Watch Your Language with Licenses and Easements

Typically, courts will uphold commercial document provisions unless they are contrary to public policy or statutory law. They traditionally presume that commercial parties are on more of an equal playing field and are more sophisticated concerning commercial real estate transactions, since both will usually have attorneys to review their documents. Because courts often defer to the specific language of a commercial document (or lack thereof), unintended results are often the norm for parties who do not seek professional advice, and for professionals who do not closely review their documents. Ms. Christiansen, in Christiansen v. Schuhart, 2011-Ohio-1199 (5th Dist. Ct. of App.) was one such professional.

Ms. Christiansen, an attorney (presumably, not a real estate attorney) purchased a part of her neighbor’s horse farm in 2003. At the time of the purchase, Ms. Christiansen prepared a document entitled “License, Easement, Right of Refusal and Non-Compete Agreement”. Presumably, Ms. Christiansen wanted to cover all bases, and have a personal right to use (a license) the other part of the Esteps (neighboring) property, a right, in perpetuity (an easement) for Christiansen and her successors to use the Esteps property, and a right to match any offer to purchase the Esteps property (right of refusal).

While the “one from column a, b and c approach” works well when dining in a Chinese restaurant, the same cannot be said when transferring property interests. In 2008, Christiansen declined to exercise her right of refusal to match an offer then received on the Esteps property, because she did not have the available cash, and she thought she had a perpetual easement to continue to use the Esteps property for equestrian purposes.

Unfortunately for Ms. Christiansen, the 5th district Court of Appeals held that the 2003 License, Easement, Right of Refusal and Non-Compete Agreement did not transfer a perpetual easement, but instead, merely transferred a personal, revocable, license to use property which was revoked upon its sale. While the above-described transfer document used the word “Easement”, it also used the word “license”. This ambiguity was easily rectified by the Court as “there was no language that states there is a covenant running with the land” (required “magic words” for an easement). Further, the Court noted that there were no maintenance provisions that are typically found in an easement agreement. Finally, the Court reasoned that the parties could not have intended there to be a continuing easement, because there would then be no need for a right of refusal. Clearly, Ms. Christiansen begged to differ.

The morals of this story: 1) Say what you mean (and don’t forget the “magic words”), precisely, or a judge will decide what you meant; 2) An attorney who represents himself/herself will also have a fool for a client.

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