Striking the Delicate Balance Between Easement and Fee Owners

Home , Easement, Exclusive right, Real estate

STRIKING THE DELICATE BALANCE BETWEEN EASEMENT AND FEE OWNERS

STEVEN L. MILLER, JR., Houston Greenberg Traurig, LLP

State Bar of Texas 29TH ANNUAL ADVANCED REAL ESTATE DRAFTING March 15-16, 2018 Dallas

CHAPTER 3

STEVEN L. MILLER, JR. Greenberg Traurig, LLP 1000 Louisiana Street, Suite 1700 Houston, Texas 77002 713-374-3500 FAX: 713-374-3505

BIOGRAPHICAL INFORMATION

EDUCATION B.A., in History and Political Science cum laude, Southern Methodist University J.D., The University of Texas

PROFESSIONAL ACTIVITIES Of Counsel, Greenberg Traurig, LLP, Houston, Texas - Real Estate Section Member, State Bar of Texas Former President, Child Builders, Board of Directors Founding Member, Colonial Williamsburg National Advisory Council Founding Member, United Way Young Leaders Council

PUBLICATIONS, ACADEMIC APPOINTMENTS AND HONORS Team Member, Chambers USA Award for Excellence, Real Estate, 2017 Team Member, U.S. News - Best Lawyers®, "Law Firm of the Year" in Real Estate Law, 2015 Team Member, The Legal 500 United States, "Top Tier" Firm in Real Estate, 2014 Team Member, Law360 "Real Estate Practice Group of the Year," 2013 and 2015 Listed, Who’s Who Among American Law Students, 1998

Striking The Delicate Balance Between Easement and Fee Owners Chapter 3

TABLE OF CONTENTS

INTRODUCTION ...... 1

I. FEE OWNERSHIP ...... 1

II. EASEMENT ALTERNATIVE TO FEE OWNERSHIP ...... 1

III. EASEMENT AGREEMENTS ...... 1

IV. TYPES OF EASEMENTS ...... 2

V. CONFLICTS BETWEEN EASEMENT AND FEE OWNERS ...... 2 A. Exclusivity ...... 2 B. Property Subject to the Easement ...... 3 C. Use of the Easement ...... 3 D. Excavation and Restoration ...... 3 E. Term of the Easement ...... 3 F. Conflicting Easements ...... 4

VI. EASEMENT VERSUS LICENSE ...... 4

CONCLUSION ...... 4

ATTACHMENTS: Reciprocal Easement Agreement (Annotated) Water Line Easement (Annotated)

Striking The Delicate Balance Between Easement and Fee Owners Chapter 3

STRIKING THE DELICATE nonpossessory (non-ownership) interest in the land burdened by the easement. In situations like these, an BALANCE BETWEEN EASEMENT easement may provide a benefit of land ownership AND FEE OWNERS (e.g., the right to use the land) without the expense and capital illiquidity involved in acquiring fee title to the INTRODUCTION land. However, unlike fee ownership which permits a Easements are commonly referenced in real estate landowner to generally use the property for any lawful transaction documents and sometimes constitute the use and in perpetuity, agreements granting easements entire transaction. In spite of this, easements are often are usually (if properly negotiated) for a limited scope, not fully understood or drafted in a manner that a specific period of time (though they may be perpetual accomplishes or maximizes the benefits to the grantor in certain easement agreements, such as utility or the grantee. More commonly in real estate easement agreements or certain access agreements), transactions, the ownership-related documents receive and contain restrictions on the use of the easement and a much greater level of attention and scrutiny. obligations regarding the property during and at the However, easement owners possess many of the same termination of the easement agreement. As with deeds rights as fee owners do. This paper examines the conveying title to land, easement agreements should in similarities, differences, and interrelationship of writing3 and be recorded in the real property records of easements and fee interests, and perhaps most the county in which the land is located to put third importantly, how to approach easement documents parties on notice of the easement agreement and to from both the grantor and the grantee perspectives. protect against loss by the easement holder of its easement rights due to a conveyance or foreclosure by I. FEE OWNERSHIP a subsequent lender of the property burdened by the In the most straightforward of real estate easement. The actual compensation, if any, to the transactions, land is conveyed directly by means of a landowner from the grantee of the easement may be set special warranty deed or general warranty deed forth in the recorded easement agreement or in a providing the purchaser with fee1 ownership of the real separate agreement or side letter. As is usually the property, which deed is recorded in the real property case with deeds, if the compensation is set forth in the 2 records of the county in which the land is located. easement agreement that is recorded, such Generally, subject to complying with law, recorded compensation will be stated in a nominal amount (e.g., restrictions, and any limitations set forth in the deed, $10). A third option, the ground leasing of property, is the new landowner may utilize the property as it an alternative to purchasing property or obtaining an chooses. Non-owners of the property have no rights to easement over the property (and contains elements of use it unless permitted by the fee owner. Fee owners fee ownership and easement rights), but ground leases may generally transfer ownership of the property are outside the scope of this paper. It should also be without restriction. However, land ownership also noted that in custom and practice, many agreements involves necessary obligations and burdens such as the between adjacent landowners are done by means of an purchase price, ongoing maintenance and repair easement agreement, so an analysis of whether a sale obligations, and ad valorem tax obligations. of a specific tract, a ground lease, or an easement agreement is most desirable to the parties may be, and II. EASEMENT ALTERNATIVE TO FEE often is, secondary to custom and practice. For OWNERSHIP example, access easement agreements are routinely Often a party desires the benefits of land entered into by custom. ownership, such as the right to use the land for a particular purpose, but for a number of reasons, III. EASEMENT AGREEMENTS purchasing the property is not feasible or desired. For An easement, in its most basic form, is a example, the intended limited use of the land may be nonpossessory (non-ownership) interest in land owned disproportionate to the cost of purchasing the land, the by another party providing for the right to use such tax implications of ownership may negate or materially land.4 The owner of the land may continue to use the lessen the purpose for which the land is desired, property it possesses, including the easement area, acquisition financing may not be attainable or may not subject to the easement. The easement holder may not be economically feasible, or quite simply the subject exclude others from using the land that is burdened land may not be for sale. An easement is very likely to unless its use of the easement is adversely impacted (or be a much faster acquisition transaction than acquiring the property in fee and provides the grantee with a 3 McClung v. Ayers, 352 S.W.3d 723, 729 (Tex. App. – Texarkana 2011, no pet.) 1 Texas Property Code § 5.022(a) 4 Marcus Cable Assocs., L.P. v. Krohn, 90 S.W.3d 697, 700 2 Texas Property Code § 13.02 (Tex. 2002) 1 Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 it has an exclusive right) and (unlike fee ownership) particular tract of land). Thus, the grantee is may not use the land except in the exercise of its prevented from transferring the right to use easement rights. While there are easements that are the easement, absent an express provision in not created via contract, such as a prescriptive the easement agreement. However, if the easement or an implied easement, this paper addresses burdened property is conveyed, the holder of easements contractually agreed to by a grantor and a the easement retains the right to use the grantee. Typically, as noted above, the legal right to easement. Easements in gross are very use the property of another party via an easement common when, for example, landowners are agreement is granted by the property owner is for a approached by pipeline companies to use a particular purpose, a limited period of time (although it portion of their land to transport product or may be perpetual), and involves restrictions on the use by utility companies to provide service to of the easement and obligations regarding the property customers. In such easement agreements, an during and at the termination of the easement express provision permitting assignment to agreement. However, often the details of the successors and assigns is common to provisions of easements agreements are largely facilitate ongoing and future business overlooked and may be an issue in the future when, for operations. An example of a negotiated example, the grantor wants to resume using its property easement in gross agreement is attached to in its discretion or the grantor grants multiple this paper as Exhibit B, which attachment easements over the same property. Easement contains annotations regarding many of the agreements should be negotiated with an understanding provisions. of the needs of the grantor or grantee (as applicable) and tailored to accomplish their respective objectives, V. CONFLICTS BETWEEN EASEMENT AND some of which will be discussed in Exhibit A and FEE OWNERS Exhibit B attached to this paper. As noted above, fee owners can largely do with their property as they wish. And when easements are IV. TYPES OF EASEMENTS granted, often they do not receive the same level of Contractual easements are either easements thought and scrutiny as they should. This combination appurtenant or easements in gross. can result in situations where a fee owner finds itself restricted from using its property as it thought it could A. Easements appurtenant are attached to and do or wants to do. If a fee owner grants easements that run with the land; that is, upon the overlap or otherwise conflict with one another, this can conveyance of the benefitted property (the create significant issues from a time, effort, and cost dominant estate), the easement is resolution perspective. automatically conveyed along with the benefitted property. Because the easement is A. Exclusivity. for the benefit of the land (and not the Easements can be exclusive or non-exclusive. easement holder itself), the owner of the Easement holders prefer exclusive easements to ensure dominant estate may use the burdened that they may utilize the easement tract without property, subject to the terms of the easement interference from other easement holders, and it is not agreement. Easements appurtenant are uncommon to see exclusive easements granted. If a commonly utilized in easement agreements landowner wants or could envision its property having between sophisticated commercial parties so multiple users with a legal right to access and use the that the negotiated easements flow through to property, it should be very cautious in granting any subsequent owners of the benefitted exclusive easements. To be exclusive, the easement properties (whether affiliates or third parties) agreement must expressly state that the easement and are not extinguished upon conveyances granted is exclusive; it may not be implied. Out of an of the dominant estate. The transferring of abundance of caution, easement grantors should always these rights is especially important to the change any “exclusive” wording to “non-exclusive” grantee, as the grantee wants to retain its unless that is not the business deal. A non-exclusive easement rights regardless of who owns the easement permits the grantor to grant other easements burdened property and wants the ability to over the same property, but even then, the easements transfer its benefitted land and the easement should be reviewed to ensure they do not conflict. It is rights that increase the value of its benefited not uncommon to find easements that are exclusive and land to other parties without losing the effectively bind the hands of the property owner in easement rights. using the burdened portion of the property, resulting in B. Easements in gross are personal to the having to negotiate with the easement owner to modify easement holder (rather than benefitting a the terms of the easement agreement to accomplish the 2 Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 landowner’s business objectives (and costing the holder should try to maximize its flexibility to use the landowner time and money). An even worse situation easement tract to cover the widest range of possible arises when the easement is not limited to a specific future uses. It is important to understand the exact portion of the property, resulting in a blanket easement requirements of the easement grantee and then that covers the entire property and is exclusive to the document them to the extent acceptable to the property grantee, which again requires negotiating with the owner; do not assume that the use language in an initial easement holder to reduce the footprint of the easement draft of an easement agreement prepared by a grantee and/or its exclusivity. reflects the actual use for which the easement is needed. B. Property Subject to the Easement. Easement owners sometimes initially default to D. Excavation and Restoration. blanket easements both because blanket easements do Often easement agreements provide for the right not require a separate legal description (and the of the easement holder to excavate the easement tract attendant time and cost of a surveyor) and they provide for purposes of, for example, laying pipelines or utility the easement holder with the largest area in which to lines. The property owner should ensure that the exercise its easement rights. If the easement is not property is restored following not only the initial restricted to a specific portion of the property through installation, but also after any repairs and maintenance use of a legal description of the easement tract, or at and at the termination of the easement term. The least a drawing to scale reflecting the easement area, property owner may also want the easement holder to and encumbers the landowner’s entire property (i.e., a remove any excess dirt following excavation and blanket easement), the landowner will be subject to remove it to a particular location, and if so, these using its property without interfering with the easement obligations should be expressly stated. The easement holder’s rights under the easement agreement. grantee should include any restoration obligations in its Depending on the terms of the easement agreement, the cost and timing considerations when negotiating the property owner may need to obtain the consent of the easement agreement. easement holder to, for example, construct improvements anywhere on its property. Such a E. Term of the Easement. situation has a chilling effect on not only the ability of Another consideration in drafting an easement the landowner to develop its property, but also on its agreement is the term. A grantee should have a ability to sell or lease the property. Utility providers, particular period of time reasonably necessary to for example, often require blanket easements to enable it to exercise its intended easement rights, provide utility services to a property, but the grantor although grantees sometimes request perpetual terms to should require in the easement agreement that upon provide the broadest possible time. Property owners completion of the utility facilities on the property, the should consider how long they are willing to encumber utility provider will release the blanket easement and their property with an easement, taking into account the easement will be modified to cover only the portion the impact on their future development of the property of the property actually subject to the utility facilities. and the ability to sell or lease it while encumbered by Then, very importantly, the grantor must actually an easement. Some easements, such as utility require the utility provider to release the blanket easements or rights-of-way easements, may have little easement upon completion of the utility facilities. to no detrimental impact on the transferability of Failure to require release of the blanket easement can property (assuming they are not blanket easements or, delay sales or lease transactions when the grantor has if they are, they can be released in favor of easements to try to obtain a release from the grantee, which covering the particular part of the property that is typically does not have a vested interest in the timing actually used by the easement holder) even if they are of the transaction. perpetual. However, easement agreements that grant a right for the benefit of another tract of land or an C. Use of the Easement. individual to access and cross property may have a Property owners should endeavor to limit the significant negative impact on the future use and types of use of the easement tract to only that which is transferability of the property if the term is not limited necessary for the intended use of the easement holder. (or if the right is exclusive). The grantor and grantee Often, the use of the easement tract is drafted much may always agree to extend the term if need be, so if broader that is actually required, and as a consequence, the limited term is ultimately not sufficient, the grantee the land is subject to a broader easement use than the is not necessarily foreclosed from continued use of the property owner intends and restricts the use of the fee easement tract. owner on the easement tract more than is actually necessary to enable the easement holder to use the easement as it intends. Conversely, the easement 3 Striking The Delicate Balance Between Easement and Fee Owners Chapter 3

