- Adjacent Property Foreclosure: Are your access or parking rights at risk?
- Borrowers with up to 4 Unit Apt. Bldgs: New Fannie Mae Payment Reduction Plan.
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Easements and REA's at risk in Adjacent Property Foreclosure
If you have a beneficial easement, for example, you own an office building which has a driveway easement providing vehicular and pedestrian access to your property through your neighbor's property, and your neighbor loses its property in foreclosure, do you still have your access easement? Depends on which came first - the loan or the easement. If the loan came after the easement then no problem. But if the deed of trust securing your neighbor's foreclosed loan was recorded prior to your easement agreement, then your easement rights will be extinguished absent any subordination or recognition by the foreclosing lender or foreclosure sale buyer. CC&R's (covenants, conditions and
restrictions)
and REA's (reciprocal easement agreements) which provide cross parking
and access with neighbors are subject to the same risk.
If you obtained title insurance on your easement (when it was granted or when you bought your property), then the title insurance policy should have revealed any senior existing deed of trust on the burdened property (i.e. your neighbor's property) and in such case you will have no recourse for loss of the easement. However, if the title insurance policy insured your easement and failed to take exception to an existing senior deed of trust then you would have a claim against your title insurer for the loss in value to your property resulting from the loss of an easement.
A review of your title policy on such properties should be undertaken now and a Subordination, Non-Disturbance and Attornment Agreement ("SNDA") or at least a Non-Disturbance and Attornment Agreement ("NDA") sought from the senior lender. Why would a lender agree to sign an SNDA or NDA? If the easement or REA/CC&R's also benefits the burdened property, for example, because tax, insurance and/or maintenance obligations are shared by both parcels, then the lender may see some value in agreeing to keep it in place; however, if the easement rights are seen as having no benefit and only burden then the lender may not agree to provide one (absent an obligation to their borrower in the loan documents, which won't be enforceable if the loan is already in default).
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