What Is an Encroachment Agreement?
Encroachment agreements are contracts made between a property owner and an adjoining property owner that allow the adjoining owner to use a very small portion of the property owner’s land in some manner. The purpose of the agreement is to authorize the adjoining owner’s use of a portion of the other owner’s land because that portion of land is currently used in a manner that would be considered an encroachment. For example, the adjoining owner may have a fence, chimney or other fixture that physically uses a portion of the property owner’s land. The most common helpful use for an encroachment agreement is for the adjoining owner’s use of land that is necessary to avoid a conflict with structures of either party. For example , the adjoining owner’s fence may be a foot or two toward the property line than what is usually the case. The fence may not be affecting the property owner, but the adjoining owner wants to ensure that the fence does not interfere with future development plans. The encroachment agreement legally authorizes the encroachment, and informs both parties how their rights are affected as a result.
In the next section, we will discuss the tax implications of using an encroachment agreement.
Major Things to Have in an Encroachment Agreement
In an encroachment agreement, the parties to the agreement must be specifically set out; in addition specific reference should be made to the condominium corporation’s governing documents and applicable by-laws. The description of the encroachment must also be specific and detailed to ensure that it is clear what is encroaching on the common elements; along with clearly identifying what parts of the encroachment are on the corporation’s land and which parts are on a unit.
The encroachment agreement should also specifically set out what permissions have been granted to the owner and clearly specify the rights to the owner and the rights to the condominium corporation. Commonly, encroachment agreements will cover all of these areas in some variation.
When Do You Need an Encroachment Agreement?
Generally, an encroachment agreement would not be necessary for a minor encroachment that does not materially affect the adjoining land owners’ use of their property or the value of their land. In that instance there would likely be no significant consequence to the adjoining land owner if it were not disclosed on the title or if not otherwise resolved and the party that was encroaching were to not fix the situation. Common scenarios where an encroachment agreement is generally not necessary are when there is a fence that has been built on the line or there is an overhanging tree or shrub that may be an encroachment but may not materially affect either party’s lands.
The need for an encroachment agreement would arise however in the event the encroachment is material or if the person encroaching is responsible for the encroachment and has a legal duty to cure the encroachment. A typical encroachment could be an air conditioning unit on a neighbouring property or a second storey deck that juts out beyond the property line or if a basement had been excavated too close to the edge of a lot, or more bizarrely, the eventual result of an extremely large tree overhanging another property. The encroaching landowner is responsible to ensure that the encroachment does not end up with the loss of any part of the encroaching landowner’s property and often the encroaching landowner is responsible for all costs associated with the encroachment such as if the deck needed fixing, removal or modification.
The Legal Aspects of Encroachment
When an encroachment occurs, the neighbours will often disagree about whose responsibility it is to address the situation. The neighbour who believes they have the right to use the land will often want an encroachment agreement. The other neighbour may not feel the same way.
If a dispute arises over the encroachment, the matter may be settled by either private negotiations or, if necessary, through a court proceeding. There is no guarantee that either party will achieve their desired outcome. Possible outcomes could include:
In addition, there are a number of additional pitfalls of not having an encroachment agreement, including: expensive delays caused by neighbours delaying the process while they consult lawyers; the burden of seeking an injunction or appealing the decision; and placing the parties at odds with each other.
In the event that a court proceeding arises, both the landowner and the neighbour have rights and obligations. The court will: require a party to backfill land for a retaining wall, even where the encroachment is trivial; allow a person to remain on the land, but only if the encroachment would not result in irreversible economic loss to the landowner; and require the neighbour to restore the land to its original state. As a result, neighbours will often prefer to negotiate an encroachment agreement before resorting to the courts.
For encroachments which are trivial or for those which involve fencing or landscaping, neighbours can usually come up with an agreement themselves, without involving lawyers or courts. However, for more serious encroachments or for those that affect the use of a significant portion of the land, an agreement is only useful if it is recorded on title. Encroachment agreements should provide for the payment of damages, compensation for permanent value lost and provide for an appropriate lease term. If there is any doubt about the appropriate terms of the encroachment agreement, the assistance of counsel should be sought.
How Do You Create an Encroachment Agreement
To draft an encroachment agreement, the process is relatively straight forward. Consideration should be given to the following steps:
1) Determine the Parties
It is important to clearly identify the legal and beneficial owners who must sign the encroachment agreement. If the encroachment concerns an easement registered on title to the lot (such as with a sewer or water line), the agreement must be signed by both the owner of the lands burdened with the easement or any land over which the easement runs – for example, for a sewer line – as well as the owner of the land in which the easement was originally created. In the event the encroachment concerns multiple properties with different ownerships and/or easements, it is always best to have the affected property owners sign the agreement along with their respective mortgages (if any). It may not be possible to obtain consent from all of the impacted property owners, so affected property owners should consider how best to deal with the possibility of not obtaining all the required consents.
