LICENSES: THE LAND WHERE CONFUSION ABOUNDS

From time to time the Underwriting Department hears from ATG members who are frustrated by their inability to eliminate encroachments with license agreements. What follows is a brief discussion of the difference between licenses and easements and ATG's underwriting requirements for raising and insuring over encroachments that are the subject of a license.

Easements

An easement is an interest or right of use over the property of another. Like any transfer of an interest in property, a grant of easement must be written in order to comply with the statute of frauds, unless the easement has existed by prescription or implication. The duration of an easement may be perpetual. A perpetual easement will continue in operation and effect until terminated by an act of the parties or by operation of law.

Easements are classified into two groups: easements appurtenant and easements in gross. An appurtenant easement gives the owner of one parcel of land the right to use the land of another for a special purpose. This type of easement passes with the land and is transferred by conveyance. In contrast, an easement in gross is for the benefit of a specific person in the real property of another, is not assignable or inheritable, and does not pass with the land.

Licenses

A license, on the other hand, only gives permission to do a particular act or series of acts on another's property. It can be express or implied, written or oral, with or without consideration. As a permissive use, a license can never ripen into a prescriptive easement, no matter how long the use. Additionally, a license is a personal right that is revocable and non-transferable. Termination at the will of the licensor is an important characteristic used to distinguish an easement from a license. A license does not run with the land. A conveyance of land will ordinarily revoke a license but may not revoke an easement. Although a license generally does not carry any enforceable rights, an easement confers definite property rights, which are enforceable against the servient tenant.

The Land in Between

Courts will look to the expressed intent of the parties to determine whether the permitted use is by virtue of an easement or a license. Thus, where a written agreement granted a "permit" to build a driveway, but also stated that the benefit and burdens of the agreement go to the "heirs and assigns" of both parties, an easement was found even though no words of grant were used.

Underwriting an encroachment that is the subject of a license can be confusing. Because the nature of a license is sometimes misunderstood, many so-called "licenses" on their face "run with the land" or inure to the benefit of "successors or assigns," both of which are incidents of an easement, not a license. Such contradictions create ambiguities that require the least restrictive reading of the document. Hence, such agreements may be characterized by the Underwriting Department as licenses.

Underwriting Requirements

Suppose a homeowner obtains a license from a neighbor to allow use of the edge of the neighbor's property for the homeowner's driveway. The encroachment is now a permitted use but only for a limited period of time. If either the homeowner or neighbor sell the property, the license will be automatically revoked. In that event, the driveway becomes an encroachment upon the neighbor's property, and the neighbor can require that the encroaching portion of the driveway be removed.

In the preceding example, the encroachment must be raised as a special exception on Schedule B. Additionally, the license itself must be raised as a Schedule B exception. It is important to recognize that the license does not eliminate the encroachment or the risk of loss resulting therefrom as an easement might. Therefore, issuing an Encroachment Note Endorsement is not appropriate merely because a license has been executed or recorded. The risk of loss from the encroachment should be assessed independently from the license. However, in some circumstances, an Encroachment Note Endorsement may be issued. For transactions involving a license, contact the ATG Underwriting Department for authorization to insure over encroachments that are the subject of the license.

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