How to value a private easement?

[Topspin]

I'm looking at buying an industrial warehouse building which has full access off a public roadway. Abutting the land on one side is a private roadway leading back to other industrial buildings. On that side of the warehouse is a loading dock and drive-in door that are not accessible other than through use of the private road.

There is a License Agreement in place covering use of the Private Roadway for the next 23 years, stipulating joint reasonable maintenance and an additional annual fee for use. I can discount the annual fees to arrive at a value. And I will be trying to negotiate an extension of the License Agreement.

However my preference would be to purchase a permanent easement. I've been researching the valuation of easements, but most articles address RR and govts who have eminent domain, who value the easement as what the landowner loses - which in this case is very little as there is no harm from using the road other than maintenance. However I don't have eminent domain, and the private roadway owner seems to view the value not as what he's losing but as value of restricting access (a troll, although I don't know him, so I don't want to be pejorative).

Could anyone point me to resources addressing valuation of private easements, or steer me in the right direction?
[My father was a commercial/industrial appraiser in MD, and taught appraising there - wishing he were alive now ...]
Thanks for any help you can give.

 

[CANative]

See "Game Theory."

 

[George Hatch]

Regardless of how an appraiser would value an access easement that provides secondary access to your structure you're not dealing with a market transaction. This is a deal between two specific property owners, neither of whom has alternatives. You can't go elsewhere for the access and they can't go elsewhere for the costs you chip in to help maintain the road. So no matter what we say your negotiation is basically going to stand on it's own.


One way to value it is it's impact on the value and marketability of your property. How much less will your property be worth without use of the overhead door and loading dock? The diminution of value would presumably represent the upper limit of what anyone in your situation would pay. I mean, if you can build another loading dock and overhead door off of your main access then you could probably do without this one.

Who knows? You might be able to seal the deal just by asking, or perhaps offer to "buy" the permanent easement by assuming responsibility for the entire cost of maintenance. After all, you've already been pulling your own weight with the maintenance, right? That's probably worth something to the other property owner.

 

[Topspin]

Thanks, you're right. The building has loading docks also from the main access, but there will be some impairment if not usable. But both you & Canactive are right that it's a negotiated settlement in any case.
I was hoping, to add a 'third-party fair value' assessment perspective to inevitable push-pull of our negotiations. That is, the seller's 'loss' from issuing the easement is quite small, the added value of extra access for me is relatively large. I can avoid use of that side and the seller gets nothing. Those are the limits, but was hoping there might be some basis for setting a value in the middle. Thanks for your comments.

 

[Restrain]

I am not a lawyer and do not play one on TV, but.....I would talk with an attorney, as there may be access rights that have conveyed to you just by the continued use, etc. The other party may not be able to prevent your continued use even if no payment. If so, that would put you in the driver's seat for the negotiations.

 

[George Hatch]

The methodology would normally amount to trying to quantify the change in lot utility. How much much less valuable the other lot is without your contribution to their maintenance vs any negative impact your use of that driveway has on their lot.

One thing a permanent easement might do is interfere with the potential for redevelopment on their lot. They wouldn't be able to ignore the existing easement in any plans for redevelopment. If their existing improvements have a long way to go before replacement then that potential problem is a long ways off. If the easement in on the periphery relative to the orientation of their building it may have no effect on the current use or any future uses; thus basically no loss other than not having exclusive use of the driveway.

But in answer to your question there's no quick-n-dirty rule of thumb on this; no formula. It doesn't sound like your current license gives you exclusive use of the driveway so they may not have any noticeable diminution of value attributable to your use of it.

 

[hastalavista]

See "Game Theory."

Correct.

Also see "Bilateral Monopoly".

 

[Pat Butler]

That's a tough one due to the market being between two captive parties.

I owned a property with a shared driveway. I actually owned the driveway and the neighboring property had a right to use 1/2 of it. That right was expressed in a deed from 1901 and had no terms to it. The neighbors were jerks (long story) so I sent them a letter letting them know that their use of the driveway was limited to one minute per year.

They got upset and I directed them to their title company who missed this driveway agreement on their search. It was also a title company who tried to rip me off one time. Anyway, I ended up selling back their full use of the driveway for $5K.

 

[leasedfee]

Other than above-market monies, you're going to have to use non-market motivations if you hope to motivate or create good will with the servient estate owner. E.g., donation to his favorite charity, sports tickets, dancing girls, whatever. It is called servient estate for good reason -- he or she serves your dominant easement -- and why would he or she want to increase that?

If you had access from numerous directions and thus had a market, then the formula would be the same as the government's. Land value X land capitalization rate X % use/encumbrance = value of the easement.

Your capitalization of the existing contractual easement is the value of the cash flows to the servient estate -- which is an historical accounting fiction. Might not relate much to today's world.

 

[Walter Kirk]

was the subject property and the adjoining property under common ownership when the improvements were built or proposed? I have seen a similar situation in which a zoning variance was issued allowing relief from rear setback requirements. Its possible that this easement can be declared perpetual.