2) Determine the Encroachment
The second step is to precisely catalogue the improvements that are encroaching on lands owned by the other property owner. In most cases, there is visual evidence that an encroachment exists. This is usually done in the context of a surveyor being retained to prepare a Real Property Report (RPR) and the RPR noting on the plan the nature of the encroachment by the registered owner and the length of the encroachment along the property line. Another common method of providing this information is through photographic evidence taken by the parties or the affected owners.
3) Negotiate the Terms of the Agreement
Once the parties know where the encroachment is and what the encroachment consists of, they need to collectively agree on the terms and conditions of the agreement, which typically include some or all of the following:
i. Provided the encroachment is minor in nature (and an encroachment agreement is appropriate given the context of the issue), the parties may also provide the owner whose land the encroachment is on will not be deemed to be in breach of any restrictive covenant contained in the title to his or her lands by reason of the encroachment – for example, if a chimney extends one foot over the owner’s lot line and the restrictive covenant in the owner’s title prohibits the construction or extension of any chimney of more than three feet in height.
ii. A party may also agree to alter or remove the encroachment provided the other party provides reasonable notice followed by a reasonable opportunity to do so. Otherwise the non-compliant party shall be responsible for all costs related to altering or removing the encroachment. The agreement should also provide the right to enter onto the other party’s lands to inspect, maintain, repair, replace, remove or alter the encroachment in order to ensure no damage is caused to either party’s property as a result of the encroachment.
4a) In the Agreement
Once the encroachment and the terms and conditions are agreed upon, the parties (or their lawyers) will prepare a draft agreement which must be signed by all parties and filed or caveated with an existing mortgage charge on title to the lands to not only give notice to the owner and the mortgagee at the time of creating the encroachment, but also to preserve the right to enter into the agreement (should they change their minds). The mortgagee will be given a right to inspect the encroachment and carry out its own rights, if any, if found to be in breach of the restrictive covenant, and the mortgagee will be afforded the right to enter lands owned by the defaulting party against which the encroachment exists and remove the improvement, if applicable.
4b) Or Use a Pre-Approved Form
Rather than enter into the process of preparing a custom agreement (which may involve ongoing negotiations), lastly, in the alternative to 4a), some developers and municipalities will enter into a simple encroachment agreement allowing the use of a standard form created by the land planner in an easement area. In such a case, and in the event the encroachment should cease or be removed at the expiry of some period of time, it will be at the developing municipality or developer’s discretion whether to grant another encroachment agreement under the same or similar terms and conditions in the future.
Pros and Cons of Encroachment Agreements
Encroachment agreements may have significant advantages to both parties, and in many cases, oral agreements or informal policies on the local level are simply insufficient. The city’s refusal to clear the encroachment means that the costs of an order for direct remedy cannot be recovered from it unless the directure can point to a published policy or ordinance that forbids encroachments. It is important, therefore, to have an agreement in place that is enforceable by both parties.
An agreement is not without disadvantages, however. The owner will be asked to waive his rights in accordance with the legal doctrine of "prescriptive easement," which, if properly established, would allow the encroacher to keep the encroachment free of charge. In some cases, the granting of such easement is a "taking," and the government also pays for it. The owner will be asked to consider the terms of the agreement, and he may be asked to pay fees in exchange for receiving consideration. Reasonable recordation costs are sometimes shared. The parties will likely have to delineate the extent of their property boundaries accurately. Sometimes physical steps must be taken to remove or add title instruments to make the encroachment agreement legally effective. A property description of the encroachment, whether it be linear or planimetric, must be prepared. Changes to the property that occur after the agreement is put in place may void the agreement.
Encroachment agreements can also be advantageous to municipalities because the tax assessment process may consider the property improvements for taxing purposes. Then the municipality may choose to collect on the tax assessment, and the tax becomes a lien on the encroaching party’s property. Furthermore , the municipality is only liable for damages to the landowner if the municipality was negligent in regard to private property. For example, if the encroachment is permitted, but replicated elsewhere or expanded, the liability is reduced, because the owner has derived some benefit from permitting the encroachment. It is not the same as a breach of contract, which is different from a tort. Failure to comply with the encroachment agreement may subject the encroacher to having to remove the encroachment at his expense, or others, such as tenants, or adjacent property owners, may have some rights if they relied on the encroachment, or the encroacher may just have to comply after the fact.
If the landowner and the encroacher cannot agree on the terms of the encroachment agreement, the landowner can sue in the superior or chancery court for an injunction against the purported encroacher to remove the encroachment, and recovery of money damages will be denied in the equity action that is for an injunction, although if the encroachment might disrupt public places, and safety and health it may be criminal.
