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Creating Covenants That Help Plan the Development of Multi-Use/Multi-Owner Projects: Reciprocal Easement Agreements (“REAs”)

Female Handing Over the Keys to Other Woman in Front of Corporate Building.If you are the developer of a multi-use project or are planning to develop a large real estate project with multiple owners, a reciprocal easement agreement (“REAs”) may be an appropriate avenue for the coordination of the development and future maintenance of the project.

REAs are legal agreements, customarily recorded in the local land records, that allow owners of different parcels of real estate to coordinate the planning, development, improvement, and possibly perpetual maintenance of their respective properties as part of a larger integrated project or complementary adjacent projects.  When property owners plan and develop such properties, they may need to access adjacent properties for ingress and egress to their property and for construction support (crane easement agreements, underpinning requirements, and cooperation for closely constructed buildings).  They may also need to plan for community-wide improvements, such as internal private roadways and utility lines that may serve multiple properties.  An REA can help the parties define the rights that the parties may have in the overall development, and where such easements and improvements will be located.

The project may include common areas within the different properties that may have improvements to be used by occupants or users of some or all of the properties.  The parties may agree on common signage and building design and architectural guidelines.  

In an REA, the parties can decide which one or more of them will be responsible for constructing the shared improvements and if and how the cost of the same may be shared among the different property owners.  Similarly, some REAs include provisions for continued, perpetual maintenance, repair, and replacement of shared improvements and mechanisms for sharing those costs as well.  The shared percentages could be based on such criteria as acreage, intended constructed square footage, number of occupants and different use types.  Such perpetual maintenance could be accomplished either through the creation of a commercial owners association or through one of the parties being designated as a manager for purposes under the REA.

Depending upon the type of project, REAs may include restrictions and prohibitions on the types of permitted uses and other leasing requirements.  These can protect the investment in and value of the project by keeping a certain mix of uses and prohibiting undesirable uses.

In addition to architectural guidelines for initial construction, REAs may also include guidelines, restrictions, and requirements for future improvements and alterations.  Proposed improvements and alterations may be subject to review and approval by the manager or a committee established by the commercial owners association.

The terms, conditions, and restrictions set forth in the REA should apply to all ultimate occupants, users and tenants within the properties.  Enforcement can be by the owners and the commercial owners association.

Other issues, such as insurance and indemnity, parking, casualty, condemnation, remedies for failure to comply with the REA and duration of the agreement, may also be included within REAs.

If you have a project for which an REA might be appropriate, or if you have other commercial real estate or business legal needs, please contact Michael Faerber at 301-251-1180 or .