Practical Points of Interest
in the Valuation of Easements
Maine Association of Assessing Officers
Annual Conference
Sebasco Estates
September 28-30, 2011
Practical Point of Interest in the Valuation of Easements
The nature and definition of easements
Easements versus rights-of way
Use of easement by public utility companies
Possessory interest & non-possessory interest
Valuation method & techniques
Effects of Easements on Just Value
Property Tax Bulletin No. 24
www.maine.gov/revenue/forms/property/pubs/bull24.pdf
Reference: Title 36, MRSA, Section 701-A
The Law; The just value of land is deemed to arise
from and is attributable to legally permissible uses only.
What is an Easement; An easement is a right,
privilege, or liberty which one has in land owned by
another; it is a right to a limited use in anothers land for
some special and definite purpose . It is a nonpossessory interest since the owner of the easement does
not posses the land itself .
Can you separately assess a non-possessory interest?
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Nature of Easements
Negative one which
Affirmative one
which allows the
allows the holder of
holder of the easement the easement to
to do certain acts on
prevent an owner from
anothers land.
doing certain acts on
his own land.
Types of Easements
A. Conservation Easements
Permanent guide to future use.
Granted voluntarily by owner
Runs with the title
Will remain forever wild or permit limited uses.
B. Rights of Way across anothers land
C. Rights to lay pipes underneath or on anothers land
D. Rights to place utility lines across anothers land
E. Right to flood anothers land
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Valuation of Properties Subject to Easement
or Adjacent to Easements
1. There is no rule of thumb which establishes
Just Value of properties subject to easements.
2. Review the terms & conditions of each
easement; what is allowed, what isnt.
3. Does the easement decrease value, increase
value, or have no effect on value.
4. Is the value of adjacent property effected?
Right of Way vs. Easement
IAAO Glossary
Right-of-Way (ROW)
(1) An easement consisting of a right of passage
through the servient estate.
(2) By extension, the strip of land traversed by
railroad or public utility, whether owned by the
railroad or public utility company or used under
and easement agreement.
Right of Way vs. Easement
IAAO Glossary
Easement
(1) Broadly, any non-possessory interest held by
one person in land possessed by another.
(2) A right held by one person to use the land of a
another for a specific purpose, such as access to
other property.
(3) In a restricted sense, a non-possessory interest
held by one person, by reason of his possession
of a given piece of land (the dominant estate).
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Types of Easements
IAAO Glossary
Easement, Appurtenant - Gives one person the
right to use anothers land so long as the first
person owns a specific piece of property.
Easement in Gross- A right to use anothers
property, usually for a specific purpose. Utility
easements and railroad right-of-way are
examples of easements in gross.
Valuation Process & Decisions
What property is being valued?
The Right-of-Way?
The entire ROW or a section of the ROW?
The larger (servient parcel)?
The easement?
All of the easements within a right-of-way?
One of the easements within a right-of-way?
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Highest & Best Use Considerations
Will the easement affect the use and/or utility
of the property that results in a change in
highest & best use?
Highest & Best Use Test
1.
2.
3.
4.
Physically Possible
Legally Permissible
Financial Feasible
Most Productive
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Easement Valuation Matrix
Right of Way, IRWA, May/June 2006
Potential Types of Easements
Comments
% of Fee
Overhead Electric, RR ROW
Severe impact on use
90%-100%
Transmission pipelines, drainage easements
Major impact on use
75%-89%
Distribution pipelines, scenic easements
Some impact on use
51%-74%
Water & Sewer lines, cable TV, telephone
Balanced use & benefit
50%
Water & Sewer lines, cable TV, telephone
Located along property
line or rear of lot
26%-49%
Air Rights
Minimal effect on use
11%-25%
Small subsurface easement
Nominal effect on use
0%-10%
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RACKO, LLC
Resort Area Community - KAPPA Omega
80 Acres of Land in Sebasco Estates
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RACKO, LLC
A. Unencumbered (80 Acres)
80 acres (x) $10,000/ acre = $800,000
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B. Encumbered by ROW-beach access (16 acres)
Total $800,000 -[16 acres @ $10,000/ac.) x 50% Factor]
= $800,000 - $80,000 = $720,000
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C. Encumbered by Underground Pipeline Easement (24acres)
Total $800,000 -[24 acres @ $10,000/ac.) x 75% Factor]
= $800,000 - $180,000 = $620,000
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D. Encumbered by Overhead Electric Transmission Easement
Total $800,000 -[32 acres @ $10,000/ac.) x 90% Factor]
= $800,000 - $288,000 = $512,000
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RACKO, LLC
Valuation: Land Cap. Rate = 10% (I=VxR)
A. Unencumbered (80ac.)
$800,000
a) $800,000 x 0.10 = $80,000/yr = $1,000/acre
B. ROW beach access (16ac.)
$720,000
b) ROW = $80,000 x 0.10 = $8,000/yr = $500/acre
C. Gas Pipeline Easement (24ac.) =
$620,000
c) Easement = $180,000 x 0.10 = $18,000/yr.
D. Electric Transmission (32ac.) =
$512,000
A. Easement = $288,000 x 0.10 = $28,800/yr.
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RACKO, LLC
Resort Area Community - KAPPA Omega
80 Acres of Land in Sebasco Estates
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