Water Access Can Buoy
A Developer's Investment
The right to access a body of water is considered the most valuable right that comes with ownership of waterfront property.
Developers may choose to grant access rights to back-lot land owners who do not have access to the water to increase the property's value. Developers owning property actually touching a lake or river ("riparian property") can maximize their return on the property by providing these rights to adjacent non-riparian property.
Developers generally use two devices to accomplish this: (1) granting easements or licenses, and (2) granting concurrent interests in a riparian parcel through the use of keyhole developments, tenancy-in-common ownership, homeowner association ownership or condominium ownership. However, developers must be cautious when using these types of development techniques.
One of the most common methods utilized to provide water access rights to non-riparian lots is the granting of an easement. Generally, these access easements benefit non-riparian owners and provide access rights that would not exist otherwise.
However, an easement in riparian land affords only the right to use the surface of the water in a reasonable manner for such activities as boating, fishing and swimming. It does not automatically afford the non-riparian owner with those rights which are incidental to the ownership of riparian property, including mooring of boats, constructing a dock and sunbathing.
Rather, the developer must expressly provide in the easement agreement any additional rights granted to the non-riparian owner, such as the right to construct a dock, to moor a boat or to sunbathe.
Careful drafting of the easement is critical to protect the interests of the riparian and non-riparian owners. Such thoughtful drafting will often avoid ambiguities in the rights of the non-riparian owners that can turn into nasty disputes between them and sometimes the developer.
As mentioned above, developers also provide riparian rights to numerous lot owners through "keyhole" access. In these keyhole developments, particular waterfront lots are sold to numerous non-riparian owners as tenants-in-common or to a homeowners association.
By actually transferring an ownership interest in riparian property to the non-riparian owners, the developer effectively provides numerous non-riparian owners with riparian rights.
Because riparian rights are so valuable, litigation remains prevalent between riparian owners and developers who wish to grant access rights to non-riparian owners. In fact, many municipalities in Michigan passed "anti-keyhole ordinances" prohibiting water access through the use of a keyhole. Developers need to carefully review the local municipality's ordinances to determine whether its proposed development is prohibited.
Additionally, developers need to make sure that lots dedicated to the use of numerous non-riparian lot owners are not subject to single-family use restrictions in the chain of title or under the local ordinance.
Lastly, developers must be careful not to mischaracterize the rights being granted to non-riparian owners in their promotional materials.
Also, developers must understand that the use of water by non-riparian owners and riparian owners must not interfere with the reasonable use by other riparian owners. Otherwise, the use of easements and keyhole lots may be challenged as an unreasonable interference with the riparian rights of others.
What constitutes "reasonable use" depends on the facts in each case.
1. Check the local municipal ordinance for anti-keyhole ordinances, single-family use restrictions, or other restrictions on waterfront development.
2. Check the chain of title for restrictions for single-family use restrictions or other prohibitions on waterfront development.
3. Clearly define rights granted to non-riparian owners in easements and keyhole developments.
4. Clearly describe those rights in promotional materials to be provided to purchasers.
5. Evaluate whether the specific rights proposed to be granted unreasonably interfere with the rights of other existing riparian land owners.
With proper investigation and careful drafting, the developer of waterfront property can enhance the value of adjacent non-riparian property by providing access to the owners of the non-riparian property.
Rob M. Davies is a real estate attorney with the Grand Rapids law firm Warner Norcross & Judd LLP.