Easements, Covenants, Leases, and Licenses: Top Misconceptions Clarified

Easements

An easement is considered to be a property right provided to a non-owner of real property for his, her, or its use and benefit over the property rights of the owner of real property.  It qualifies as an interest in real property and confers a right, benefit, dominion, or lawful use out of or over the real property rights of another.  There are various types of easements and some examples include ingress and egress for access or utility access easements.  As an interest in real property, an easement should be prepared much like a real estate deed and then recorded in the real estate records of the county in which the properties are located.  See Central of Ga. R.R. v. DEC Assocs., 231 Ga.App. 787 (1998).  (unrecorded agreement insufficient to serve as grant of easement where there was no deed or any agreement in form that could have been recorded in the real estate records and where problems within the agreement itself existed).

A common misconception or just downright confusion with easements is the distinction between an easement in gross and an easement appurtenant.  An easement in gross is “a mere personal right in the land of another.”  Church of the Nativity v. Whitener, 249 Ga.App. 45 (2001).  It is therefore “not given for the purpose of ingress or egress to and from other land.”  Lovell v. Anderson, 242 Ga.App. 537 (2000).  And furthermore, it only involves one parcel of real estate.  An example of an easement in gross would be a right of way that a private corporation, such as a railroad company, pipeline, or public utility, has across an individual parcel of land.  An easement appurtenant exists when there are at least two parcels of land and the dominant estate receives benefits from the use of the servient estate. 

Another common practical misconception is one faced by a residential property owner that is approached by a commercial developer about a temporary construction easement.  A temporary construction easement generally concerns the installation of a pipeline or other utility across a landowners’ property.  The pipeline or other utility will usually terminate at the street of the property owner, cross the property owner’s land, and then meet up with the commercial development abutting the property owner’s land.  Once constructed by the developer, a permanent easement will be created in favor of the local municipality that will then maintain the pipeline or utility.  Commercial developers may make representations such as the easement cannot be modified or the price for the easement cannot be negotiated.  In turn, many residential property owners do not believe they can negotiate these types of agreements.  This is not true.  The residential property owner does not have to agree to such an easement and can force the commercial developer to look to other neighboring property owners or to agree on terms more favorable to the residential property owner.  The temporary construction easement and its price can be negotiated, although the permanent easement turned over to the municipality generally cannot (albeit some special stipulations can be added to their form documents).  Commercial developers need to have backup plans in case the residential property owner will not agree to the easement or insists on too many revisions to the temporary construction easement or a reasonable price.

Covenants

A common misconception with covenants in the commercial context is that zoning regulations automatically displace them.  This will be the case if the zoning regulation is more restrictive than the covenant, but not vice-versa.  For example, in Arlington Cemetery Corp. v. Hoffman, 216 Ga. 735 (1961), lot owners claimed that a cemetery held real estate in trust for them and for other lot owners who were entitled to use the land only as a place of burial, and that the cemetery and the crematory operator had no right to use the property as a crematory.  The lot owners further alleged that the lease to the crematory was an attempt to appropriate the property, which was dedicated to cemetery purposes, for uses other than the burial of the dead.  The lot owners claimed that unless the cemetery and the crematory operator were retrained from constructing the crematory, the lot owners would suffer irreparable injury and damage.  The trial court granted an interlocutory injunction to the lot owners.  On appeal, the Georgia Supreme Court agreed and held that the proposed construction of the crematory was a breach of a covenant made for the benefit of the lot owners that restricted the use of the cemetery property.  The crematory operator further argued that other jurisdictions by statute or zoning regulations had defined the operation of a crematory as being a cemetery use.  In response to that argument, the appellate court held that “permits as to use of property by zoning authorities do not abrogate or destroy the rights of persons acquired under covenants as to restrictive use of property, where such restrictions do not violate public law or public policy.”  Id. at 739 (citations omitted).  Thus, as long as a covenant does not violate public law or public policy, it is enforceable, despite a zoning regulation allowing operation of the property in such a manner.

Leases

Most commercial leases contain a clause which automatically places the tenant into default upon the commencement of a bankruptcy action.  Such a clause may read as follows:

This Lease shall terminate, without notice, (i) upon the institution by or against either party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of either party’s debts, (ii) upon either party making an assignment for the benefit of creditors, or (iii) upon either party’s dissolution or ceasing to do business.
 
Surprisingly, even though many leases contain these types of provisions, they are generally unenforceable.  The Bankruptcy Code generally renders these types of ipso facto clauses void.  This is because at the moment a bankruptcy action is commenced, any interest of the tenant in property becomes “property of the estate.”  11 U.S.C. § 541(c).  That code section further provides that the interest becomes property of the estate despite a provision in an agreement: “that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement, and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor’s interest in property.”  Furthermore, Section 365(e)(1) explicitly voids such clauses.

