Reciprocal Easements, Cost Sharing Agreements and CC&Rs;
Reciprocal Easements, Cost Sharing Agreements and CC&Rs;
Reciprocal Easements, Cost Sharing Agreements and CC&Rs;
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 1<br />
www.luce.com<br />
<strong>Reciprocal</strong> <strong>Easements</strong>, <strong>Cost</strong><br />
<strong>Sharing</strong> <strong>Agreements</strong> <strong>and</strong> CC&<strong>Rs</strong>:<br />
The Blueprint for Ensuring a<br />
Successful Project<br />
A Presentation by:<br />
Nancy T. Scull, Esq.<br />
Luce, Forward, Hamilton & Scripps LLP<br />
www.luce.com<br />
Types of <strong>Agreements</strong><br />
• <strong>Reciprocal</strong> Easement <strong>Agreements</strong><br />
• <strong>Reciprocal</strong> Easement <strong>and</strong> <strong>Cost</strong> <strong>Sharing</strong><br />
<strong>Agreements</strong><br />
• CC&<strong>Rs</strong><br />
• What are the differences?<br />
101054839.1 2<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 2<br />
www.luce.com<br />
• <strong>Reciprocal</strong> Easement <strong>Agreements</strong>:<br />
– Shared easements between two owners with<br />
no cost sharing<br />
• <strong>Reciprocal</strong> Easement <strong>and</strong> <strong>Cost</strong> <strong>Sharing</strong><br />
Agreement:<br />
– Shared <strong>Easements</strong> between two or more<br />
owners with cost sharing.<br />
101054839.1 3<br />
www.luce.com<br />
• REAs may be between 2 or more owners<br />
or<br />
• Can be established by the developer as<br />
Declarant before any property is conveyed<br />
• It then becomes a Declaration<br />
Establishing <strong>Reciprocal</strong> <strong>Easements</strong> <strong>and</strong><br />
<strong>Cost</strong> <strong>Sharing</strong> Agreement<br />
But the concepts remain the same!<br />
101054839.1 4<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 3<br />
www.luce.com<br />
Declaration of Covenants, Conditions &<br />
Restrictions or “CC&<strong>Rs</strong>”<br />
1. Established by Declarant<br />
2. Typically (but not always) establish an<br />
Owners Association<br />
3. May be subject to regulatory agency<br />
approval if there are residential interests<br />
101054839.1 5<br />
www.luce.com<br />
Whether it is an REA or CC&<strong>Rs</strong><br />
• Establish covenants running with the l<strong>and</strong><br />
• May establish equitable servitudes<br />
• Benefitted Property <strong>and</strong> Burdened Property<br />
• Statutory Requirements<br />
• Reference in Grant Deeds may be required<br />
101054839.1 6<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 4<br />
www.luce.com<br />
• Which type of Agreement or Declaration<br />
do you choose – it may depend upon your<br />
project <strong>and</strong> other factors!<br />
101054839.1 7<br />
www.luce.com<br />
REA or Declaration May Be Simple<br />
or Complex<br />
• Shared Driveway – REA<br />
Shared Driveway<br />
101054839.1 8<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 5<br />
www.luce.com<br />
RIVERPARK<br />
Horizontal Mixed Use<br />
Residential/Retail/Office<br />
• Mixed Use Residential & Retail Buildings<br />
• Retail Parcels<br />
• Office Parcels<br />
• Hotel Parcels<br />
• Shared surface, parking <strong>and</strong> other areas, main<br />
street, l<strong>and</strong>scaping, drainage . . .<br />
101054839.1 9<br />
www.luce.com<br />
Vertical Mixed Use with<br />
Mixed Use Parcels<br />
Residential Condominiums with a<br />
Residential Association<br />
Vertical Parcel Line<br />
Retail/Hotel – One Owner<br />
Subterranean Parking<br />
The Avenue -- “Chicago Model” REA or CC&<strong>Rs</strong> with an<br />
Association or Associations.<br />
101054839.1 10<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 6<br />
www.luce.com<br />
Factors in Selecting an REA or CC&<strong>Rs</strong><br />
