An easement is a nonpossessory right to use another party's real property for a specific, defined purpose. Unlike a lease, an easement does not transfer possession; the property owner retains title and the right to use the land in ways consistent with the easement.
Easements are real property interests that run with the land; they bind not just the parties who created them but all future owners of both the benefited and burdened properties. An encumbrance is a broader term encompassing any claim, lien, charge, or liability attached to a property that may diminish its value or restrict its use, including easements, mortgages, restrictive covenants, mechanic's liens, and judgment liens.
In commercial real estate due diligence, the identification and evaluation of easements and encumbrances is a core component of title review, because these interests can materially affect development potential, financing eligibility, and market value.
Easements arise in several common forms in commercial real estate. Appurtenant easements benefit a dominant estate and burden a servient estate; the classic example is an access easement that allows the owner of a landlocked parcel to cross a neighboring property to reach a public road.
Easements in gross benefit a specific party rather than a parcel and are commonly created for utility infrastructure: hydro companies, gas pipelines, telecommunications carriers, and municipal water and sewer authorities routinely hold easements in gross across commercial properties that restrict building within the easement corridor and require access for inspection and maintenance. Conservation easements are voluntary restrictions, typically donated to a land trust or government body, that permanently limit development intensity or use on a property in exchange for a charitable deduction; they transfer with the land and bind all future owners, which can significantly limit development rights on rural, agricultural, or environmentally sensitive commercial properties.
The impact of easements on value and development potential varies with the nature of the easement and its physical location on the property. A utility easement running along the rear lot line of an industrial property may have negligible value impact if development is concentrated toward the street; the same easement bisecting the centre of the site could prevent construction of a planned building, rendering a significant portion of the site undevelopable and reducing its value accordingly.
Access easements can work in both directions: a property burdened by a shared access easement may face vehicular traffic and liability exposure while receiving limited economic benefit, while a property benefiting from an access easement over a neighbouring parcel may hold title to land that is only developable because of that easement. In acquisition due diligence, the surveyors' boundary and location survey (ALTA/NSPS in the US, survey requirements vary by province in Canada) is the primary tool for identifying where easements physically intersect with the site and how they constrain the development envelope.
Title insurance and the purchase agreement structure are the primary risk management tools for easements and encumbrances discovered in due diligence. Standard ALTA owner's title insurance policies insure against losses arising from defects in title, including undisclosed encumbrances, but typically contain exceptions for encumbrances visible on survey and for matters created or assumed by the insured.
Endorsements expanding coverage for specific survey exceptions (access easements, utility corridor restrictions, parking easements) are available and should be negotiated by the buyer based on the specific encumbrances identified. Where an encumbrance materially impairs the buyer's intended use or development plan, the appropriate responses are a purchase price adjustment, a condition requiring the seller to obtain a release or subordination, or, in cases where the encumbrance is fundamental to the site's value proposition, a decision not to proceed.
Buyers who proceed without resolving material encumbrances, relying on purchase price adjustments that may not fully capture future impairment, bear the risk that the easement burden is more constraining in practice than it appeared at closing.