Partnerships

Structuring a joint venture for properties with unrecorded easements

Structuring a joint venture for properties with unrecorded easements requires clear definitions of responsibility and risk allocation among partners. These hidden encumbrances can complicate title and impact property value, making a robust JV agreement essential.

October 28, 2026 · 3 min read

Understanding the risk of unrecorded easements

An unrecorded easement is a right for someone else to use a portion of your property, but it is not formally documented in public records. This could be an old utility line, a shared driveway, or even a pathway a neighbor has used for decades. They can significantly impact marketability and even force you to rework plans.

These easements are often discovered during a new survey or when a buyer's title company does extensive due diligence. They can lead to title defects, legal disputes, and delays or cancellations of deals. Your JV needs a plan for this.

Due diligence: discovering the hidden lien

Your JV agreement must emphasize thorough due diligence upfront. This means going beyond standard title searches. Talk to neighbors, look for physical evidence like worn paths or utility markers, and get a new survey if there is any doubt. Review old deeds for references.

A partner with local experience or an attorney specializing in real estate law can be invaluable here. His or her expertise might uncover clues that a standard search misses, saving the JV from a major headache later.

Defining roles and responsibilities in the JV

Clearly assign who is responsible for discovering and resolving unrecorded easements. Is it the partner finding the deal, the one bringing capital, or a third-party attorney? This needs to be in writing.

The partner responsible for due diligence should be compensated for that effort, whether through a higher percentage or a fixed fee, especially given the increased complexity. Do not assume someone will just take it on.

Risk allocation and dispute resolution

Address what happens if an unrecorded easement is discovered late in the game. Who bears the cost of a quiet title action, negotiation with the easement holder, or a potential price reduction? Outline a clear process for making these decisions.

Include a dispute resolution clause in your JV agreement. This could be mediation or arbitration, to avoid costly court battles if partners disagree on how to handle the discovery of a significant unrecorded easement.

Exit strategy considerations

An unrecorded easement, once discovered and potentially recorded, can affect your exit strategy. It might limit your buyer pool or reduce the potential sale price. The JV needs to anticipate this and build it into the financial modeling.

Consider holding back a portion of the profits in an escrow account until the easement issue is fully resolved or clarified. This protects all partners from unforeseen legal costs or property value adjustments after the initial closing.

Questions people ask

What if we find an unrecorded easement after buying the property?

This is a risk you take. Your options typically involve negotiating with the party claiming the easement, attempting to get it formally recorded or extinguished, or pursuing a quiet title action.

Does title insurance cover unrecorded easements?

Usually not. Standard title insurance policies often have exceptions for unrecorded easements or those that would be discoverable by a physical inspection or survey. Always review the specific policy.

Can an unrecorded easement prevent us from selling the property?

It can certainly complicate it. Most traditional buyers and lenders will require a clear title. You might need to resolve the easement issue before you can successfully sell, or sell to a cash buyer who understands the risk.

How do we prove an easement is unrecorded but still valid?

Proof often involves demonstrating continuous, open, and adverse use over a statutory period, depending on state law. This is where an attorney's expertise becomes essential, potentially leading to a prescriptive easement claim.