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Developers: Be Wary of Utility Company Easement Forms

June 18, 2018

By: Gary M. Kaleita

A utility company that provides service to an owner’s property usually requests the owner to sign a standard form of easement that is intended to allow the utility company to enter onto the owner’s property in order to install and service its utility lines. These forms vary from one utility company to the next, but they typically contain a number of customary terms that many developers and builders do not bother to negotiate even though some of them can be problematic.

Many easement forms are “blanket” in nature, meaning that they do not describe a particular easement area where the utility lines are to be located, but allow the utility to place lines anywhere on the property. This may be fine if the property is being used for agricultural purposes (and many utility company easement forms were created with that scenario in mind), but for a property that is to be developed for commercial or residential purposes, a blanket easement presents problems. It gives the utility company the legal right to require the removal of any improvements on the property that would unreasonably interfere with the utility company’s ability to place, access or maintain its lines. While the utility company may install its lines in locations that do not interfere with improvements, it need not do so. Blanket easements are therefore objectionable to purchasers and mortgage lenders because they may interfere with the ability of the owner to maintain improvements it has built on the property.  One way to avoid this problem is to negotiate a provision into the easement that the lines will be installed only at mutually agreeable locations, and limit the easement area to a specific width wherever the lines are installed (such as five feet on either side of the lines).   However, this still does not specify where the lines will be. A better option is to create a specific sketch and legal description of the easement area.  In both of these cases, the owner should make sure that the locations do not include any building footprints or other areas where vertical improvements are intended to be constructed.

Another “blanket” right that many utility company easement forms usually contain is the right of the utility company to access its lines on the property with vehicles and equipment. This can allow utility company trucks, bobcats and backhoes to drive across and around the owner’s property, wrecking grass and landscaping. Accordingly, the easement should provide that vehicular access to the easement area will be limited to the drives, roads, and parking areas constructed on the property to the maximum extent practicable.

Many utility company easement forms prohibit the owner from installing any improvements whatsoever in the easement area. Others severely limit the types of improvements that an owner can be install. If the easement is silent on this subject (which few are), an owner has the right to install any improvements that do not unreasonably interfere with the easement holder’s rights. If the easement contains prohibitions on improvements, an owner should consider specifying what types of improvements it reserves the right to install in the easement area. This usually consists of so-called “horizontal” infrastructure improvements like pavement, curbing, sidewalks, landscaping and other improvements that do not unreasonably interfere with the utility company’s ability to access and service its lines.

Even if the owner has the right to install improvements in the easement area, the utility company still has the right to access and service its lines, which means that the utility company can remove or disturb those improvements. Under Florida common law, the utility company will not have a legal obligation to restore them when it is done, unless the easement provides that it must do so. It is therefore important to negotiate a provision into the easement that requires the utility company to restore the surface of the easement area to as near as practicable the condition which existed prior to its activities that disturbed the easement area.  Absent such a provision, the owner would have to do this and bear the cost.

Consideration also should be given to whether the utility company should be required to install its lines underground. Without such a requirement in the easement, it need not do so.

An owner should also consider whether to limit the types of lines a utility company can install pursuant to an easement. It is not unusual for electric and telephone company easements to provide that the utility company can install not only electric or phone lines, but also lines for cable television, internet access and telecommunications services. This allows the utility company to let other companies “piggyback” onto the utility company’s easement rights (for a fee, of course), and use the easement area as an assignee of the utility company. The way to avoid this is to specify in the easement that the lines can only be for the specific purpose initially intended by the utility company (such as electric or phone service).

Finally, an owner should always require that the utility company indemnify the owner against any liability for personal injuries, death, or property damage, and any other loss or damage (including the owner’s attorneys’ fees), which arise out of the utility company’s exercise of its easement rights, except for loss or damage which results from the willful or negligent acts of the owner or its agents, contractors or employees.

Utility companies will usually negotiate in good faith to address an owner’s reasonable concerns with their easement forms, and it is not unusual to get them to agree to these types or provisions in an addendum to the easement; however, there will be some lead time required since it will usually require the involvement of their legal department. The bottom line is that developers and builders who are presented with utility company easement forms should not just sign them, but think about the kinds of issues they can present. It is easier to negotiate these concessions up front before the lines go in, than to ask the utility company to amend its easement later.

 


Gary

With more than 30 years of experience in real estate law, including over 20 years as a Board-certified expert in the field, Gary Kaleita has acquired the ability to navigate the complexities of sophisticated real estate deals with relative ease.


Gary has a wide variety of experience in real estate development, finance and transactions, condominiums, property owners’ associations, commercial leasing, commercial lending, and title insurance.

Gary enjoys a reputation for anticipating and avoiding problems, rather than merely reacting to them. He has years of experience handling purchases, sales and financings of commercial and residential projects, including office, industrial, retail, multi-family, single-family, condominium, resort, hotel and golf course properties. Gary has prepared and negotiated contracts for sale and purchase, performed due diligence investigations, and handled all aspects of closings, including issuance of title insurance and legal opinions. He has also performed tax free exchanges (both forward and reverse) under Section 1031 of the Internal Revenue Code, and has handled closings for housing revenue bond financing transactions with the Florida Housing Finance Corporation and various local housing finance authorities.

In the area of real estate development, Gary has assisted developers in obtaining land use approvals, plat approvals and permits for various developments from a number of jurisdictions in Central Florida, including planned developments (PD’s) and Developments of Regional Impact (DRI’s). He has drafted and negotiated complex land use documents, including development agreements, cost-sharing agreements, declarations of covenants, conditions, restrictions and easements. He also has experience in mall and shopping center developments, including outparcels, and has assisted developers with the selection, formation and operation of business entities, including commercial and residential property owners associations. He has extensive experience with the formation and operation of both commercial and residential condominiums as well.

In addition, Gary has established somewhat of a boutique practice by acting as local counsel to help out-of-state lenders, investors and law firms navigate the complexities of Florida real estate law. He is frequently engaged by large national and international law firms needing assistance on a variety of issues for their clients doing business in Florida. Gary regularly provides advice on Florida law and custom pertaining to purchase and sale contracts as well as loan documents, addresses local due diligence issues, answers questions involving titles, surveys and title insurance, and provides Florida legal opinions.

Not just another real estate lawyer, before pursuing his career in law Gary served as a U.S. Naval officer on active duty for 4 years in the Mediterranean Sea, first with a patrol gunboat squadron in Italy and then at a communications station in Greece. During this period he traveled extensively throughout Europe, the Middle East and North Africa. He believes his military experience is the source of the practical approach he has developed to problem solving.

Gary also took the initiative, after a homeowner in his own neighborhood was mauled by a Florida black bear in 2013, of researching what his homeowners’ association could do to limit the likelihood of future attacks. In the process, he became an expert in the subject of “bear-wise” communities and drafted a policy that his own homeowners’ association adopted, thereby becoming the first residential community to be officially recognized as bear-wise by the Florida Fish and Wildlife Conservation Commission (FWC). He has since written and spoken extensively on this subject, serves on the FWC’s Central Bear Management Unit Stakeholder Group, and has become a resource for FWC to educate other communities on the importance of bear-wise practices in areas of Florida containing black bear habitat.

Gary focuses on finding pragmatic solutions to complex problems, recognizing that clients want sensible and realistic advice in a timely manner so they can go about their business.

Chambers USA (2015)* reports that Gary has substantial experience acting as lender’s counsel and is acclaimed by market sources as an “extremely responsive, very practical and reasonable” practitioner.


*We make no guarantees or promises that the reader will realize the same or similar results

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