Easements, licenses, and transfers—oh my! If your association finds itself in a situation where it needs to use the property of another, or allow the association’s property to be used by another, you may be overwhelmed and confused by the options and terminology. For example, the board is approached by a homeowner who has just obtained a survey of his or her lot. It turns out the homeowner’s fence has been partially constructed on the association’s common elements. The homeowner is now requesting an easement from the association to allow the fence to remain. Both parties agree that the fence can remain in its existing location, but the association is now questioning how to document permission for the fence to remain. Should the board grant an easement? Should it grant a license or should it sell and convey the property to the homeowner? Although the appropriate use of an easement, license, and transfer will depend upon the specific circumstances, this article outlines the typical characteristics and ramifications of easements, licenses, and transfers.
In general terms, an easement is the right of one person to use, but not possess, the property of another person for a specific purpose. Easements are a legal interest in real property akin to a lease. As such, easements are subject to the laws regarding real property and they are commonly created by written agreements that are recorded in the land records. In community associations, easements are used to address situations where an improvement, such as a fence or other structure, encroaches upon the adjacent parcel of property. Easements are also commonly granted in order to allow access to neighboring properties and for the installation of utility lines across common areas.
Easements typically attach to the property and bind/benefit all future owners of both the benefitting property and the property over which the easement is granted. Therefore, ownership of property means very little when it comes to most types of easements.
A license grants rights to an individual, known as the “licensee,” to enter upon the property of another. Unlike an easement, a license is not considered an interest in real property. Instead, a license is personal permission given to the licensee. Therefore, unlike an easement, a license is not subject to the laws regarding real property and licenses can be created by verbal agreement. Licenses are usually temporary and revocable and cannot be transferred by the licensee to another person. An attempt by the licensee to transfer the licensee will typically terminate the license rights. A property owner may grant a license allowing their property to be used for a sports practice. In such an instance the sports team has the right to enter the property and use it for the intended practice. However, the team does not hold any interest in the real property and cannot transfer the right to use the property to another individual or team.
When the term “transfer” is used, it is typically used in the context of title conveyance. This is done via issuance of a deed from the existing owner to a new owner. A fee simple transfer is an absolute conveyance of ownership of the real property. Unlike an easement or license that merely conveys the right to use the subject’s real property, a fee simple transfer conveys all ownership and the right to use and possess the property. Therefore, unlike licenses, such transfers must comply with laws regarding real property interests.
Why it Matters
Now that you understand the basics, why does it matter? Well, knowing the difference matters for three primary reasons. The first is how the interest can be created and must be documented. For example, a license (which is personal in nature and not a legal interest in real property) can be created verbally, whereas an easement cannot.
The next reason is the issue of what approval requirements are necessary to grant the interest. For Post-CCIOA communities (created after July 1, 1992), a conveyance or transfer of common elements requires approval of homeowners holding at least 67% of the total votes in the association, whereas the board, without any homeowner vote or approval, can typically grant easements and licenses over the common elements.
The community approval requirements concerning an easement, license, or conveyance will depend upon a combination of when the community was created and the provisions of the association’s governing documents. The final issue is the intended permanency of the grant. In a fee simple transfer or conveyance, after the grant the transferor holds no further interest in the real property. However, if an easement or license is used, the ownership of the property does not change and the existing owner retains title to the property. Likewise, an easement is typically permanent, whereas a license is not. As you can see, there are a myriad of issues when considering which option is appropriate for a given situation.
If you have questions or would like to discuss easements, licenses, or transfers in more detail, please contact a Altitude Community Law attorney at 303.432.9999.