F. Conflicting Easements. when the grantee only requires use of the property for a Easement holders will also want to protect short period of time. Temporary construction themselves from the property owner granting easements are customarily used to provide the grantee easements that overlap or otherwise conflict with their with a laydown area for its construction staging and easement rights and tract. While the easement holder parking (and sometimes construction access if access is cannot control or prevent the landowner from entering not otherwise provided) to enable the grantee to into subsequent easement agreements, the easement construct improvements elsewhere on the property, grantee should provide in the easement agreement that whereas a license (being revocable) would not be the property owner has the right to enter into the sufficient to provide the grantee with a reasonable easement agreement and that it does not conflict with means to commence and complete construction. any other easements granted on the subject property. If an easement is granted that conflicts with a prior CONCLUSION easement, the prior easement is superior to the In summary, while fee ownership provides the subsequent easement as between the parties to the prior maximum latitude in utilizing property, easements easement agreement and as to the subsequent easement provide a cheaper and faster (but less comprehensive) assuming the easement agreement creating such prior alternative to land ownership (and significantly greater easement has been properly recorded in the real rights than a license). Both fee ownership and property records of the county in which the property is easement rights provide rights to use the land, but located. If an easement agreement is entered into easements are more limited in their permitted use, covering the same tract of land over which a prior potentially are of a limited duration, and may contain easement has been granted and such easement restoration obligations during and upon their agreement is properly recorded, while the prior termination. An understanding of the requirements of easement has priority, the subsequent easement holder both the landowner and the easement grantee are may have a claim against the property owner provided important in drafting the easement agreement to meet the easement grantee has protected itself by including their respective objectives. Easement drafters should language as noted above. A landowner should review pay particular attention to whether the easement is all easements on its property for any exclusivity exclusive or not exclusive, perpetual or limited in time, provisions and where a new easement may potentially and broad or narrow in its permitted use and land overlap or conflict with an existing easement. To the burdened. A successful easement agreement will extent there are or may be any conflicts, the fee owner provide revenue for the property owner while is well served to address them upfront before granting maximizing its use of the easement tract, subject to the a new easement. easement grantee’s use thereof, while also providing the easement holder the necessary rights to use the VI. EASEMENT VERSUS LICENSE easement tract without interference from the property As noted above, an easement creates an insurable owner and any other easement holders. interest in real property. Another alternative to an easement, a license, is personal to the licensee, does not create an interest in real property, and title insurance is not obtainable on a license. Unlike an easement, which may be perpetual or for a specific period of time and may run with the land, a license is revocable at any time by the grantor. Consequently, a grantor may prefer to provide a license in order to maximize its ability use its land given that it may revoke the licensee’s rights at any time. Given the temporary nature of a license, grantees will not provide the same level of consideration (if any) that would be paid for an easement. Grantors are also usually less concerned with the specificity of the description of the property subject to a license because they may revoke the license, whereas easements should be described by means of a legal description and sometimes also a drawing given the potential lengths of their terms. Licenses often are used when grantors are intending to sell property that would otherwise be burdened by an easement and impair the marketability of the property, when the grantor intends to develop the property, or 4 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER1

THE STATE OF TEXAS § § KNOW ALL BY THESE PRESENTS: COUNTY OF ______§

RECIPROCAL EASEMENT AGREEMENT

This RECIPROCAL EASEMENT AGREEMENT (this “Agreement”) is made and entered into as of ______, 201_ (the “Effective Date”), by and between ______, a ______(“Landowner A”), and ______, a ______(“Landowner B”).2

R E C I T A L S

WHEREAS, Landowner A owns the tract or parcel of land described in Exhibit A attached hereto and made a part hereof for all purposes, together with the improvements located thereon (“Tract A”); and

WHEREAS, Landowner B owns the tract or parcel of land described in Exhibit B attached hereto and made a part hereof for all purposes, together with the improvements located thereon (“Tract B”); and

WHEREAS, Landowner A and Landowner B intend to develop and operate their respective tracts in conjunction with each other as integral parts of an office complex,3 and in order to effectuate the common use and operation of their respective tracts they desire to enter into certain covenants and agreements, and to grant to each other certain reciprocal easements, in, to, over, and across their respective tracts.

