Rights now or rights later? The case for options for easements

Traditionally, on the acquisition of land for the purposes of development, parties have sought to reserve rights for any retained or adjoining land over the development site in a transfer. However, as development schemes become larger and more complex, landowners, developers, registered providers and purchasers are increasingly considering ways to preserve future access and infrastructure rights without permanently burdening land with extensive (and often unnecessary) easements. One solution is the use of an option for easement which can offer practical and commercial advantages as well as greater flexibility to the traditional rights reserved in a transfer.

An easement is a right of use over land that is owned by another party. Examples of easements include, a right of way over an access road or a right to lay and maintain service media.

Key differences

An option for easement grants a contractual interest to require the grant of an easement at a future date. Once the option has been validly exercised, the parties will then need to enter into a deed of easement in order to grant the relevant rights. An easement constitutes a disposition under the Land Registration Act 2002 and therefore must be registered in order to operate at law.

A transfer, however, grants the rights immediately on completion of the transfer and is registered against the title to the site indefinitely (or until such time as the rights are extinguished).

An example of where an option for easement might be useful is where a developer agrees to sell a parcel of land but anticipates that at a later stage, they may acquire a neighbouring site which could require access through an estate road on the parcel of land being sold. Rather than reserving extensive rights in a transfer, the parties can instead agree an option for easement which can be exercised if the neighbouring land secures planning permission and is subsequently developed.

Benefits of an option for easement

1. Avoids granting unnecessary rights

Rights contained in a transfer burden the site indefinitely, even if the beneficiary of the rights never actually exercise the rights. An option for easement allows the parties to make the grant of the easement conditional on a genuine future need, avoiding unnecessary incumbrances indefinitely.

2. Allows the precise rights to be settled at a future date

An option for easement enables parties to agree a proposed framework and rights but defer the final details until a future date. For example, the route of an access road or the location of service media until such time as plans have been finalised.

This is always subject to the option containing a clear mechanism for determining the necessary rights.

Furthermore, options for easement can assist where infrastructure requirements remain uncertain due to ongoing discussions or site layouts that are evolving. Rather than granting extensive rights at the outset, parties defer the creation of permanent easements until the final route and requirements of infrastructure are known.

3. Preserves greater control

The party that owns the land that is to be subject to the rights retains greater control over their land whilst the option remains unexercised.

However, it should be noted that the party with the benefit of the option will likely register a restriction and/or notice against the burdened land in order to secure the option. The wording of any such restriction should be agreed between the parties in the option to ensure that the burdened land is still able to exercise sufficient control without requiring the owner of the benefiting land's consent to do so.

4. Facilitates phased development

Options for easement are particularly useful on development schemes where access or infrastructure rights are only needed once a particular phase proceeds or where planning permission is obtained or a neighbouring parcel of land is developed. This enables the parties to agree a commercial position before all of the practical details become known.

Important points to note

An option for easement is not the same as an easement. Careful drafting is required to ensure that the benefit and burden of the option pass to successors in title, where appropriate. Otherwise, the purpose of the option may be undermined if the ownership of the relevant parcels of land changes before the option is exercised.
As with other forms of option agreements, the terms of an option for easement must be sufficiently certain in order to be enforceable. If essential terms are left undecided, there is a risk that the option may be incapable of enforcement. Therefore, the parties need to agree a clear mechanism for determining issues at an early stage.
As noted above, the party with the benefit of the option for easement should seek to register an appropriate notice and/or restriction on the title of the burdened land to ensure that the option is protected. Failure to protect the option on the title to the burdened land, could result in a purchaser acquiring the burdened land without being bound by the option, potentially frustrating the intended future grant of easements.
Lenders or purchasers may seek further information in regard to contingent rights affecting the land.
Parties need to consider the term that the option is intended to operate for (a "longstop date"). Without a longstop date by which the option must be exercised, the option will be subject to rules against perpetuities. There is also a risk to the party with the benefit of the option if they fail to validly exercise the option within the agreed period. The owner of the burdened land would not be contractually required to grant the easements after the expiry of the option period.

Options for easement therefore provide a valuable alternative to reserving rights in a transfer, particularly where future requirements are uncertain. By allowing rights to be granted only when required, parties can avoid unnecessary incumbrances on the title whilst giving flexibility as developments evolve.