Easement
Also known as: property easement, right-of-way, utility easement, access easement
An easement is a legal right that permits someone other than the property owner to use a specific portion of the property for a defined purpose. Unlike ownership, an easement does not grant possession — it grants limited use. Easements are recorded against the property's title and, in most cases, run with the land, meaning they survive changes in ownership, including foreclosure sales. For mortgage note investors, easements are a category of encumbrance that must be identified and evaluated during due diligence because they can affect the usability and value of the collateral property.
Types of Easements
Not all easements carry the same weight. Understanding the type tells you how it was created, who benefits from it, and how difficult it is to remove.
| Type | Description | Example |
|---|---|---|
| Utility easement | Grants utility companies the right to install and maintain infrastructure | Power lines, water mains, sewer pipes running along or through the property |
| Access easement | Provides a right-of-way for a neighboring property that would otherwise be landlocked | A shared driveway or path crossing one parcel to reach another |
| Drainage easement | Allows water runoff to flow across the property | A natural drainage channel that the municipality requires to remain unobstructed |
| Conservation easement | Restricts development to preserve natural features, often in perpetuity | A wooded area on the parcel that cannot be cleared or built upon |
| Prescriptive easement | Acquired through continuous, open, and unauthorized use over a statutory period | A neighbor who has openly used a portion of the land for access for 10+ years |
Easements are further classified as appurtenant (attached to and benefiting an adjacent property) or in gross (benefiting a specific person or entity, such as a utility company). Appurtenant easements transfer automatically with the land. Easements in gross may or may not transfer depending on the jurisdiction and the terms of the grant.
How Easements Affect Property Value
Most residential properties carry at least one easement — typically a utility easement along the lot edges — and these are standard enough that they have virtually no impact on property value. The easements that create concern for note investors are those that:
- Restrict buildable area significantly. An easement running through the center of a lot can prevent expansion, additions, or even rebuilding after damage.
- Grant public or broad access. An access easement allowing foot traffic or vehicle passage across the property reduces privacy and can lower desirability.
- Limit property use. Conservation easements may prevent clearing, grading, or developing portions of the land that would otherwise add value.
- Create maintenance obligations. Some drainage easements require the property owner to maintain the drainage path at their own expense.
When evaluating a note, compare the easement's footprint to the overall lot size and the location of the improvements. An easement running under a backyard is different from one running under the house's foundation. The legal description and recorded plat map will show the easement boundaries; cross-reference these with the property survey if one is available.
Easements and Foreclosure
A critical point for note investors considering a foreclosure exit strategy: easements almost always survive foreclosure. Unlike certain junior liens that may be extinguished when a senior lien forecloses, easements are not debts — they are property rights. A utility easement, access easement, or recorded conservation easement will remain on the property after the investor takes title through foreclosure or deed in lieu.
This is why easement review belongs in the title search phase of due diligence, not after acquisition. If an easement materially reduces the property's value, that reduced value should be reflected in the investor's BPO or appraisal and, consequently, in the bid price for the note.
Practical Due Diligence Steps
When reviewing easements on a property securing a note you are considering purchasing:
- Pull the title report and identify every recorded easement by type and beneficiary
- Map the easement boundaries against the property survey or plat to understand the physical footprint
- Assess value impact — routine utility easements along lot lines need no adjustment; easements affecting 10% or more of usable land, or crossing through improvement areas, warrant a value discount
- Check for unrecorded easements — prescriptive easements and implied easements may not appear on a standard title search but could still be enforceable
- Factor easements into exit strategy — if the plan is to foreclose and sell the property, a significant easement will affect resale value and marketability
Most easements on residential properties are routine and require no special action beyond verification. The ones that matter are the exceptions, and catching those exceptions before you buy the note is the entire point of due diligence.
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