NOW, THEREFORE, in consideration of the premises, the sum of Ten and No/100 Dollars ($10.00),4 and other good and valuable consideration in hand paid, and in consideration of the mutual agreements herein made, the receipt and sufficiency of which are hereby acknowledged, Landowner A and Landowner B hereby agree as follows:

Article I Definitions

For purposes of this Agreement, the following terms shall have the meanings set forth below:

“Access Easement” shall have the meaning ascribed thereto in Section 2.01.

“Access Easement Area” shall have the meaning ascribed thereto in Section 2.01.

“Agreement” shall have the meaning ascribed thereto in the introductory paragraph.

“Buildings” shall mean the buildings constructed or to be constructed by or on behalf of the Owners (as hereinafter defined) at the Office Complex (as hereinafter defined).

“Claims” shall have the meaning ascribed thereto in Section 6.01.

“Common Utility Line” shall mean those Utility Lines which are installed to provide the applicable service to each of Tract A and Tract B.

“Landowner A” shall have the meaning ascribed thereto in the introductory paragraph.

“Landowner B” shall have the meaning ascribed thereto in the introductory paragraph.

“Effective Date” shall have the meaning ascribed thereto in the introductory paragraph.

“Force Majeure” shall mean acts of God, fire, earthquake, flood, explosion, actions of the elements, war, invasion, insurrection, riot, mob violence, sabotage, inability to procure or general shortage of labor, equipment, facility, materials or supplies in the open market; failure of transportation, strikes, lockouts, actions of labor unions, condemnation, requisition, laws, governmental action or inaction, orders of government or civil or military or naval authorities, or any cause, whether similar or dissimilar to the foregoing, not within the reasonable control of the applicable Owner.

“Governmental Authorities” shall mean any federal, state, county, city or local governmental or quasi-governmental authority, entity or body (or any departmental agency thereof) exercising jurisdiction over a particular subject matter.

“Governmental Requirements” shall mean all applicable laws, statutes, ordinances, codes, rules, regulations, orders, and applicable judicial decisions or decrees, as presently existing and hereafter amended, of any Governmental Authorities.

“Occupants” shall mean any Person or Persons, from time to time, entitled to the use and occupancy of any portion of the Office Complex under any lease, sublease, license, concession or other similar agreement.

“Office Complex” shall mean the office complex constructed or to be constructed on Tract A and Tract B.

“Owner” shall mean, individually, Landowner A or Landowner B.

“Owners” shall mean, collectively, Landowner A and Landowner B.

“Permittees” shall mean all Owners, Occupants and the partners, officers, directors, employees, agents, contractors, customers, vendors, suppliers, visitors, invitees and licensees of all Owners and Occupants.

“Persons” shall mean individuals, partnerships, firms, associations, corporations, trusts, governmental agencies, administrative tribunals or any other form of business or legal entity.

“Proportionate Share” shall mean ______% with respect to Landowner A and _____% with respect to Landowner B.5

5 Proportionate Share could be allocated according to the square footage of the Buildings (and may exclude the square footage of 6 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 “Separate Utility Line” shall mean (i) those Utility Lines which are installed to provide the applicable service to any of Tract A or Tract B, and/or (ii) the portion of a Utility Line extending between a Common Utility Line and a Building.

“Tract A” shall have the meaning ascribed thereto in the Recitals.

“Tract B” shall have the meaning ascribed thereto in the Recitals.

“Tract” shall mean, individually, Tract A or Tract B.

“Tracts” shall mean, collectively, Tract A and Tract B.

“Utility Easement” shall have the meaning ascribed thereto in Section 3.01.

“Utility Lines” shall mean those facilities and systems for the transmission of utility services, including, the drainage and storage of surface water.

Article II Access Easements

2.01 Grant of Access Easements. Each Owner hereby grants, sells, and conveys6 unto the other Owner, for the benefit of the other Owner and its Permittees, a non-exclusive,7 perpetual8 easement (the “Access Easement”) for ingress and egress between the Tracts by vehicular and pedestrian traffic9 upon, over and across the drives, curb cuts, driveways and drive lanes from time to time10 located on the Tracts as generally shown on Exhibit C attached hereto and made a part hereof for all purposes (the “Access Easement Area”),11 such Access Easement to be used in common with the Owners and their respective Permittees. Each Owner shall have the right, from time to time to establish reasonable rules and regulations governing the use of the Access Easement Area located on its Tract, provided that such rules and regulations are not discriminatory and shall be implemented and enforced without discrimination, and provided further that no rules or regulations established with respect to the Access Easement Area on its Tract shall (i) unreasonably interfere with the enjoyment of the easements granted in this Agreement, or (ii) be contrary to or cause the Tracts to be in violation of any Governmental Requirements.12

any skybridges) or by any another method. 6 Akin to the conveyance language in deeds, the easement should be granted, sold, and conveyed to the grantee. 7 Some easement agreements will provide that they are exclusive or will be silent on exclusivity. In this Agreement, the easements are intended to be mutual and non-exclusive so as to be usable by each party’s customers, invitees, employees, contractors, etc. In general, unless the business deal is that the easement is to be exclusive, it is preferable for the grantor that it is non-exclusive, and adding language to that effect makes it clear that is the intent of the parties. The grantee may desire the exclusive right to exercise rights to the easement tract, and depending on the nature of its easement use, this may or may not be acceptable to the grantor. The grantor may also request additional compensation for granting an exclusive easement given that it potentially gives up income from other easements overlapping the easement tract. 8 The term may be perpetual or it could be for a defined term of [years]. In this case, the Owners intend for the mutual easements to benefit the Office Complex for as long as it exists, so the term is perpetual. 9 Drafters should ensure that the easement use expressly covers all intended activities. Some easements only reference ingress and egress, leaving open if this use was intended to permit, for example, vehicular use and leading to potential issues during the easement term. 10 From “time to time” recognizes that roads may be in different locations during the term and may cease to exist, so if the parties intend that certain roads always be accessible, these should be expressly stated, and then include a reference to other roads from time to time. 11 The Access Easement Area should be identified, ideally, with both a drawing and a legal description; the drawing should be to scale. Relying on a drawing, especially one not to scale, invites future disputes as to the location of the Access Easement when an Owner wants to use portions of the property that are arguably encumbered by the Access Easement. The grantee also wants to ensure that its easement interest is clearly defined to so that it knows exactly where it may access the property and where it may not. If time does not permit a legal description to be determined by a surveyor, the Agreement can be signed but not recorded, and the parties should agree to enter into a superseding easement agreement following completion of the legal description, following which the superseding easement agreement should be recorded. 12 While Owners have a vested interest in establishing rules and regulations for their Tracts, drafters should ensure that such 7 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 2.02 Maintenance and Repair; Lighting. During the term,13 each Owner shall (a) maintain, at its expense, the Access Easement Area located on its Tract, so as to keep such areas at all times in an attractive, good and functional condition, similar to the condition of parking areas for other similar Class __ office complexes in the ______sub-market of ______, ______County, Texas, and (b) illuminate, at its expense, the Access Easement Area located on its Tract.14

2.03 No Barriers. Each Owner agrees that no barrier, fence, curb, wall, ditch, barricade or other structure or obstacle will be placed or maintained, or allowed to be placed or maintained, on the Access Easement Area that would unreasonably interfere with, impede or prevent vehicular and pedestrian traffic from passing and/or parking therein or thereon.15

Article III Utility Easements

3.01 Grant of Utility Easement. Each Owner hereby grants, sells, and conveys to the other Owner a non-exclusive, perpetual easement (the “Utility Easement”) in, to, over, under, along and across those portions of the grantor’s Tract necessary for the installation, operation, flow, passage, use, maintenance, connection, repair, relocation, and removal of Utility Lines serving the grantee’s tract. The initial location of any Utility Line shall be subject to the prior written approval (which approval shall not be unreasonably withheld, conditioned or delayed) of each of the Owners whose tract is to be burdened thereby. Such easement area shall be no wider than necessary to reasonably satisfy the requirements of a private or public utility company, or five (5) feet on each side of the centerline if the easement is granted to an Owner. The grantee shall provide to the grantor a copy of an as-built survey showing the location of such Utility Line.16 All Utility Lines shall be underground except:17

(a) ground mounted electrical transformers;

(b) as may be necessary during periods of construction, reconstruction, repair or temporary service;

(d) as may be required by the provider of such utility service; and

(e) fire hydrants.

