Special Alert- Property Owners Signing Pipeline Easements

28 Jul

Our firm represents many landowners who have had to deal with new pipeline easements.  Whether it is the Sunoco Mariner East series of lines, the Columbia Lines, Eastern Shore Natural Gas, the Williams Atlantic Sunrise, Constitution Pipeline or any other pipeline, there are lingering issues you need to consider:

Sooner or later, most of us will sell all the real estate we own.  What would you think if I told you that you would be in default under the contract, the minute you signed it?

Let’s take this apart and discuss residential real estate first.  Most homes are sold with contracts using the Pennsylvania Association of Realtors® form.  That form requires a Seller to deliver a special warranty deed at closing.  A special warranty deed is one in which you, the seller, warrant that you have not done anything to diminish the absolute title to the property received by you.  Guess what?  The execution of an easement for a pipeline diminishes the title to your property.

Why is this important?  Let me give you a very realistic example.  You are at closing; the buyer wants money, because they saw something during the walk through.  You say no.  They say ‘give me a $5000 credit or I will not buy the house.’  You say, ‘you are in default and I will take your deposit.’  They say, ‘OK deliver to me a special warranty deed, and I will immediately sue you for the money you were paid by the pipeline company.”   Oops, they have you.

What is the solution?  First, prior to signing a contract, make reference to the pipeline easement in your sellers’ disclosure. Next, you need to modify the agreement of sale. The reason is you need to be obligated to deliver a deed of special warranty, excepting the pipeline easement you have executed. Finally, at the time of closing, you need to modify the warranty provision in the deed to exclude from the warranty anything related to the pipeline easement.

If you signed a pipeline easement, print this page out and put it where you can find it when you want to sell.

If you have a commercial property, the issue may be even more dangerous.  That is because buyers often spend considerable money on due diligence.  If a buyer has spent $20,000 before they learn you cannot deliver a special warranty deed, you will not have a pleasant day.