FREQUENTLY ASKED QUESTIONS

An easement is a legal agreement where one party (“grantor”) --typically the property owner -- conveys specific real property rights to another party (“grantee”).  The easement is for a specific use, pertains to a specific area of the property, and only conveys limited rights to the grantee.

No. An easement is a legal agreement, in some cases referred to as a right-of-way agreement, and is typically a perpetual agreement and allows the grantee specific rights (usually the construct the pipeline, repair, replace, monitor, etc.) that are restricted to a specific area (“the easement strip”).  A right-of-way corridor is a path that typically extends across or adjacent to many properties for the purpose of providing a connection between two points.  A right-of-way corridor may be used for overhead power transmission lines, underground gas or oil pipelines, underground water pipelines, railroads, fiber optic lines, etc.  In many cases, there are multiple linear uses within a right-of-way corridor (overhead transmission lines and underground pipelines).  A right-of-way corridor could be owned by a company (for example, the power transmission company might own the entire strip/corridor), could be located within easements that encumber private property, or a combination of the two. 

The value of an easement is determined by measuring the value of the rights the owner conveys.  The process requires a valuation of the property owner’s whole property, an analysis of the easement rights being conveyed by the property owner, and the impact of the easement to the owner’s remainder property.

A good-faith offer is a term used in litigation that effectively means the offer made by the acquiring party (for example, a pipeline company) is equitable and reasonable.  A real estate appraisal developed by a professional appraiser can assist in determining if the offer is reasonable and fair.

The property owner owns the strip of land impressed with the easement and can use the easement strip as long as the use does not interfere with the grantee’s rights.  However, there may be restrictions and limitations with the use of the strip by the landowner.

The easement strip does not physically divide the property.  The landowner is typically allowed to cross the easement strip with roads and utility services including water and sewer lines.  Refer to the easement document for the specific terms and restrictions.

Typically no; however, the easement agreement controls what the energy company can and cannot do with respect to the landowner’s property.  An experienced attorney can assist in determining if additional pipelines can be installed.

Energy companies typically will have obtained an appraisal, a market study, or some other independent research report to assist them in providing property owners a fair offer for the easement rights they seek.  In some cases, the research might be completed by a company representative.  In other cases, the company might retain a professional real estate appraiser to provide an opinion of value for the property.  The decision to obtain an appraisal and the release of the appraisal report (or research, market study, etc.) to the property owner is governed by rules and laws based on who has jurisdiction over the pipeline project. A qualified real estate or eminent domain attorney is recommended to assist the property owner through the acquisition process. 

Typically a right-of-way agreement was recorded with the local recorder of deeds that will include details about the easement.  Depending on when the easement document was created and executed, the information contained in the easement can vary.  For example, contemporary easement agreements typically include very specific details (the size of the pipe, the depth of the pipe, the precise location of the pipe, the product in the pipe, the pressure of the product in the pipe, etc.) including a drawing or plat that illustrates the specific easement boundaries.  In situations involving older right-of-way agreements (easements granted in the early 1900s), the documents are less specific and in some cases do not delineate the exact location of the underground pipeline.  Information about the pipeline easement can be obtained from the pipeline company and often through the services of a surveyor and title company.

The impact of an underground pipeline to the market value of the property varies, similar to the impact of many other property and location characteristics (size, shape, topography, availability of utilities, road frontage, access to major roads, access to amenities, zoning, adjacent land uses, etc.).  One of the most common errors professional appraisers can make in any assignment is to assume impacts and market behavior without an objective and impartial analysis.  In some cases, the construction of a pipeline can cause substantial diminution in property value.  In other cases, it may have no impact to the market value of the property; and, it can have varying impacts within the range from no impact to total property damage (loss in value).  The appraiser must carefully study the easement agreement, understand all of its conditions, requirements, and restrictions, and analyze the easement in the context of the property’s highest and best use.  Each case is unique and requires a professional appraiser to research and study substantial market data in order to develop an opinion that is credible and meaningful. Guessing, assuming, using speculation and conjecture, etc. will not provide a credible or meaningful valuation answer.  

A real estate appraisal can provide the property owner the value of the easement strip and an analysis of how the property owner's remainder property is affected.

An experienced attorney can work in cooperation with the energy company and the title insurance company to determine where the pipelines are located. 

No.  There are professional appraisal standards that apply to all real estate appraisers (the Uniform Standards of Professional Appraisal Practice, “USPAP”).  Explicit in USPAP is the requirement for the appraiser to only accept assignments for which the appraiser is competent to complete.  Competency applies to (1) property type; (2) market (supply/demand);  (3) geographic location; (4) intended use; (5) applicable rules, laws, regulations; and (6) analytical methods and procedures.  Competency is achieved by a combination of experience and education. A valuation assignment pertaining to easements and partial interests is much more complicated than typical valuation assignments.

Yes, the communication of the appraiser’s analysis and opinions can be presented orally, in a short/brief letter format, or a detailed report that includes all of the explanations, descriptions, and market data in the report.  The decision of what format is best suited for the client is determined by the appraiser based upon the clients intended use of the assignment results.  For instance, if the property owner seeks a value opinion (or range of value) to be used to determine the reasonableness of an offer to acquire easement rights, an oral report or brief written report might be appropriate.

No.  Once the appraiser collects relevant market data, analyzes the data, and forms an opinion, the opinion is the same whether it is communicated to the client orally or via a voluminous report.  

No, the appraisal is not a predictor of price or a statement of what a particular buyer will agree to pay for the property.  An appraisal of market value is an opinion of what a typical purchaser will pay for a property based upon relevant market data, and assuming the buyer (and seller) are knowledgeable, not under duress, and acting in their own best interest.  Many properties sell at prices below or above “market value”.

The credibility of an appraisal opinion is affected by the quality and quantity of the market data relied on as well as the extent of the analysis performed by the appraiser.  For assignments pertaining to the valuation of properties with pipeline easements, it is critical to collect market data for properties with and without pipeline easements in order to study the impact of market behavior.