At least thirty (30) days prior to exercising the rights to such Utility Easement granted herein, the grantee Owner shall provide the grantor Owner with a written statement describing the need for such Utility Easement, shall identify the proposed location of the Utility Line, the nature of the service to be provided, and the anticipated commencement and completion dates for the work.

rules and regulations do not impede the intended purposes of the Access Easements. 13 This language is not necessary when the term is perpetual, but it is included in the event the term is for a shorter period of time. 14 Maintenance and repair and lighting are deal-specific, and drafters should address who has the obligation to maintain the Access Easement Area and to what standard, in addition to remedies to address failure to do so. Self-help remedies are included in Section 7.01. 15 While Owners want to control activity on their Tracts, it is important to place limits on the ability of Owners to impede, whether intentional or not, ingress and egress by placing barricades, fences, etc., on the Access Easement Area. Drafters should expressly address these limitations to effectuate the intent of the Access Easement. 16 Any Utility Easements granted may not have a specific location at the time of the execution of the Agreement. Accordingly, if a specific location is not determined, the subject language provides a path forward for reasonably determining the location, given that the utility provider will largely determine the exact location. 17 To avoid the surface of the Tract being unduly burdened by above-ground utility facilities, drafters should require them to be located underground except where surface placement is necessary. 8 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 3.02 Separate Utility Lines. Any Owner electing to install a Separate Utility Line shall obtain all permits and approvals and shall pay all costs and expenses with respect to the initial construction and all subsequent maintenance, relocation or abandonment of the Separate Utility Line. The Separate Utility Line shall be maintained in a safe, clean and good state of repair and condition. The grantee Owner shall promptly perform such work in compliance with all Governmental Requirements18 and shall not unreasonably interfere with the use, occupancy or enjoyment of the operations of grantor Owner. Except in the case of a maintenance emergency where such work may be initiated after reasonable telephonic notice, the grantee Owner shall provide the grantor Owner with at least fifteen (15) days prior notice before commencement of any work. The grantee Owner of any Separate Utility Line agrees to defend, protect, indemnify and hold harmless the grantor Owner from and against all claims or demands, including any action or proceeding brought thereon, and all costs, losses, expenses and liabilities of any kind relating thereto, including reasonable attorneys’ fees and cost of suit, arising out of or resulting from the exercise of the right to install, maintain and operate the Separate Utility Line; provided, however, the foregoing obligation shall not apply to claims or demands based on the negligence or the willful misconduct of the grantor Owner.19

3.03 Common Utility Lines. Except as may otherwise be agreed, if the Owners elect to install a Common Utility Line, once constructed, ______20 shall promptly maintain, replace and/or relocate the Common Utility Line in a safe, clean and good state of repair and condition, and in compliance with all Governmental Requirements.21 If an Owner, in performing maintenance, repair or replacement of a Common Utility Line, is likely to incur costs of more than ______Dollars ($_____) for such work in any one instance, such Owner shall prepare a list of qualified bidders (as reasonably determined by such Owner), shall seek competitive bids from the list of qualified bidders before performing the work and shall select the lowest responsive qualified bidder to perform the work. After an Owner has incurred any costs for maintaining, repairing or replacing a Common Utility Line, it shall send a statement of such costs, together with a copy of any invoice to the other Owner (unless the Owner incurring such costs elects to be solely responsible for such costs). Each Owner shall pay within thirty (30) days after receipt of the statement of costs its Proportionate Share of such costs (unless the Owner incurring such costs elects to be solely responsible for such costs). Except in the case of a maintenance emergency where such work may be initiated after reasonable telephonic notice, the grantor Owner shall be provided with at least fifteen (15) days prior notice before commencement of any work.

3.04 Relocation. The grantor Owner shall have the right to relocate a Utility Line on its Tract upon thirty (30) days prior written notice to the grantee Owner, provided that such relocation:22

(a) shall not interfere with or diminish the utility service to the grantee Owner during the grantee Owner’s business hours; and if an electrical line/computer line is being relocated, then the grantor Owner and grantee Owner shall coordinate such interruption to minimize any detrimental effects;

(b) shall not reduce or unreasonably impair the usefulness or function of such Utility Line;

(d) shall be completed using materials and design standards which equal or exceed those originally used; and

18 Drafters may want to provide for after-hours work if this is the business deal. 19 These provisions provide flexibility for development of the Tracts by permitting utility lines separate from the Common Utility Lines. 20 The parties may elect an individual Owner to maintain a Common Utility Line or, alternatively, if a manager/operator of the properties is employed or otherwise selected, such Person may have such responsibilities. 21 Drafters may want to provide for after-hours work if this is the business deal. 22 To maximize the usability of the Tracts, a provision should be included permitting relocation of Utility Lines provided that interference with utility service is minimized, approvals are obtained, etc. 9 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 (e) shall have been approved by the provider of such utility service and the appropriate Governmental Authorities.

Documentation of the relocated easement area, including the furnishing of an “as-built” survey to the grantee Owner, shall be at the grantor Owner’s expense and shall be accomplished as soon as possible following completion of such relocation.

Article IV Construction

Each Owner agrees that all construction activities performed or authorized by it within the Office Complex in connection with this Agreement shall be performed in compliance with all Governmental Requirements, and each Owner further agrees that any construction activities performed or authorized by it shall not: (a) unreasonably interfere with construction work being performed on any other part of the Office Complex; (b) unreasonably interfere with the use, occupancy or enjoyment of any part of the remainder of the Office Complex by the other Owner or their respective Permittees; or (c) cause any building located on another Tract to be in violation of any Governmental Requirements.

Article V Access Easement Area Maintenance, Insurance and Operating Expenses

5.01 Maintenance and Insurance. Each Owner, at its expense, shall repair, replace and maintain all landscaping and other improvements located in the Access Easement Area on its respective Tract in good order and repair, promptly remove all accumulated trash and debris from the Access Easement Area on its respective Tract, and keep the Access Easement Area on its respective Tract in a clean and orderly condition.23 Each Owner shall maintain, at its own expense, (i) a policy or policies of commercial general liability insurance, including personal injury and property damage, with contractual liability endorsement, in the amount of ______Dollars ($______) for property damage, ______Dollars ($______) per occurrence, and ______Dollars ($______) in the aggregate, for personal injuries or death of any person occurring on its respective Tract, and excess umbrella liability insurance in the amount of ______Dollars ($______); (ii) workers’ compensation insurance in accordance with statutory law and employers’ liability insurance with a limit of not less than ______Dollars ($______) per accident, ______Dollars ($______) disease policy limit, and ______Dollars ($______) disease limit each employee; and (iii) business auto liability insurance insuring bodily injury and property damage with a combined single limit of not less than ______Dollars ($______) per accident for owned, non-owned and hired vehicles. Each Owner shall be named as an additional insured in the policies of the other Owner affording such coverage.24

Article VI Indemnity

6.01 Indemnification. EXCEPT AS LIMITED BY ANY WAIVER OF SUBROGATION, TO THE FULLEST EXTENT ALLOWED BY LAW, EACH OWNER SHALL INDEMNIFY, DEFEND AND HOLD THE OTHER OWNER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, COSTS (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES, ACCOUNTANTS’ FEES, CONSULTANTS’ FEES, COURT COSTS AND INTEREST), LIABILITIES, ACTIONS AND DAMAGES (COLLECTIVELY, “CLAIMS”) BY OR ON BEHALF OF ANY PERSON OR PERSONS ARISING IN CONNECTION WITH THE ACCESS EASEMENT AREA, ANY COMMON UTILITY LINE OR THE OTHER TERMS AND PROVISIONS OF THIS AGREEMENT, TO THE EXTENT SUCH CLAIMS ARE CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE

23 Drafters should provide for the deal-specific obligations of the Owners to maintain the Access Easement Area. If an operator/property manager is selected, these may become its obligations. 24 Each Owner has an interest in ensuring that the other Owner has required insurance given the use of the Access Easement Area on each Tract. Drafters should consult with their clients for appropriate types and amounts of insurance to be required. 10 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 INDEMNIFYING OWNER OR ITS AGENTS, EMPLOYEES OR CONTRACTORS OR ARISE ON THE ACCESS EASEMENT AREA OR ANY COMMON UTILITY LINE LOCATED ON THE INDEMNIFYING OWNER’S TRACT.25