Despite their unenforceability, these clauses continue to frequently appear in commercial leases.  One reason for this may be to deter an otherwise less sophisticated tenant from filing bankruptcy.  While it does not hurt to include these clauses in leases, practitioners, landlords, and property management companies need to be aware of their general unenforceability in the event a tenant files for bankruptcy.

Licenses

A license in real property is defined as “authority to do a particular act or series of act on land of another without possessing any estate or interest therein.”  Henson v. Airways Serv., 220 Ga. 44 (1964) (citations omitted).  A parol license to use another’s land is revocable at any time if its revocation does no harm to the licensee.  De Castro v. Durrell, 295 Ga. App. 194 (2008).  It may, however, become irrevocable if the licensee has acted pursuant to the license and in doing so he has incurred expense.  Id.  If the license is irrevocable, then it becomes an easement that runs with the land.  Id.

A common misconception is that a license may ripen into an irrevocable license if the licensee makes improvements to his property in reliance on the license.  Georgia appellate courts have held that this is not enough as “the mere fact that a licensee erects improvements upon his own land in expectation of enjoying a parol license, and thereby incurs expense, is not enough to make the license irrevocable under O.C.G.A. § 44-9-4.”  Decker Car Wash, Inc. v. BP Prods. N. Am., Inc., 286 Ga.App. 263, 266 (2007).  Instead, the correct analysis is whether the licensee improved and increased the value of the licensor’s property.  Only then does the license have the ability to become irrevocable.

Creating and Enforcing Easements

There are essentially three (3) different types of easements in Georgia: (i) an express easement, (ii) a prescriptive easement, and (iii) an easement by necessity.  In the commercial context, an express easement is the most preferable method of obtaining an easement.

Express Easement

An express easement does not take away any rights to the real property from its owner.  Rather, as the Georgia Supreme Court stated “[o]wnership in the soil and the right to an easement are independent.  Folk v. Meyerhardt Lodge No. 314, 218 Ga. 248 (1962).  In Folk, the owner granted an easement for use of a stairway from the first to the third floor of a building.  The benefitting party of the easement – i.e., the grantee – claimed that by granting the easement, the owner could no longer use the stairway.  The Supreme Court disagreed.  The owner – i.e., the grantor – retained the right of dominion and use of the land, except so far as a limitation thereof is essential to the reasonable use of the easement granted.  The Supreme Court remanded the case back to the trial court to have the finder of fact determine whether the stairway could be reasonably used by the grantee while allowing the owner to use the stairway as well.  The parties to this action had an agreement in writing but failed to specify the rights of each party.  

It is important for the express easement to define the parties, the parcels of land, the scope and location of the easement, the term of the easement, and the specific right of use of the easement, in order to avoid the pitfalls noted in the Folk case.

Prescriptive Easement

A prescriptive easement is an easement created through some type of adverse possession.  There must be a use of another’s property for a period of at least seven (7) years.  If there is permission by the land owner for another to use his or her property, a prescriptive easement cannot be established.  Douglas v. Knox, 232 Ga.App. 551 (1998).  Instead, an element in establishing a prescriptive easement is that “the owner was given notice that the user intended to appropriate [the property] as his own.”  Id.  Prescriptive easement rights are to be strictly construed.  Keng v. Franklin, 480 S.E.2d 25 (1997). 

Maintenance of a portion of real property may be sufficient to establish a prescriptive easement.  For example, in Georgia Pacific Corp. v. Johns, 204 Ga.App. 594 (1992), the Georgia Court of Appeals held that the plaintiff, who used and maintained roads owned by a utility company, had established a prescriptive easement.  The utility company had been placed on notice of the plaintiff’s use and maintenance of a strip of their land for hunting and fishing but did nothing about it for a long period of time.  This gave rise to notice of an adverse claim to the utility company.

The seven (7) year minimum requirement only applies to private ways.  Prescriptive easements which are not private ways instead must be used for twenty (20) years before such easement is established.  O.C.G.A. §§ 44-5-161 and 44-9-1.

There are limitations, however, as against whom a prescriptive easement may be acquired.  Exceptions apply to state or political subdivisions, minors during minority, prisoners during their confinement, mentally ill during illness, unrepresented estates during the first five years, remaindermen during the life estate, and as a grantor against a grantee.  Glaze v. Western and Atlantic R.R. Co., 67 Ga. 761 (1881); Satterfield v. Tate, 132 Ga. 256 (1909); Sweat v. Arline, 186 Ga. 460 (1938); O.C.G.A. §§ 44-5-170, 173.

Easement by Necessity

If a property is landlocked and the only access to a public road available is over another’s property, the owner may obtain a prescriptive easement.  
If a grantor conveys property to a grantee which is landlocked “an implication arises that the grantor intended to convey a means of access.”  Eardley v. McGreevy, 279 Ga. 562 (2005).  The party seeking the easement, however, still must establish that access is necessary as there is no other way to access his property.