with an Owners Association<br />
Riverpark<br />
1. Nature of <strong>Easements</strong><br />
2. Statutory or Regulatory Issues<br />
3. Objective for Control<br />
4. Comparable Values of the<br />
Residential/Commercial<br />
Interests<br />
5. Concern for balance <strong>and</strong><br />
fairness<br />
6. Lender issues<br />
7. When do you want to impose<br />
the covenants?<br />
The Avenue<br />
101054839.1 11<br />
www.luce.com<br />
Common Theme <strong>and</strong> Goal in a<br />
Mixed Use REA or CC&<strong>Rs</strong><br />
1. Divergent Interests: Mixed Marriage of<br />
Residential <strong>and</strong> Commercial – are not<br />
necessarily compatible!<br />
2. Commercial Owners – One Goal<br />
• Minimize Contact with Residential Owners<br />
101054839.1 12<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 7<br />
www.luce.com<br />
1. What does an REA or CC&<strong>Rs</strong> need to<br />
address?<br />
Easement Rights<br />
Maintenance Obligations<br />
<strong>Cost</strong> <strong>Sharing</strong> Allocations<br />
(depends upon nature of<br />
easement areas)<br />
Cure Rights<br />
Damage & Destruction<br />
Use Restrictions<br />
101054839.1 13<br />
www.luce.com<br />
The Easement Process<br />
Reserve<br />
(Declarant hereby<br />
reserves)<br />
or simply<br />
Grant<br />
(Declarant or<br />
Owner of Lot 1<br />
hereby grants to)<br />
To<br />
101054839.1 14<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 8<br />
www.luce.com<br />
The Easement Process<br />
For Benefit of<br />
And its Permittees<br />
(Easement in Gross)<br />
For Benefit of Lot 1 / (Easement Appurtenant)<br />
101054839.1 15<br />
www.luce.com<br />
Pylon Sign with LED Reeder Board<br />
Reserve Easement in Gross<br />
101054839.1 16<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 9<br />
www.luce.com<br />
• Where? On, over, under, through <strong>and</strong><br />
across (the Burdened Property)<br />
101054839.1 17<br />
www.luce.com<br />
• For what purpose?<br />
– Emergency ingress <strong>and</strong> egress?<br />
– Maintenance <strong>and</strong> repair?<br />
– Exclusive use of an area or facility<br />
• Then what you give, you may take away<br />
101054839.1 18<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 10<br />
www.luce.com<br />
Limitation on Easement Rights<br />
• Rules<br />
• Declarant or developer<br />
rights<br />
• Entry into areas<br />
• Closure<br />
• Relocation<br />
101054839.1 19<br />
www.luce.com<br />
General Character of <strong>Easements</strong><br />
• Appurtenant or in Gross?<br />
– Example:<br />
LED READER Board or Vending Machine Operations may<br />
be an easement in gross<br />
• Roadway easement -<br />
– An easement appurtenant<br />
– Elevator easement in a building-easement<br />
appurtenant<br />
101054839.1 20<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 11<br />
www.luce.com<br />
What Questions Do You Need to Ask?<br />
Issue<br />
Who is reserving the easement?<br />
Who is the easement being granted to?<br />
What is the easement over?<br />
For what purpose is the easement granted?<br />
Language<br />
Declarant hereby reserves…<br />
Declarant hereby reserves for the benefit of the<br />
Residential Owners <strong>and</strong> their Permittees…<br />
Or<br />
Declarant here grants to the Commercial Owner <strong>and</strong><br />
its agents, contractors <strong>and</strong> employees…<br />
Declarant hereby reserves for the benefit of the<br />
Residential Owners <strong>and</strong> their Permittees on,<br />
over, through <strong>and</strong> across the Project Common<br />
Area…<br />
Declarant hereby reserves for the benefit of the<br />
Residential Owners <strong>and</strong> their Permittees on,<br />
over, through <strong>and</strong> across the Project Common<br />
Area for vehicular <strong>and</strong> pedestrian ingress <strong>and</strong><br />