6.02 Waiver of Subrogation. Notwithstanding the provisions of Section 6.01 hereof, each Owner hereby releases and waives all claims, rights of recovery, causes of action that such Owner or any party claiming by, through or under such Owner (including, without limitation, such Owner’s insurers) by subrogation or otherwise may now or hereafter have against the other Owner or any of the other Owner’s Permittees by reason of force majeure or any other cause, INCLUDING THE NEGLIGENCE OF THE OTHER OWNER OR ITS PERMITTEES, that is covered, in whole or in part, under the terms of an applicable insurance policy or that would have been covered under the terms of an applicable insurance policy which is required to be carried under the terms hereof. IT IS THE EXPRESS INTENTION OF THE OWNERS THAT THE WAIVER OF SUBROGATION CONTAINED IN THE PRECEDING SENTENCE APPLY TO ALL CLAIMS, INCLUDING, WITHOUT LIMITATION, ANY CLAIMS THAT ARE CAUSED IN WHOLE OR IN PART BY THE SOLE OR CONCURRENT NEGLIGENCE OF AN OWNER OR AN OWNER’S PERMITTEE.26

Article VII Remedies

7.01 Self Help and Other Remedies. If any Owner defaults in the performance of its obligations hereunder and the default is not cured within thirty (30) days following delivery of written notice to such defaulting Owner then the non-defaulting Owner shall have the right to (a) perform such obligations on behalf of the defaulting Owner, in which event such defaulting Owner shall reimburse such non-defaulting Owner for all reasonable amounts expended by the non-defaulting party on behalf of the defaulting party, together with interest thereon at a ______rate of interest; and/or (b) exercise any other rights or remedies available to the non-defaulting Owner under Governmental Requirements. Any defaulting Owner agrees to execute any applications for permits or other documents required by the non-defaulting Owner in order to perform the obligations of the defaulting Owner.

7.02 Injunctive Relief. In the event of a breach by any Owner hereto of any obligation of such party under this Agreement, the non-defaulting Owner shall be entitled to injunctive relief mandating compliance herewith, and shall be entitled to obtain a decree specifically enforcing the performance of the obligations created hereunder. Each Owner hereby acknowledges and stipulates the inadequacy of legal remedies and irreparable harm which would be caused by the breach of this Agreement, and such non- defaulting Owner shall be entitled to relief by any and all other available legal and equitable remedies from the consequences of such breach. Any costs and expenses of any such proceeding, including reasonable attorneys’ fees, shall be paid by the defaulting Owner.

7.03 Non-Waiver. No delay or omission of any Owner hereto in the exercise of any rights created hereunder shall impair such right, or be construed to be a waiver thereof, and every such right may be exercised at any time during the continuance of an event of default hereunder. A waiver by any Owner hereto of a breach of, or default in, any of the terms and conditions of this Agreement by another Owner shall not be construed to be a waiver of any subsequent breach thereof or of any other provision of this Agreement. Except as otherwise specifically provided in this Agreement, no remedy provided in this Agreement shall be exclusive, but shall be cumulative with all other remedies provided for in this Agreement, and all other remedies at law or in equity which are available to the parties hereto.

25 Any indemnities should allocate risk as determined by the parties. 26 Any waiver of subrogation is deal-specific. If a party is to be indemnified for or released from its own negligence, the indemnity or release must abide by the Texas express negligence rule, which provides that the indemnity or release must expressly set forth in clear and specific terms that such party is to be indemnified for or released from its own negligence and be conspicuous so as to attract the attention of a reasonable person. See Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex. 1987) and Dresser Industries v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993) Many indemnities fail to meet one or both tests and run the risk of not being enforceable in whole or in part. 11 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 Article VIII Notices

8.01 Notices. Any notice, report or demand required, permitted or desired to be given under this Agreement shall be in writing (except in the event of emergency as provided herein) and shall be deemed to have been sufficiently given or served for all purposes if and when it is hand delivered, or if it is mailed by certified mail, return receipt requested, at the address set forth below, or at such other address as the respective Owner may from time-to-time designate, on the third business day following the date of such mailing:

To Landowner A: ______Attn: ______

with a copy to: ______Attn: ______

To Landowner B: ______Attn: ______

with a copy to: ______Attn: ______

Article IX General Provisions

9.01 Binding Effect. The provisions of this Agreement shall be binding upon and inure to the benefit of the Owners and their respective Permittees, as well as the successors and assigns of such Persons. The easements [and restrictive covenants]27 shall be appurtenant to, and for the benefit of, the Owners and shall run with title to the Tracts and shall continue in perpetuity.28 This Agreement shall be construed in accordance with the laws of the State of Texas and all obligations hereunder are performable in ______County, Texas.29

9.02 Partial Invalidity. If any term, covenant or condition of this Agreement or the application of it to any Person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such term, covenant or condition to Persons or circumstances, other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and shall be enforced to the extent permitted by law.

9.03 Captions. The captions and headings in this Agreement are for reference only and shall not be deemed to define or limit the scope or intent of any of the terms, covenants or conditions contained herein.

27 Depending on the business deal, this Agreement may include restrictions on signage, use, etc. 28 This provision makes it clear that the easements run with the land and are binding upon transferees. 29 Absent a compelling reason for venue to be other than the county in which the property is located, the county where the Tracts are located is typically selected to be the venue for any lawsuits. 12 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 9.04 Gender. In construing the provisions of this Agreement and whenever the context so requires, the use of a gender shall include all other genders, the use of the singular shall include the plural, and the use of the plural shall include the singular.

9.05 Relationship to the Parties. Nothing contained herein shall be construed to make any Owner’s partners or joint venturers, or render any Owner liable for the debts or obligations of another Owner.

9.06 Amendment. This Agreement may be canceled, changed, modified or amended in whole or in part only by the written agreement of the Owners.

9.07 No Dedication. Nothing herein contained shall be deemed to be a gift or dedication of any portion of the Tracts to the general public or for the general public or for any public purpose whatsoever, it being the intention that this Agreement shall be strictly limited to and for the purposes herein expressed. This Agreement is not intended to create, nor shall it be in any way interpreted or construed to create, any third party beneficiary rights in any person not specifically benefited by the terms and provisions hereof. No Owner shall have the right to dedicate all or any part of the easement areas owned by that Owner to the general public or for the general public or for any public purpose whatsoever.

9.08 Counterparts. This Agreement may be executed in any number of counterparts and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute but one Agreement.

9.09 Attorneys’ Fees. If any legal action or proceeding for the enforcement of any right or obligations herein contained is commenced, the prevailing party in such action or proceeding shall be entitled to recover its costs and reasonable attorneys’ fees incurred in the preparation and prosecution of such action or proceeding.

9.10 Retention of Fee Ownership. Each Owner hereby retains, reserves and shall continue to enjoy fee ownership of the surface and subsurface of its respective Tract and may use its respective Tract (including, without limitation, the Access Easement Area) for any and all purposes which do not unreasonably interfere with or prevent the use of the Access Easement or the Utility Easement by the other Owner for the purposes set forth in this Agreement.

9.11 Force Majeure. Each Owner shall be excused from performing its obligations or undertakings (other than the payment of money) provided in this Agreement, in the event, but only so long as, the performance of any such obligations or undertakings are prevented, delayed or hindered by an event of Force Majeure.

9.12 Landowner A and Landowner B each represent and warrant (each a “Representing and Warranting Party”) to the other that notwithstanding anything herein to the contrary and as of the Effective Date:

(a) The execution, delivery, and performance of this Agreement by the Representing and Warranting Party are within such Representing and Warranting Party’s powers and have been duly authorized by all necessary action of such Representing and Warranting Party.

(b) Neither the execution and delivery of this Agreement nor the consummation of any of the transactions herein contemplated nor compliance with the terms and provisions hereof or thereof will contravene the organizational documents of the Representing and Warranting Party nor any applicable laws to which such Representing and Warranting Party is subject or any judgment, decree, license, order, or permit applicable to such Representing and Warranting Party, or will conflict or be inconsistent with or will result in any violation or breach of any of the terms of the covenants, conditions, or provisions of, or constitute a default under, or result in the creation or imposition of a lien upon any of the property or assets of such Representing and Warranting Party pursuant to the terms of any indenture, mortgage, deed of trust, agreement (including, without limitation, any existing easements that may encumber the Easement Tract), 13 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 or other instrument to which such Representing and Warranting Party is a party or by which such Representing and Warranting Party is bound, or to which such Representing and Warranting Party is subject.30

(c) No consent, authorization, approval, order or other action by, and no notice to or filing with, any court or governmental authority or regulatory body or third party is required for the execution, delivery and performance by the Representing and Warranting Party of this Agreement.

(d) The Representing and Warranting Party is a ______or ______(as applicable), and such Representing and Warranting Party is qualified to do business in the State of Texas.

