specific housing proposal and existing use.
Conditions of approval on the local government approvals can impose disclosure requirements and deed restrictions that would provide some protection for the existing use and future buyers, but the protection is quite limited.
Note that these alternatives are less effective than collaborative easements in requiring future owners of the residential property to inform the next-in-line buyers and tenants with regard to the existing use and their legal rights. In addition, collaborative easements can be easier to modify in the future than deed restrictions, CC&Rs, and conditions of approval.
Existing Housing and Settlement of Conflicts
The collaborative use of easements described in this article occurs when a new housing development (or other sensitive use) approaches an established use.
A different situation arises when an existing residential user asserts that an existing industrial use is a nuisance, often because of an increase in the nuisance level (such as more noise or more odor). In reported cases where conflicts arose between existing housing and existing airports, wind farms, and landfills, the parties have sometimes resolved the conflicts by entering into settlement agreements under which residents release their claims in return for compensation, soundproofing and other improvements, and restrictions on the industrial uses (such as hours of operation, limits on decibel levels, and restrictions on traffic). These settlement agreements sometimes contain easement language.
A very different situation is presented when an existing residential use may be affected by a proposed new industrial use. For example, to get approvals and limit liability, a proposed wind farm or asphalt plant may offer nearby residents advance compensation and mitigation measures (such as restrictions on production, operating hours, and traffic) in exchange for the execution of a “settlement agreement” that releases all future claims for personal harm and property damage, sometimes with the use of easement language. In one reported matter, a fracking company paid large sums of money to residents in exchange for a broad waiver of future claims for property harm and property damage. This aggressive strategy may face substantial legal challenges, including assertions that local governments always retain police powers over health and safety issues. In addition, this type of contract may be unenforceable as contrary to public policy.
Limitations of Collaborative Easements
Collaborative easements are most effective in situations where a new, sensitive user is approaching an existing use. In that situation, the interests of the existing user, the developer, future residents, and the local government can be aligned. However, even in those situations, collaborative easements are not without limitations.
Collaborative easements do not apply to any neighboring property that is not covered by the recorded easement. The agreements also are not effective against the members of the public, including those using public land, streets, and rights-of-way.
Collaborative easements resolve issues of private trespass and private nuisance, but are not effective against public nuisance claims and certainly not against criminal nuisance claims. Furthermore, even with a collaborative easement, the existing user is still subject to established legal standards relating to clean water, clean air, noise limits, and other environmental measures.
Elements of a Collaborative Easement
Collaborative easements are simple, affirmative easements. Traditional easements allow the dominant property to pass people, vehicles, livestock, and/or other physical objects across the easement. Under the type of collaborative easement described here, the dominant property (i.e., the existing user) is simply passing noise, dust, odor, fumes, vibration, and/or illumination across the easement.
Collaborative easements commonly include the following provisions:
- Recitals describing the parcels involved, the existing use, the development proposal, and the purpose of the agreement.
- A grant to the existing user of a nonexclusive easement for noise, dust, vibration, odor, illumination, and/or other factors (taking into account possible successor industrial or other users).
- Agreed restrictions on the scope of the easement (such as hours of operation, decibel levels, and traffic).
- The term of the easement (perpetual, fixed years, or terminating with the end of the industrial use).
- A waiver and release of all future claims for the grantee’s permitted activities within the defined scope of the easement.
- Indemnity and limitation of damages.
- A requirement that the grantor (and all future owners) make the written disclosures to all successors-in-interest (including buyers and tenants) and obtain a written receipt.
- The reservation of the grantor’s right to use the servient property for all permitted uses not inconsistent with the purposes of the easement.
- The subordination of senior interests in the real property. (Title searches and insurance should be considered.)
- A clear statement that the easement is a covenant running with the land.
- The requirement that each party cooperate with future requests for estoppel certificates (i.e., a written statement acknowledging that the agreement is still in full force and effect with no defaults).
- Other standard contractual provisions, such as clauses relating to signing authority, notices, integration/merger, and “further acts and assurances.”
- A requirement that the easement be notarized and recorded before the recording of the developer’s subdivision map.
Collaborative easements often include the following additional provisions:
- Naming of the local government as an express third-party beneficiary. (Depending on state law, this may prohibit future amendment of the easement without the written consent of the local government and may allow the government to directly enforce the agreement.)
- Reference to the conditions of approval imposed by the local government.
- Provisions that are state-specific or that reflect local government requirements.
- Mediation and arbitration provisions.
- Provisions for the recovery of legal fees and costs.
Collaborative easements have not been commonly used, but the technical aspects of creating them are straightforward. The challenge in using collaborative easements lies in forging the alignment of interests among the existing user, the developer, and the local government. Overcoming such challenges through the use of collaborative easements can provide a path to approving more housing, informing prospective buyers and tenants, protecting existing uses, and avoiding political turmoil and litigation.
GEOFFREY C. ETNIRE is a ULI member and a land use and real estate regulatory lawyer based in Venable LLP’s offices in Washington, D.C., and San Francisco. He has over 30 years of nationwide experience in representing real estate owners, developers, and lenders, as well as mining and industrial users.