egress…<br />
101054839.1 21<br />
www.luce.com<br />
Title Issues<br />
• Title Insurance<br />
• Subordinations<br />
• Review Title Reports – do you have the<br />
correct signatories?<br />
• Duration – Survive Termination of REA or<br />
CC&<strong>Rs</strong><br />
101054839.1 22<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 12<br />
www.luce.com<br />
Scope of <strong>Easements</strong> Will Vary<br />
Project by Project<br />
• Ingress & egress over<br />
surface areas<br />
• Utilities<br />
• Drainage<br />
• Signage<br />
• Parking<br />
101054839.1 23<br />
www.luce.com<br />
Vertical Mixed Use Building<br />
• Building<br />
Stairwells<br />
• Elevators<br />
• Roof<br />
<strong>Easements</strong><br />
• Walkways<br />
Pathways<br />
• Lobby<br />
• Trash Chutes<br />
• Utility Rooms<br />
• Loading Docks<br />
• Emergency<br />
Areas<br />
• Support<br />
• Encroachment<br />
• Parking<br />
• Shared Facilities<br />
101054839.1 24<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 13<br />
www.luce.com<br />
Must identify each easement <strong>and</strong><br />
do your analysis!<br />
101054839.1 25<br />
www.luce.com<br />
Deciding the Balance of Power<br />
(i.e. Maintenance) in REA or CC&<strong>Rs</strong><br />
• Who should maintain the easement areas?<br />
• He who maintains has the power!<br />
101054839.1 26<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 14<br />
www.luce.com<br />
Owner/Operator REA:<br />
Protecting Other Ownership Interests<br />
• Designate a primary owner to maintain <strong>and</strong> operate<br />
• If you shift the balance of power to one owner, how<br />
do you protect the other owners?<br />
• Establish the rules of the game in the REA or<br />
CC&<strong>Rs</strong><br />
• Approval of other owners on certain issues<br />
• Covenant of good faith <strong>and</strong> fair dealing<br />
• Operational Disputes – establishing a process to<br />
resolve disputes<br />
101054839.1 27<br />
www.luce.com<br />
Maintaining the Easement Areas<br />
• Ensuring easement areas are properly<br />
maintained<br />
– St<strong>and</strong>ard of Maintenance<br />
General<br />
• Good condition of<br />
maintenance <strong>and</strong><br />
repair<br />
Specific<br />
• Repave shared<br />
parking lots every<br />
7 years<br />
• Clean, remove<br />
trash on a weekly<br />
basis<br />
101054839.1 28<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 15<br />
www.luce.com<br />
Maintaining the Easement Areas<br />
(continued)<br />
• What happens when things go wrong?<br />
– Cure Rights<br />
– Take Over Rights<br />
101054839.1 29<br />
www.luce.com<br />
• To whom do you want to give cure <strong>and</strong> take over<br />
rights?<br />
• May vary depending upon project<br />
– A simple REA for a roadway – cure <strong>and</strong> take over rights<br />
to the other owner<br />
– Mixed use buildings<br />
• Not a multitude of small l<strong>and</strong>owners<br />
• Condominium Association – maybe<br />
• Majors or other Big Guys<br />
101054839.1 30<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 16<br />
www.luce.com<br />
Allocation of Expenses - REA or CC&<strong>Rs</strong><br />
• Establish Allocation Formulas<br />
– Can vary . . . may have multiple formulas<br />
• Determining a proportionate share<br />
– L<strong>and</strong> Area<br />
– Floor Area<br />
– Square Footage<br />
– Other Factors<br />
• Control of increases – statutory or contractual<br />
• Fund Reserves<br />
• Flexibility to change formulas <strong>and</strong> amounts based<br />
on first year operations<br />
101054839.1 31<br />
www.luce.com<br />
Defining Expenses<br />
• General<br />
– Shared Expenses, include the costs of maintaining, repairing<br />
<strong>and</strong> replacing the shared easement area<br />
• Specific Approach<br />