9.13 Priority. This Agreement and the rights granted and created hereby, including the easements granted and created hereunder, shall be superior to all leases, conveyances, transfers, assignments, contracts, mortgages, deeds of trust and other encumbrances and documents recorded or entered into hereafter in any way affecting any part of the Tracts.31 Any party foreclosing any such mortgage, deed of trust, lien or encumbrance, and any party acquiring title to or any interest in any part of the Tracts as a result thereof shall acquire and hold such title or interest expressly subject to the provisions of this Agreement. Any transferee of any interest in any part of the Tracts shall automatically be deemed, by acceptance of such interest, to have agreed to be bound by all of the provisions of this Agreement, and to have agreed to perform and do any and all things thereafter required to be done and performed hereunder by the owner of the interest transferred.

[SIGNATURE PAGES FOLLOW]

30 While this provision looks like boilerplate language, it contains a very important representation and warranty: It is a default under this Agreement if any provisions conflict with those of any other agreement, including existing easements that encumber the Access Easement Area. Thus, if another easement agreement contains an exclusive easement covering all or a portion of the Access Easement Area, the Owner making such representation and warranty is in breach of this Agreement and liable to the other Owner. While a fee owner may generally utilize its property as it desires, subject to applicable law, as an easement grantor, it must be aware of the implications of granting exclusive and/or conflicting easements and the liability associated therewith. 31 If a deed of trust, for example, exists as of the Effective Date, the consent and subordination thereof should be obtained. An example of such a consent and subordination is attached as Exhibit D. 14 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 EXECUTED effective as of the Effective Date.

LANDOWNER A:

, a

By: Name: Title:

THE STATE OF ______§ § COUNTY OF ______§

This instrument was acknowledged before me on this ___ day of ______, 201__, by ______, ______of ______, a ______, on behalf of said ______.

(NOTARY SEAL)

Notary Public, State of ______

Registration Number:

15 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 LANDOWNER B:

, a

By: Name: Title:

THE STATE OF ______§ § COUNTY OF ______§

This instrument was acknowledged before me on this ___ day of ______, 201__, by ______, ______of ______, a ______, on behalf of said ______.

(NOTARY SEAL)

Notary Public, State of ______

Registration Number:

16 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 EXHIBIT A

______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 EXHIBIT B

______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 EXHIBIT C

______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3 EXHIBIT D

CONSENT AND SUBORDINATION

The undersigned, being the owner and holder of the lien described in that certain ______[deed of trust] dated as of ______(the “Deed of Trust”),32 covering Tract __, executed by ______for the benefit of ______, and recorded under Clerk’s File No. ______in the Real Property Records of ______County, Texas, hereby consents to this Agreement and joins in to subordinate its liens and the Deed of Trust so that this Agreement shall hereafter be considered superior in title to all liens and the Deed of Trust (except that in no event shall any lien on Tract __ arising out of non-payment or non-performance under this Agreement be superior to the lien of the Deed of Trust),33 in favor of the undersigned against Tract __, and hereby further agrees that a foreclosure of any or all of its liens shall not affect this Agreement.

This consent and subordination shall not be construed or operate as a release of any mortgage or liens owned or held by the undersigned, or any part thereof, but the undersigned agrees that the Deed of Trust and liens shall hereafter be upon and against Tract __ subject to this Agreement.

Executed as of ______, 201_.

______, a ______

By: Name: Title:

THE STATE OF ______§ § COUNTY OF ______§

This instrument was acknowledged before me on this ___ day of ______, 201__, by ______, ______of ______, a ______, on behalf of said ______.

(NOTARY SEAL)

Notary Public, State of _____

Registration Number:

32 This Consent and Subordination assumes a recorded deed of trust covering the applicable Tract. 33 To protect the lender’s interest, this parenthetical provides that any liens arising out of failure to perform under the Agreement shall not be superior to the lien of the deed of trust so that remedies exercised in connection with the “failure to perform” liens do not trump or impair the lender’s rights and remedies under the deed of trust.

______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3

WATER LINE EASEMENT

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER1

THE STATE OF TEXAS § § KNOW ALL BY THESE PRESENTS: COUNTY OF ______§

THAT ______, a ______(“Grantor”),2 for and in consideration of the sum of Ten and No/100 Dollars ($10.00),3 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, SOLD, AND CONVEYED and by these presents does GRANT, SELL, AND CONVEY4 unto ______, a ______(“Grantee”),5 its successors and assigns,6 subject to the terms of this Water Line Easement, a non-exclusive7 permanent and perpetual8 easement and right-of-way (“Easement”) for the purpose of laying, constructing, installing, maintaining, repairing, relocating, replacing, removing, upgrading, changing the size of, placing, inspecting, protecting, altering, and operating, in whole or in part, underground water lines and all above-ground and below ground incidental and related facilities, connections, and appurtenances thereto, including, without limitation, related communications facilities9 (“Facilities”) as Grantee may from time to time reasonably10 require across, along, under, over, upon, through, and within that certain tract of land located in ______County, Texas, and more particularly described and shown on Exhibit A attached hereto, and made a part hereof for all purposes (“Easement Tract”).11

1 Although an easement is not an “instrument” as defined in Texas Property Code Section 11.008(a), an easement does convey an interest in real property, and out of abundance of caution, drafters may want to insert the Texas Notice of Confidentiality of Rights – Texas Property Code 11.008(c). 2 To ensure Grantor owns the property over which the Easement is granted, Grantee should confirm the Grantor entity name is consistent with the name set forth in the real property records of the county in which the property is located. If the Grantor name is different, Grantor may not have the legal right to convey an easement on the property, thereby negating the purpose of the easement agreement! 3 As with deeds conveying fee ownership, drafters should recite the consideration for the granting of the Easement, which may be recited as nominal consideration to provide confidentiality for the parties. 4 Like the conveyance language in deeds, the Easement should be granted, sold, and conveyed to Grantee. 5 Grantee should confirm its name is correctly recited to ensure its ability to enforce the Easement. 6 As this Easement benefits an entity rather than a tract of land, it is an easement in gross, but Grantee should ensure that it benefits its successors and assigns to maximize the benefit of the Easement. 7 Some easement agreements will provide that they are exclusive or will be silent on exclusivity. Unless the business deal is that they are to be exclusive, it is preferable for Grantor that they are non-exclusive, and adding language to that effect makes it clear that is the intent of the parties. Grantee may desire the exclusive right to exercise rights to the Easement tract, and depending on the nature of its easement use, this may or may not be acceptable to Grantor. Grantor may also request additional compensation for granting an exclusive easement given that it potentially gives up income from other easements overlapping the Easement Tract. 8 The duration of the Easement is a negotiable deal term. A grantor should not grant a perpetual easement for uses that do not require it (e.g., an access right the parties intend to be for a limited duration). Alternatively, in the case of a utility easement, a perpetual easement is common to facilitate the provision of utility services. 9 The purpose of the Easement should be expressly described. Grantors should tailor this as narrowly as possible, while grantees should ensure that their current and future uses are protected. Grantors should, in particular, place close attention to broad language such as “in connection with”, “related to”, and “as Grantor deems necessary” to avoid unnecessarily providing Grantee with greater rights than may be required or needed by Grantee. 10 Grantors should be sure to qualify grantees’ rights where possible. In this case, rather than Grantee being granted rights to perform its work as Grantee determines, adding “reasonably” provides Grantor at least an argument if it believes Grantee does not need to be doing the work with the frequency that it is doing so. 11 The Easement Tract should be identified, ideally, with both a drawing and a legal description; the drawing should be to scale. Relying on a drawing, especially one not to scale, invites future disputes as to the location of the Easement when Grantor wants to use portions of the property that are arguably encumbered by the Easement. Grantee also wants to ensure that its easement interest is clearly defined to so that it knows where it can perform its work. If time does not permit a legal description to be determined by a surveyor, the Easement can be signed but not recorded, and the parties should agree to enter into a superseding easement agreement following completion of the legal description, following which the superseding easement agreement should be recorded. 25 ______Striking The Delicate Balance Between Easement and Fee Owners Chapter 3

