A reciprocal easement agreement is a legal contract between two or more property owners for commercial development of an area which is shared by them. The recipient does not become the owner of the property but merely has the right to use or access the property as per the terms of the agreement. As denoted by the term ‘reciprocal’, the owners of the shared area provide equal rights to each other with regard to the use of the shared area. These agreements are made against mixed-use spaces which have both commercial and residential property. The owners can use the common hallways or other accesses. Such agreements are used for the development and operation of integrated shopping centers.
When do you Need a Reciprocal Easement Agreement
A reciprocal easement agreement is required when two or more property owners of adjoining land decide to jointly develop a property for commercial use. The purpose of the reciprocal easement agreement is to provide the right of use to the co-owners of the property but not ownership. The objective is to jointly develop the property and ensure that the benefits from such commercial use will accrue to the co-owners of the property. These agreements ensure that the development, maintenance, and operation of the property goes smoothly. These agreements are made against both residential and commercial property, but mostly for the development of shopping centers.
Inclusions in Reciprocal Easement Agreement
The parties to a reciprocal easement agreement will depend on the number of property owners involved and all the names must be included in the agreement.
The Reciprocal Easement Agreement must also include
- The effective date of the agreement
- The shared area being developed
- Details of the proposed project
- Cost of proposed project
- Floor plan
- The laws of the state under whose jurisdiction this agreement is being made
- Penalties in case of breach of contract
- Demarcation of the area belonging to the different owners.
The details of the easement must be mentioned in the agreement with regard to ingress, egress, and parking. The minimum notice period with regard to changes to be made to the site plan should be mentioned in the agreement. Provisions for any escalation clause should also be incorporated.
How to Draft Reciprocal Easement Agreement
When drafting a reciprocal easement agreement, the following points need to be kept in mind:
- It is extremely important that the names of all the parties to the agreement and the relationship between them be clearly stated in the agreement.
- The purpose of this agreement should be clearly stated including the benefits accruing to the parties of the agreement.
- The rights and liabilities of the owners of the properties should be clearly mentioned
- The floor plan and specifications of the area being developed must be mentioned including the sanction for the same from the relevant authorities
- The compliance with regard to the laws of the state under whose jurisdiction the agreement is being made should be stated
- The events which lead to the revocation of the contract
- The site plan controls with regard to the portion being demarcated for shops or restaurants as well as parking
Benefits of Reciprocal Easement Agreement
The benefits of having a reciprocal easement agreement are:
- Right of use: The right of use by the different owners of the property are clearly defined. The owners are ensured that they don’t lose the right to the property and are only allowing the other owners the right to use the property. Being a reciprocal arrangement, all owners have the right to use each other’s property
- Sharing of revenues: These agreements are normally meant for commercial shopping malls to be developed by the owners. The revenue sharing between the owners are clearly stated.
- Rights and responsibilities: The rights and responsibilities of the owners with regard to the development of the property are mentioned in the agreement
Types of Reciprocal Easement Agreement
The different types of reciprocal easement agreement are:
- Residential easement: In case of residential easement agreements, it is usually required when two housing units share a driveway, for example, a duplex. With the easement, it is possible to drive on any part of the driveway and a fence cannot be constructed in the middle of the driveway. These easements also allow access to shared open space areas and roads.
- Commercial easement: In the case of a commercial easement agreement, it is applicable to parking lots. Parking lots of shopping centers are sold in multiple parcels to other companies. These easements are used in mixed-use spaces with residential-cum-commercial real estate spaces. Easements give other people the right to use a parcel of land. An example of this would be the utility company using an easement to step on to your property to check your meter.
[Also Read: Joint Development Agreement]
Key Terms in Reciprocal Easement Agreement
The key terms of the reciprocal easement agreement are:
- Easement: This means the right to use or cross someone else’s land for a specified purpose.
- Common Area: The area where the Reciprocal Easement Agreement applies to.
- Commercial center common facilities: The facilities that will be provided at the commercial center
- Commercial center allocable share: This refers to the percentage arrived at by dividing the area of the tract of land by the total area of the commercial center.
- Default: The breach by any party of any clause in this contract
- Governing Law: This refers to the law of the state where this agreement is being made
Download Reciprocal Easement Agreement
If two or more property owners wish to develop a shared piece of land, then a reciprocal easement agreement is extremely important.
You can download a Reciprocal Easement Agreement sample here.
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