2.1 Encumbrances, Easements & Encroachments

Understanding Real Property Encumbrances

In real estate law, an encumbrance is defined as any right to, interest in, or legal liability upon real property that does not prohibit the passing of fee title from the grantor to the grantee, but diminishes the property's market value, restricts its use, or clouds the title. Encumbrances operate on a continuum from minor operational accommodations to severe title defects that render title unmarketable.

Real estate professionals must distinguish between the two primary classifications of encumbrances:

1. Financial Encumbrances (Liens): Monetary claims against property that use the asset as security for the payment of an obligation or debt (e.g., mortgages, tax liens, mechanic's liens, judgment liens).
2. Non-Financial (Physical) Encumbrances: Interests or physical burdens that affect the physical condition or lawful use of the land (e.g., easements, restrictive covenants, encroachments, zoning ordinances).

While monetary encumbrances can generally be resolved through financial satisfaction at or prior to closing, non-monetary encumbrances permanently shape how real property may be enjoyed, developed, or conveyed.

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Easements: Legal Nature, Tenements, and Classifications

An easement is a nonpossessory property interest that grants the easement holder the legal right to use another party's land for a specific, limited purpose. The easement holder does not possess or own the underlying land; title remains with the fee owner.

Easement Appurtenant

An easement appurtenant directly benefits an adjacent parcel of land. To exist, an easement appurtenant legally requires two distinct tracts of land owned by different parties:

• Dominant Tenement (Benefited Estate): The parcel of land that enjoys the benefit of the easement.
• Servient Tenement (Burdened Estate): The parcel of land over which the easement crosses or which suffers the physical burden.

Running with the Land: An easement appurtenant "runs with the land." When title to the dominant tenement is conveyed, the easement automatically transfers to the new owner, even if the easement is not expressly mentioned in the deed of conveyance. Conversely, when the servient estate is transferred, the burden remains attached, provided the successor has actual, constructive, or inquiry notice.

+-----------------------+              +-----------------------+
|   Dominant Tenement   |  ===> Uses   |   Servient Tenement   | ===> Access to
| (Benefited Property)  |   Driveway   |  (Burdened Property)  |      Public Road
+-----------------------+              +-----------------------+

Easement in Gross

An easement in gross benefits an individual or a corporate entity personally, rather than benefiting an adjacent parcel of real estate. In this arrangement, there is a servient tenement, but no dominant tenement.

Easements in gross are divided into two categories:

• Commercial Easements in Gross: Granted to business entities (e.g., utility companies for electric transmission lines, gas pipelines, municipal sewer conduits, railroad rights-of-way). These rights are treated as valuable commercial property interests, are alienable (freely transferable and assignable), and do not expire upon the dissolution of the corporate entity.
• Personal Easements in Gross: Granted to private individuals for recreational or personal convenience (e.g., permission granted to a specific person to fish in a private pond or cross private land to reach a shoreline). These rights cannot be assigned, leased, or inherited, and they terminate automatically upon the death of the easement holder or the conveyance of the servient property.

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Creation of Easements

Easements may be created under New Jersey law through several distinct legal mechanisms:

1. Express Grant: The fee simple owner executes a formal written instrument (typically a deed or standalone indenture) granting an easement to another. To satisfy the New Jersey Statute of Frauds (N.J.S.A. 25:1-11), express easements must be in writing, contain an adequate legal description, and be signed and acknowledged by the grantor.
2. Express Reservation: A grantor conveys title to real estate but reserves within the deed of conveyance an easement over the conveyed parcel for the grantor's retained land.
3. Implied Easement (Prior Use): Arises when a single parcel is severed into two or more tracts, and before severance, an apparent, continuous, and permanent use of one part of the land for the benefit of another part existed (a quasi-easement). The use must be reasonably necessary for the beneficial enjoyment of the conveyed parcel.
4. Easement by Necessity: Recognized when an owner subdivides land in a manner that leaves one parcel completely landlocked, lacking legal or physical access to a public highway. The grantee has an absolute common law right to cross the grantor's retained land to access the public thoroughfare. Unlike an implied easement based on prior use, strict necessity—not prior use—is the foundational requirement.
5. Easement by Prescription: Acquired through continuous, open, notorious, and hostile/adverse use of another's land for the statutory period. Under New Jersey law, the prescriptive period is 20 years. The use must occur without the property owner's permission (adverse to the owner's title) and in such an open manner that a diligent landowner would be placed on notice.
6. Condemnation (Eminent Domain): Acquired by government bodies or authorized public utilities through eminent domain proceedings for public utility easements, highway expansions, or drainage projects, requiring payment of just compensation.