Subject to the terms of this Water Line Easement, Grantee may lay, construct, install, maintain, repair, relocate, replace, remove, upgrade, change the size of, place, inspect, protect, alter, and operate the Facilities across, along, under, over, upon, through, and within the Easement Tract and shall have reasonable access across, along, under, over, upon, through, and within the Easement Tract to engage in all activities as may be reasonably necessary, requisite, or appropriate in connection therewith.12 The Facilities shall be located underground except for those portions of the Facilities that, of reasonable necessity, must be located at or above grade (including, without limitation, vent piping for air release valves, bollards at air release valves, cathodic protection-rectifier enclosures, and water main markers), provided that any Facilities or portions thereof that are located at or above grade shall be subject to the prior written consent of Grantor with respect to the location and height of same.13 The water lines and all above-ground and below ground incidental and related facilities, connections, and appurtenances thereto within the Easement Tract will be buried, at the time of original construction, to a minimum depth of forty- eight inches (48”) below the surface of the ground, measured from the top of the pipe to the surface of the ground.14 Grantee’s rights shall include, without limitation but consistent with and subject to the terms of this Water Line Easement, (i) the right to clear and remove trees, brush, growth, shrubbery, and other obstructions or improvements from the surface and subsurface of the Easement Tract if same unreasonably interfere with, disturb, or limit in any way Grantee’s use of the Easement Tract for the purposes set forth herein,15 (ii) the right to excavate dirt and other materials within the Easement Tract in connection with Grantee’s exercise of its rights under this Water Line Easement,16 and, except as otherwise set forth herein, to remove and use offsite or otherwise dispose of any such materials,17 and (iii) the right to bring and operate such equipment on the Easement Tract as may be reasonably necessary, requisite, convenient, desirable, or appropriate to effectuate the purposes for which the Easement is granted; provided, however, Grantee shall not interfere with the day to day operations of Grantor and/or its tenants, subtenants, licensees, invitees, permittees, or employees during any such work.18 Subject to the rights granted to Grantee herein,19 Grantee will, at all times after doing any work in connection with the Easement, promptly20 restore the surface of the Easement Tract, including paving existing at the time of the original construction of the Facilities, as nearly as reasonably practicable to substantially the condition existing immediately prior to the undertaking of such work;21 provided, however, that, subject to the provisions of this Water Line Easement, Grantee shall not be obligated to replace or restore any trees, growth, shrubbery, or other improvements or obstructions removed from within the Easement Tract in connection with the construction, installation, repair, maintenance, relocation, replacement, removal, upgrade, change in the size of, operation, placement, inspection, protection, or alteration of the Facilities.22 Grantee shall remove, at Grantee’s sole expense, any dirt, earth, or other material (“Excavated Materials”) excavated from the Easement Tract in connection with Grantee’s construction, installation, repair, maintenance, relocation, replacement, removal, upgrade, change in the size of, operation,

12 The permitted use should be consistent with the Easement granted above. It is not uncommon to see different language, which sometimes stems from different forms having been combined over time. 13 Grantor should require utilities to be underground except where it is necessary that they be aboveground. This increases the ability of Grantor to utilize the easement tract where not inconsistent with Grantee’s rights. Grantee should ensure that any improvements it makes that need to be located at or above ground are expressly stated. 14 It is important to have underground facilities buried to a suitable depth so as to not interfere with surface use. Grantor should check with its engineers as to the minimum depth, while Grantee should not go any deeper underground than is absolutely necessary to accomplish to reduce their construction and maintenance costs. 15 Grantee typically has the right to remove obstructions from the surface of the Easement Tract, but Grantor should condition this right on the obstructions unreasonably interfering with, or at least interfering with, Grantee’s use of the Easement. 16 Grantee’s excavation rights should be related to its permitted work. 17 Grantee wants as little obligation to dispose of Excavated Materials as possible, with any right to remove being in its discretion, while Grantor should require them to be removed as set forth below for aesthetic reasons as well as possible liability issues. 18 If Grantor’s property is used for other purposes or may be so in the future, Grantor should require Grantee to not interfere with its daily operations. Grantee should try to remove this restriction or at least qualify it. 19 “Subject to the rights” language is used to provide that, for example, Grantee should not have to restore landscaping that reasonably interferes with its work as provided above. 20 Grantor should provide for when the surface is restored (e.g., promptly), while Grantee would prefer this obligation to be open-ended to enable to it to complete its obligation at a time of its choosing. 21 If the Easement Tract is paved, Grantor may want Grantee to restore the paving if it is disturbed by Grantee’s work, and such restoration should be to the condition immediately prior to Grantee’s work. 22 Grantee does not have to restore or replace landscaping or improvements provided that they reasonably interfered with Grantee’s work. This provision should be consistent with Grantee’s rights to remove previously described.

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placement, inspection, protection, alteration, or maintenance of the Facilities that is not used by Grantee in connection with its activities hereunder.23 Notwithstanding anything to the contrary in the immediately preceding sentence, Grantor may designate a location within Grantor’s property (of which the Easement Tract is a portion) for the deposit of any such Excavated Materials by delivering written notice to Grantee no later than ninety (90) days from the date hereof, and Grantee and Grantor shall enter into a separate agreement regarding such deposit.24 Subject to the provisions of this Water Line Easement and Grantee’s release and indemnification obligations herein,25 Grantor hereby acknowledges receipt of payment in full by Grantee for all claims or losses associated with or arising from the removal of excess dirt, if any, and the removal of, or damages to trees, plants, shrubs, bushes, and vegetation growing within the Easement Tract caused by Grantee, its employees, or any other persons acting under its control, during Grantee’s use of the Easement. Grantee shall not install any gates in fences that cross and/or are located on the Easement Tract.26

To the fullest extent permitted by law, Grantee covenants and agrees for itself, its grantees, successors, and assigns, to indemnify, and hold Grantor, its successors and assigns, harmless from any and all costs, losses, liabilities, expenses (including reasonable attorneys’ fees) and/or judgments incurred in connection with claims for injury to or death of any person or for damage to property, specifically including claims arising or alleged to arise from the fault, negligence, gross negligence, act, or omission of Grantee, arising out of or in any way connected with Grantee’s rights, obligations, actions, or inactions under or in connection with this Water Line Easement (including, without limitation, in connection with the Facilities) within or without the Easement Tract, or claims which result from strict liability imposed upon Grantee by the law or claims arising from injuries, deaths, or damages which would not have occurred but for the presence of the Facilities or Grantee’s actions or inactions or exercise of its rights or obligations, actions, or inactions, in connection with this Water Line Easement (collectively, “Claims”). To the fullest extent permitted by law, Grantee covenants and agrees for itself, its grantees, successors, and assigns, to release and waive all Claims against Grantor, its successors and assigns.27

Subject to the limitations herein, Grantor expressly reserves the right to the use and enjoyment of the surface and subsurface of the Easement Tract for any and all purposes; provided that such use and enjoyment of the surface and subsurface of the Easement Tract shall not unreasonably impair, interfere with, obstruct, or restrict the full and complete use and enjoyment of the Easement by Grantee or its successors and assigns for the purposes set forth herein.28 Subject to the terms and conditions set forth herein, Grantor further reserves for itself, its successors and assigns, the right, at its sole cost and expense, to (i) construct or locate upon or across the Easement Tract surfacing materials for parking and/or driveways or walkways (subject to any above-ground Facilities), (ii) construct or place any houses, buildings, structures, or other above-ground improvements, whether temporary or permanent, or plant or locate any trees, vegetation, or shrubs on the Easement Tract; (iii) install pipelines or other underground facilities within the Easement Tract; (iv) dedicate other easements within the Easement Tract; and (v) change the grade over the Facilities constructed under the Easement Tract.29 All such improvements and work shall be constructed,

23 Grantee desires as little obligation to dispose of Excavated Materials as possible, while Grantor should require them to be removed for aesthetic reasons as well as possible liability issues. Any requirement of Grantee to remove Excavated Materials following its work should mirror the description of Grantee’s work; often these descriptions are inconsistent, leaving open a possible dispute as to after what type of work should Grantee remove Excavated Materials. 24 If Grantor desires to retain Excavated Materials, it and Grantee may provide for a location to deposit same. This right is typically not needed by Grantor unless there is an anticipated use for the Excavated Materials. 25 Grantee should endeavor to not be obligated to pay for any landscaping losses incurred by Grantor. Grantor should condition its agreement upon Grantee paying for losses for which Grantee is responsible and subject to any Grantee indemnity. 26 Sometimes landowners want to control ingress and egress points on the Easement Tract and prevent grantees from creating additional points of entry and exit. Grantees should ensure these types of access restrictions are acceptable to it and will not interfere with its intended use of the Easement Tract. 27 Grantors want to be released from any and all claims by Grantee and indemnified for Grantee’s actions. This is a highly negotiable point, and the extent to which Grantor obtains a release and/or indemnity may be linked to the amount of compensation paid by Grantee for the Easement. Grantees should resist a release and/or indemnity, and if either or both are provided, they should try to limit it to their negligence (preferably gross negligence) or willful misconduct and exclude damages caused by Grantor. 28 While Grantee possesses use of the Easement Tract, Grantor will likely want to reserve the right to use the surface so long as it does not unreasonably (or materially) interfere with Grantee’s use. Grantee should attempt to remove the reasonableness qualifier since it is paying for the Easement, and Grantee’s rights trump Grantor’s need to use the surface. 29 To the extent Grantor requires use of the surface, it should be expressly stated. Grantee will want to condition any improvements Grantor may construct upon obtaining Grantee’s prior written consent and should seek a release and an indemnity

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installed, operated, and maintained in accordance with applicable laws, rules, and regulations, and shall not unreasonably interfere with, disturb, or limit in any way Grantee’s use of the Easement Tract for the purposes set forth herein. If Grantor constructs, places, installs, or permits any construction, placement, or installation that unreasonably impairs, obstructs, restricts, or interferes with Grantee’s full and complete use and enjoyment of the Easement for the purposes set forth herein, Grantee shall have the right to prevent or remove such obstructions.

