Assessing Compensation for Easements

Assessing Compensation for Easements
June 4, 2019 Tony Lenord

It stands to reason that because the majority of property sold is residential, the majority of litigation is with residential properties (not including divorce proceedings).

And because there is no greater emotional investment in real estate than owner occupied residential property, matters involving compensation for the family home can get especially heated.

In my experience, the majority of claims are historic in nature and are only discovered after some incident has taken place. These types of scenarios may include failure of the conveyancer/solicitor to recommend an independent building report (and potentially the building report writer if their advice is erroneous), failure to properly identify encumbrances such as easements, rights of way, restrictions on use, the impact of potential compulsory acquisition and the absence of easements.

The actual cost of compensation to rectify the situation can vary greatly from minor costs to significant loss or cost to adequately compensate.

It is my opinion that in cost cases, the aggrieved parties often treat these scenarios as an opportunity for a large windfall when, in reality they have not experienced negative affect to the utility of their property or quiet enjoyment of their property.

Alternatively, the owners have experienced some detriment or diminution in value but have significantly overestimated the value of the encumbrance.

A scenario that I have experienced a number of times is the amount of compensation attributed to an easement.

One particular case was for an easement over adjoining land to allow drainage from a property at the rear which was at a higher elevation than the subject property (gravity fed private drainage pipes to a Sydney Water drain). The encumbered owner was particularly upset that part of his terrace was being dug up to allow for the drainage pipes.

In this scenario there is a distinction between compensation for the easement and the cost associated with installing the pipes. The cost of installing the pipes and any rectifying work to bring the property back to its original state are costs generally born by the dominant tenement and may also include compensation for loss of quiet enjoyment of the property while installation works are being carried out.

Compensation for the easement is generally a lot lower than affected owners expect. Compensation for the “blot on title” (the term sounds more ominous than it actually is) is actually a relatively small amount.

Easements for subterranean pipes is generally in the order of approximately 10% of the value of the land affected, not the whole allotment. So a 1 metre wide strip of say 20 metres length represents affectation to only 4% of a 500 square metre allotment. If the affectation is only 10%, the amount of compensation is only 0.4% of the land value of the whole allotment.

If the easement was for a “Right of Way”, then the use of the land surface is restricted (a clear path must be available at all times) and therefore there is a greater affectation. But again, we are talking about a percentage of the land value of the portion affected with the compensation more aligned to around 20% of the land value of the portion affected.

When dealing with complex and emotional legal matters involving compensation, it pays to have an experienced expert valuer to get you the right outcome.