During the initial planning stage of a commercial real estate project, you or your development company (if you partnered with a developer) will need to verify permanent access to the site before the close of escrow. This critical process is a joint effort between the development and legal departments during any due diligence or planning phase. Do not underestimate the importance of buying a property with easy access or the means to obtaining it.
Keep reading for the most important items to know when it comes to verifying access to a commercial property.
Before delving into the “how,” let’s discuss the “why” this is pertinent information to know. Permanent access refers to the ingress/egress into a piece of property, either dedicated by plat, record of survey, Department of Transportation (DOT)/government permitting, or easement for the purpose of providing access to the boundaries of a property. It is usually required to meet state and local operational requirements, always in the name of safety, and may be handled differently depending on whether a public or private street is involved.
For instance, if a property abuts a public street, confirm you have permanent access by checking that the public street right of way goes all the way to the property line, and there are no gaps between the property and the public street. This is typically verified on the ALTA survey.
On the other hand, if the property abuts a private street, review the document(s) creating the access to ensure you have permanent access on that private street. This is typically an access easement document between private parties.
Now, before even considering closing on a prospective property, ask the following questions:
- Is the property only accessible by a private road?
- Does the access rely on an easement to cross the adjoining landowner’s property?
- Or, is it “landlocked,” meaning there’s no road access leading to the property at all?
After obtaining passing answers to the questions listed above, it’s time to work on obtaining verification with the municipality. Keep in mind, as no two properties are the same, this process also will vary from state to state and city to city. The development team’s role in this stage is to confirm how access to city streets and/or highways work in relation to the property’s future operation.
Documents for Access
- Public Access - Most common and least complicated
- Deeded Access - Written agreement with adjoining landowners to use road
- Undeeded Access - Access to undocumented road only
A good general contractor or construction manager will likely conduct a preliminary site visit in order to prepare their bid packages for the project. Unless you have partnered with a developer who will already be handling this, ensure these professionals verify the access roads and water, identify electrical and other service utilities, and locate suitable locations for the temporary facilities and field office for the construction period. Any interference of existing facilities with construction should also be noted and addressed prior to construction commencement.
Access via Title/Survey
As alluded to previously, verifications on the ALTA survey take place when a property owner needs to protect adjoining properties during construction, make construction easier/less expensive, or confirm permanent access for future traffic and customer operations. The details of the access, protection and insurance will also need to be coordinated with your contractor and architect.
Enlist in an experienced real estate attorney who is well-versed in verifying access to land for commercial properties. If needed, they may obtain a license from the adjoining property owner through negotiation and agreement. This “license” describes the permission for non-exclusive use for a defined purpose and specified period of time. However, if an agreement cannot be reached, a legal representative can look into a court-order (i.e. legal proceeding under Section 881 of New York’s Real Property Actions and Proceedings Law).
Whether the license is obtained by agreement or court order, understand it will take time and preparation to address items such as:
- Minimize access and intrusion required
- Protect the adjoining property owner’s interest
- Define period of time for the access and intrusion
- Outline process if period must be extended
- Compensation, either in cash or in-kind, and who receives it if there are affected occupants aside from the owner
- Terms of insurance coverage for potential damage or injury
- Indemnification against claims arising from the access, construction, and intrusion
- Security and privacy concerns
- Identify any short-term temporary construction conditions and long-term maintenance obligations
In Oregon, to have a legal right to drive a vehicle onto a state highway from a property that borders the state highway, property owner must have both:
- A special property right known as a Indenture of Access (also called an access right)
- A highway approach permit or other written permission from ODOT.
Oregon state law prevents the Oregon Department of Transportation (ODOT) from issuing a highway approach permit if a property does not have an access right legally assigned to them. To avoid delays or complications due to a property not having the proper access rights, ODOT starts the permit application process by reviewing highway right of way records. If ODOT approves a Reservation of Access, it becomes recorded in the property deed. You can find more information here.
To complicate things further, a Reservation of Access also does not legally give all landowners the direct right to take access onto the state highway. Only an Indenture of Access would allow that once the land and all parties tied to that Reservation of Access are all considered first.
Reservations of Access = a limited property right for reserved access that requires permission from ODOT for the right to move or change the access to a state highway
Indenture of Access = a specific legal right granted by the ODOT to relocate the access to a more desirable location, widen, change the use, or make other improvements to gain access to a state highway.
Needless to say, the weight that the process of verifying permanent access to a commercial property holds on the overall success of a development process is nothing to underestimate. So keep this information in mind for the next prospective property that catches your eye.