Although the roadmap provided will assist the government entity in ensuring the landowner received money for damage, the same result may not happen for other parties, such as commercial or residential property owners, tenants, leased space, or other entities such as cooperative associations or community associations. The encroachment agreements may be challenged by some landowners as an improper taking, or may be considered too broad or unreasonable, or excessive in scope, or the fees required to the private party may be excessive. Finally, the negotiations may just break down.
Encroachment Agreements and Land Value
An encroachment agreement can either increase or decrease the value of a property. If the encroachment is reversible and removable, such as a fence or tree, the value of the property will not be decreased. Removal of the encroachment will presumably restore the previous property value. On the other hand, the value of the property will be decreased if the encroachment is such that it cannot be easily reversed or reversed without damage to the property, such as a concrete garage constructed that is partially on both properties.
In addition, the value of the property may be positively or negatively affected by the existence of an encroachment agreement. The impact on value will depend on the nature of the encroachment agreement. A typical type of encroachment agreement grandfather’s the structures and fences which are on the boundary in existence for many years. This type of encroachment is cash positive because the owner need not remove the encroachment and potentially suffer loss of value to the property. An encroachment agreement which benefits both sides is often accepted by the other. For example, if one property owner builds a pool on the boundary line which is located in part on the property next door, and both owners agree to the encroachment contained in an encroachment agreement, neither party will suffer a loss of value.
If one considers a property owned by a couple who are getting separated and divorcing, the sale of the property will be damaged unless an encroachment agreement is signed by all parties. If there is an encroachment onto the adjacent property by a structure such as a pool or garage and it does not belong to the adjacent owner, the value of the property with the encroachment will be less than the value of the property without the encroachment.
The awareness of the encroachment by the existing owner or owners of the property will also affect the value. If the encroachment is relatively new, and it does not belong to a party claiming an interest in the land, the repair and maintenance provisions and right of removal will generally fetter the freehold interest and decrease the value of the property.
One party may be required to compensate the other for damage caused by removal of the encroachment.
Frequently Asked Questions About Encroachment Agreements
Q: Who can enter into an encroachment agreement?
A: Any person can enter into an encroachment Agreement. Encroachment agreements are primarily with municipalities or conservation authorities. However, the City of Toronto has stated that it will not enter into encroachment agreements on private property.
Q: Do I need permission to construct a fence over a registered easement?
A: Yes. A registered easement provides both sides with rights and obligations regarding the use and access over the lands subject to the easement. You must respect the easement and obtain the consent of the easement holder to construct a fence including any post or cornerstone to initiate the fence.
Q: How do I best enforce an easement?
A: The ideal scenario is to get express or implied agreement among the parties, preferably through a contractual terms of use and by-laws on the use of the easement. Failure to reach any of these agreements would result in one or both parties wanting to go to Court for an injunction, damages or declaration to remedy the violation of the easement. A Court injunction is a remedy granted by a Court requiring a person to cease from a statutory prohibition or from otherwise proceeding with an action or practice which the Court finds is in violation of an encroachment agreement.
Q: What happens if construction occurs prior to obtaining any form of agreement?
A: A violation of an easement must be remedied as it constitutes trespassing if the encroachment onto the easement exceeds what is reasonably necessary for the purpose stated in the easement itself. If the easement does not mention this reason then the encroaching party must take down any construction exceeding the purpose within a reasonable amount of time of being served notice of an encroachment.
Q: If I enter into an encroachment agreement does my neighbour have to enter into one as well?
A: No. Each agreement must be entered into voluntarily. An agreement cannot be forced upon a neighbour and any such obligation to sign under duress is not binding.
Q: Can I unilaterally cancel an easement?
A: No. A unilateral cancellation would invalidate the agreement among the parties and the easement. Unilateral cancellation generally occurs when one person tries to cancel his or her own obligations under a contract or agreement. It renders meaningless a document that was entered into with the intent of mutual binding effect.
Wrapping Up: The Significance of a Proper Agreement
Encroachment agreements are critical for any owner of property that encroaches onto an adjoining owner’s property or, vice versa, for any owner whose property is encroached upon. It is important to ensure that the agreement is properly drafted to allow sufficient flexibility and to include terms that adequately protect the rights and interests of both the owner who builds the encroachment and the owner whose property is being encroached upon. An agreement that includes appropriate terms, such as a right to remove the encroachment or a right to access the encroachment for repair, will increase the likelihood that the respective owners can avoid the need to dismantle a structure if it turns out to be unsuitable for its intended purpose .
In order to ensure that the rights and interests of both property owners are protected, the best way forward is to have a proper agreement prepared with the assistance of legal counsel. It is important to have these agreements negotiated and drafted by experienced real estate counsel to ensure that the agreement meets all legislative requirements under the applicable governing regime and that it fully protects the rights and interests of the parties.