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Termination of Easements

Easements do not expire automatically simply because of a passage of time or temporary disuse. Once established, an easement continues perpetually unless terminated through one of the following recognized legal methods:

• Written Release: The owner of the dominant tenement executes a formal written release (typically a quitclaim deed) surrendering the easement rights back to the owner of the servient tenement.
• Merger of Title (Unity of Ownership): If legal title to both the dominant and servient tenements becomes vested in the same individual or entity, the easement is extinguished by operation of law. An easement cannot exist over one's own land. Even if the property is later re-subdivided, the original easement does not automatically revive.
• Abandonment: Mere non-use does not constitute legal abandonment. To prove abandonment, the party asserting termination must demonstrate both non-use and an affirmative, unequivocal act by the dominant owner showing an intent to permanently relinquish the easement (e.g., constructing a permanent stone wall blocking access).
• Cessation of Purpose or Necessity: An easement created for a specific purpose or by necessity terminates when that purpose or necessity ceases to exist (e.g., a municipal road is opened providing direct access to a landlocked parcel).
• Destruction of the Servient Tenement: Involuntary destruction of the underlying servient building or structure (e.g., total destruction of a commercial building supporting a party-wall easement) extinguishes the easement.
• Prescription (Adverse Use by Servient Owner): The servient owner obstructs the easement openly, notoriously, and continuously for the 20-year statutory period in New Jersey, reclaiming unencumbered ownership.

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Licenses vs. Easements

A license is a personal, revocable, and non-assignable privilege to enter upon the land of another for a specific purpose. Unlike an easement, a license does not confer any estate or interest in real property. It is essentially legal permission that prevents the licensee from being treated as a trespasser.

Key characteristics of a license include:

• Revocability: Can be revoked at the will of the licensor at any time, unless the licensee has expended substantial funds in reliance on the license (which may create an irrevocable license under the equitable doctrine of estoppel).
• Termination: Automatically terminates upon the death of either party or upon the sale/conveyance of the underlying property.
• Formality: Can be granted orally or informally; not subject to the Statute of Frauds.
• Common Examples: Movie theater tickets, parking lot passes, permission to hunt or store personal property on a neighbor's lot.

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Encroachments and Boundary Disputes

An encroachment occurs when an improvement, fixture, or physical structure unlawfully intrudes onto the land of an adjoining property owner or into an existing easement corridor. Common examples include overhanging roof eaves, improperly placed fences, outbuildings, paved driveways, and retaining walls built across boundary lines.

Legal and Brokerage Implications of Encroachments

1. Detection: Encroachments are typically discovered through a current, certified land survey or boundary inspection conducted by a licensed New Jersey professional land surveyor. Standard title insurance policies explicitly exclude unrecorded boundary disputes and encroachments unless the buyer purchases an extended coverage policy or provides a certified survey that allows the title insurer to remove the standard survey exception.
2. Clouds on Title: An encroachment renders title unmarketable because it exposes the purchaser to potential litigation or structural removal costs. A seller cannot force a buyer to close on a contract with an unresolved encroachment unless the contract specifically contemplated the condition.
3. Risk of Prescriptive Rights and Adverse Possession: If an encroaching structure remains in place openly, notoriously, and without permission for New Jersey's 20-year statutory period, the encroaching owner may establish a prescriptive easement or obtain fee title through adverse possession, permanently stripping the true owner of their property rights.
4. Remedies: The burdened property owner may bring an action for ejectment, seek an equitable injunction requiring removal of the encroaching improvement, or seek monetary damages for trespass and diminution in property value.