Grantor reserves all oil, gas, and other minerals in, on, or under the Easement Tract, but waives all rights to use the surface of the Easement Tract for, and all rights of ingress and egress for, the purpose of exploring, developing, mining, or drilling for the same; provided, however, that nothing herein shall prohibit or in any manner restrict the right of Grantor to extract oil, gas or other minerals from and under the Easement Tract by directional drilling or other means that do not unreasonably interfere with or disturb the surface of the Easement Tract or Grantee’s use of the Easement for the purposes set forth herein.30

This conveyance is further made subject to any and all restrictions, covenants, easements, rights-of-way, encumbrances and mineral or royalty reservations or interests affecting the Easement Tract and appearing of record in the Official Public Records of Real Property of ______County, Texas, to the extent that the same are in effect and validly enforceable against the Easement Tract (“Permitted Encumbrances”); provided, however, to the extent Grantor has the ability to enforce any of the Permitted Encumbrances, subject to applicable law, Grantor will not do so in a manner that would unreasonably prejudice or interfere with Grantee’s exercise of its rights in the Easement and use of the Easement Tract for the purposes set forth herein.31

Except for the express written terms and provisions set forth in this Water Line Easement, Grantor acknowledges and agrees that neither Grantee, nor any of its agents or representatives, has made any representations, agreements, inducements or statements to Grantor to induce Grantor into granting the Easement or executing this Water Line Easement. This Water Line Easement constitutes the entire agreement between Grantor and Grantee, and supersedes any and all prior agreements between the parties, if any, written or oral, with respect to the subject matter hereof. This Water Line Easement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Water Line Easement may not be modified or amended except in writing signed by both parties hereto.

TO HAVE AND TO HOLD, subject to the matters set forth herein, the Easement, together with, all and singular, the rights and appurtenances thereto in any wise belonging, including all reasonably necessary rights to ingress, egress, and regress, unto Grantee, its successors and assigns, forever. Grantor does hereby bind itself, its successors and assigns to WARRANT AND FOREVER DEFEND, all and singular, the Easement and right-of-way and other rights described herein unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through, or under Grantor, but not otherwise, subject only to the Permitted Encumbrances.32

Any notice, request, consent, or other document provided or permitted to be given in this Water Line Easement must be in writing and will be deemed given (i) when received if delivered personally or by courier; (ii) on the date receipt is acknowledged (or, if delivery is refused, on the date of such refusal) if delivered by certified mail, postage prepaid, return receipt requested; or (iii) one (1) day after deposit with a nationally recognized overnight delivery service. For purposes of notice the addresses of the parties shall be as follows until changed by notice given in accordance with this paragraph:

from Grantor in connection therewith. At a minimum, Grantee will want to require that the improvements do not (unreasonably) interfere with it and that it has the right to remove any such interfering improvements. 30 Surprisingly, many easement agreements do not address the right to extract minerals, even those with perpetual terms. So long as Grantor waives surface rights and does not (unreasonably) interfere with Grantee’s use rights, Grantors are typically granted mineral extraction rights. 31 Unless the parties have a current title commitment (which is usually not the case), easements are typically granted subject to all matters of record. Grantee should require Grantor to not enforce any such permitted exceptions, subject to applicable law, if enforcement would be an impediment to Grantee’s rights. 32 Grantee should seek to make the warranty be a general warranty to maximize the warranty of title from Grantor to extend beyond Grantor’s period of ownership. Conversely, Grantor will want to modify the warranty to be a special warranty, thus only covering Grantor’s time of ownership.

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Grantor: ______Attention: ______

Grantee: ______Attention: ______

The covenants and agreements contained herein shall run with the land and shall inure to the benefit of and shall be binding upon Grantor and Grantee and their respective heirs, executors, administrators, successors, and assigns.33

Grantor and Grantee each represent and warrant (each a “Representing and Warranting Party”) to the other that notwithstanding anything herein to the contrary and as of the date set forth below:

(a) The execution, delivery, and performance of this Water Line Easement by the Representing and Warranting Party are within such Representing and Warranting Party’s powers and have been duly authorized by all necessary action of such Representing and Warranting Party.

(b) Neither the execution and delivery of this Water Line Easement nor the consummation of any of the transactions herein contemplated nor compliance with the terms and provisions hereof or thereof will contravene the organizational documents of the Representing and Warranting Party nor any applicable laws to which such Representing and Warranting Party is subject or any judgment, decree, license, order, or permit applicable to such Representing and Warranting Party, or will conflict or be inconsistent with or will result in any violation or breach of any of the terms of the covenants, conditions, or provisions of, or constitute a default under, or result in the creation or imposition of a lien upon any of the property or assets of such Representing and Warranting Party pursuant to the terms of any indenture, mortgage, deed of trust, agreement (including, without limitation, any existing easements that may encumber the Easement Tract), or other instrument to which such Representing and Warranting Party is a party or by which such Representing and Warranting Party is bound, or to which such Representing and Warranting Party is subject.34

(d) The Representing and Warranting Party is a ______or ______(as applicable), and such Representing and Warranting Party is qualified to do business in the State of Texas.

Neither party’s waiver of any breach or default of any term, condition, or provision of this Water Line Easement shall be deemed a waiver of any other or subsequent breaches or defaults of any kind, character, or description under any circumstance. No waiver of any breach or default of any term, condition, or provision of this Water Line Easement shall be implied from any action or non-action of either party, and any such waiver, to be effective, shall be set out in a written instrument signed by the waiving party.

All exhibits attached to this Water Line Easement are made a part hereof and incorporated herein by this reference for all purposes.

33 This provision makes it clear that the Easement runs with the land and is binding upon transferees. Very importantly, although this is an easement in gross, the Easement benefits not only Grantee, but also Grantee’s successors and assigns, thus maximizing the value of the Easement to Grantee. 34 While this provision looks like boilerplate language, it contains a very important representation and warranty: It is a default under this Water Line Easement if any provisions conflict with those of any other agreement, including existing easements that encumber the Easement Tract. Thus, if another easement agreement contains an exclusive easement covering all or a portion of the Easement Tract, Grantor is in breach of this Water Line Easement and liable to Grantee. While a fee owner may generally utilize its property as it desires, subject to applicable law, as an easement grantor, it must be aware of the implications of granting exclusive and/or conflicting easements and the liability associated therewith.

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The prevailing party in any suit, action, or other proceeding instituted in connection with any controversy arising out of this Water Line Easement shall be entitled to recover its reasonable attorneys’ fees and costs from the other party.

This Water Line Easement and the provisions contained herein shall be interpreted and construed in accordance with the laws of the State of Texas, without regard to conflict of laws principles, and venue for any suit, action, or proceeding instituted in connection with any controversy arising out of this Water Line Easement or the Easement shall be the state courts situated in ______County, Texas.35

This Water Line Easement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one instrument.

[Signature pages follow this page.]

35 Absent a compelling reason for venue to be other than the county in which the property is located, the county where the property is located is typically selected to be the venue for any lawsuits.

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EXECUTED this the _____ day of ______, 201__.

GRANTOR:

______, a ______

By: Name: Title:

THE STATE OF TEXAS § § COUNTY OF ______§

This instrument was acknowledged before me on this ___ day of ______, 201__, by ______, ______of ______, a ______, on behalf of said ______.

(NOTARY SEAL)

Notary Public, State of Texas

Registration Number:______

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GRANTEE:

By: Name: Title:

THE STATE OF TEXAS § § COUNTY OF ______§

This instrument was acknowledged before me on this ___ day of ______, 201__, by ______, ______of ______, a ______, on behalf of said ______.

(NOTARY SEAL)

Notary Public, State of Texas

Registration Number:______

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Attachment: Exhibit A – Legal Description and Depiction of Easement Tract

AFTER RECORDING, PLEASE RETURN TO: ______Attention: ______

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EXHIBIT A

LEGAL DESCRIPTION AND DEPICTION OF EASEMENT TRACT