Picture it — your client is in a rush to complete diligence on a potential acquisition and hates to pay for the cost of an ALTA survey in the event they decide not to move forward. I know many acquisition lawyers have experienced this at least once (particularly on mid-market deals). Some may assume that what appear to be standard utility easements are innocuous. However, utility easements must be reviewed carefully to assess risk. It is always best to review utility easements with a current ALTA survey in hand. Here are a few things your lawyer may look for:
1. Improvement Restriction: One of the most common provisions an attorney will review is whether the easement prohibits improvements from being located within a designated area. Although it may be rare to hear of a utility company suing to force removal of all or part of any improvements located in a restricted area, it is best to know about any such encroachment and seek an amendment to the given utility easement to avoid problems down the road.
2. Clearing Trees: Another common provision in utility easements provides that the utility may cut or remove trees from a designated area. This type of provision makes sense from the utility company’s point of view. However, an owner should consider if any trees or other vegetation that can be removed by the utility company were put in place as a requirement under a zoning approval process or other government requirement.
3. Notice or Consent on Sale & Form Language: In some cases, an owner will sign a utility easement without engaging counsel to review the terms in advance. Some utility companies will use boilerplate form documents which may, in some cases, contain provisions requiring that an owner provide notice to a utility company (or obtain advance consent from a utility company) prior to a sale or transfer of the property. An owner should never agree to such a restriction but an unwary owner may sign a form document containing it nonetheless.
4. Location Selected In Future: A utility company may want the right to select the specific utility easement location in the future. If the location has not been selected at the time the agreement is reviewed, it is virtually impossible for an attorney to complete a full review of the easement.
Of course, the list above is not intended to cover the full range of possibilities – that always depends on what is contained within the document and what is located on a given property. Plus, always remember, even if an owner/buyer is ok with any risk resulting from the items outlined above – a lender’s counsel may not be and title insurance may be limited or unavailable depending on the circumstances.