Another way to establish a prescriptive easement is through O.C.G.A. § 44-9-40(b), which reads “[w]hen any person or corporation of this state owns real estate or any interest therein to which the person or corporation has no means of access, ingress, and egress and when a means of ingress, egress, and access may be had over and across the lands of any private person or corporation, such person or corporation may file his or its petition in the superior court of the county having jurisdiction…”  

The sought easement must be more than simply convenience.  Moore v. Dooley, 240 Ga. 472 (1978).  However, the party seeking an easement, even if there are alternative means of access, may show that the existing access options are not economically feasible.  Atlanta-East, Inc. v. Tate Mountain Associates, Inc., 265 Ga. 742 (1995).  The landlocked property owner generally cannot have voluntarily landlocked himself.  Bruno v. Evans, 200 Ga.App. 437 (1991); but see Kellett v. Salter, 244 Ga. 601 (1979).

Termination of an Easement

The ability to enforce an easement is dependent on avoiding termination of the easement.  There are generally four (4) ways in which an easement may terminate: (i) express agreement of the parties, (ii) abandonment, (iii) merger, and (iv) end of necessity.  Of course, an express agreement of the parties to terminate an easement is just as it seems – the landowners agree amongst themselves to terminate the easement and that document is then recorded in the real estate records.

An easement may also terminate through abandonment.  This requires a showing by the owner of the real property which is burdened by the easement that there has been an explicit act or failure to act that implies the easement holder no longer possesses an interest in the easement.  This act or failure to act must be permanent, as opposed to temporary.  Temporary acts or failure to act may even go on for an extended period of time.  

Merger is another way in which an easement may terminate.  If the dominant and servient estates are completely unified – i.e., both parcels being owned by the same person – then since the estates have been merged together an easement is no longer needed and thereby terminates.  

An easement by necessity may terminate by way of the ending of the period of necessity.  As discussed above, such an easement is created in favor of a landlocked property which needs access.  If an alternative means of access is established, such as through the construction of a public road which abuts the affected property or through acquisition of another easement, then the easement by necessity will terminate.

CC&Rs and Development Agreements

Covenants, Conditions & Restrictions (CC&Rs)

A commercial developer of condominiums or units will likely engage a law firm to handle the placement of certain Covenants, Conditions & Restrictions (CC&Rs) on the property.  These CC&Rs will specify when the developer turns over control of the community to an association.  The association will then be governed by the CC&Rs, its bylaws, and applicable statutory and governmental regulations.  The board of directors of the association is usually made of volunteers, who in turn oversee governance of the association and the community.  The CC&Rs should be drafted in a way that will avoid issues arising in the future.

Georgia law recognizes and protects the freedom of parties to contract.  NEC Technologies v. Nelson, 267 Ga. 390, 396(4) (1996).  This is true even though the parties may enter into contracts that are unreasonable or which may lead to hardship.  Id.  It is well established law that the rules of contract construction apply to a declaration of covenants in a community.  Hall v. Town Creek Neighborhood Assoc., 320 Ga.App. 897, 899 (2013).  These rules require courts to ascertain the intent of the parties based on the plain language of the CC&Rs as a whole:

The cardinal rule of construction is to ascertain the intent of the parties. Where the contract terms are clear and unambiguous, the court will look to that alone to find the true intent of the parties. To determine the intent of the parties, all the contract terms must be considered together in arriving at the construction of any part, and a construction upholding the contract in whole and every part is preferred. When the language employed by the parties in their contract is plain, unambiguous, and capable of only one reasonable interpretation the language used must be afforded its literal meaning and plain ordinary words given their usual significance.
 
CC&Rs are to be interpreted “so as to give a reasonable, lawful and effective meaning to all manifestations of intention by the parties rather than an interpretation which leaves a part of such manifestations unreasonable or of no effect.”  Elite Realty Svcs. v. City of Auburn, 272 Ga. 195, 197 (2000) (emphasis added).  

Development Agreements

Commercial developers may enter into development agreements amongst themselves to specify certain obligations in a large development and assign costs.  Commercial developers may also enter into private development agreements with municipalities.  In private development agreements with municipalities, various statutes may come into play, such as the Georgia Development Impact Fee Act, which authorizes municipalities to “impose by ordinance development impact fees as a condition of development approval on all development.”  O.C.G.A. § 36-71-1 et seq.  

If a provision of either of these types of agreements is ambiguous, courts will use the rules of contract construction to ascertain the parties' intent.  See Fulton Greens, L.P. v. City of Alpharetta, 272 Ga.App. 459 (2005) (citations omitted).  This is a question of law for the court.  If the ambiguity cannot be resolved through application of the statutory rules of construction, then any factual questions will be submitted to a jury.  Old Republic Nat. Title Ins. Co. v. Darryl J. Pannella, LLC, 319 Ga.App. 274, 277(1) (2002).
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Rountree Leitman & Klein, LLC provides real estate litigation services to its clients. Please contact David S. Klein for a consultation on any disputes involving a real estate in Georgia.