– Shared Expenses means the following: (a) expenses directly<br />
related to the maintenance, management, operation, repair <strong>and</strong><br />
replacement of the Shared Building Elements; (b) any<br />
expenses related to inspections required under the<br />
Maintenance Program; (c) any expense related to Property<br />
Insurance which the Operator is required to obtain as provided<br />
in Artlcle ___; (d) a management fee in a reasonable <strong>and</strong><br />
customary amount but not to exceed ___ (__) percent of ___<br />
___ Shared Expenses; (e) any other categories of costs<br />
delineated in the Shared Expenses Budget; <strong>and</strong> reasonable<br />
reserves required to be funded under Section ___.<br />
101054839.1 32<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 17<br />
www.luce.com<br />
How do you protect against substantial<br />
increases?<br />
• Examine records<br />
• Approval rights over budget<br />
• Requiring maintenance to a Project Quality<br />
St<strong>and</strong>ard<br />
• Reserves <strong>and</strong> protecting against a<br />
bankruptcy<br />
101054839.1 33<br />
www.luce.com<br />
Use Restrictions in REA/CC&<strong>Rs</strong><br />
Restrictive<br />
• No obstruction of roadway<br />
• No use of common area for<br />
outdoor sales areas<br />
• No access to shared stairwells<br />
except for emergency ingress<br />
or egress<br />
Permissive<br />
• Can operate from 7 am to 1 pm<br />
• Can have access at all times<br />
• Can have an outdoor sales area<br />
101054839.1 34<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 18<br />
www.luce.com<br />
Insuring the Easement Areas<br />
• Easy in a Horizontal<br />
REA<br />
– Operator or Owner<br />
– Easement areas will<br />
probably not include the<br />
building<br />
– Easement Area is rebuilt<br />
if Building is rebuilt<br />
– If no rebuilding,<br />
Benefitted Easement<br />
Holder can rebuild<br />
• Complex in CC&<strong>Rs</strong> or<br />
REA for a Single Building<br />
– Association or one owner<br />
– Do not divide property<br />
insurance obligation<br />
– Named Insured - controls<br />
insurance issues<br />
– Additional Insureds – gives<br />
other owners rights<br />
101054839.1 35<br />
www.luce.com<br />
Damage <strong>and</strong> Destruction<br />
Address it in REA or CC&<strong>Rs</strong><br />
• What happens when<br />
insurance is not<br />
adequate to repair?<br />
101054839.1 36<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 19<br />
www.luce.com<br />
Issues to Consider<br />
• Requirement to rebuild essential easement<br />
areas<br />
• Will Commercial Owner control rebuilding?<br />
• Lender concerns<br />
• Purchase rights upon an election not to<br />
build<br />
101054839.1 37<br />
www.luce.com<br />
Duration of <strong>Easements</strong> <strong>and</strong> Other<br />
Customary Provisions<br />
1. In perpetuity<br />
2. Do they survive termination of CC&<strong>Rs</strong>?<br />
3. Amendments<br />
4. Relocation<br />
5. Mortgagee Protection<br />
6. Condemnation<br />
7. Covenant of Cooperation<br />
101054839.1 38<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Nancy T. Scull of Luce, Forward, Hamilton & Scripps LLP Speaker 9: 20<br />
www.luce.com<br />
Lessons Learned / Lessons Shared<br />
• Meet with architect or engineers if<br />
easement areas are complex<br />
• Underst<strong>and</strong> scope of all required<br />
easements above ground <strong>and</strong> below ground<br />
• Analyze the pendulum of control<br />
• Do not create a dictatorship (at least if you<br />
have residential interests)<br />
• Flexibility for change<br />
101054839.1 39<br />
Law Seminars International | Development <strong>Agreements</strong>, <strong>Easements</strong> <strong>and</strong> CC<strong>Rs</strong> | 12/5/07 in Las Vegas, NV
Change language