Do Right-of-Way Grants Negatively Impact Real Property Value?

Individuals buy and sell real property in metropolitan Las Vegas and often they do not consider the potential impact of a right-of-way grant or blanket easement made several years earlier within a U.S. Patent that initially conveyed the property into private ownership. Since Patent conveyances can be recent or over 50 years old, a grant can often show up as a small blurb noted on the Exceptions page of a title insurance policy and almost nowhere else. The problem with these blurbs is that they can have a significant negative impact on your property value. As an example, if thirty-three (33) feet was reserved along one side of your square 2.50 gross Acre parcel of land, an area of 33 feet X 330 feet or 10,890 square feet has already been reserved for a potential future public use.  If you bought the property for $ 5.00 a square foot based on its gross size, you may find that you have to deed away a $ 54,450 portion of the parcel for free due to this relatively hidden grant provision.
Appraisers consider whether grants detailed in Patents are likely to reduce market value during the appraisal process. When it appears unlikely that existing Patent grants will be claimed for use, most appraisers assign little or no value loss to them. If, however, it becomes probable that an identified grant area will be claimed for use, the risk of loss is high, an appraiser may discount the value of the affected grant area.
Many property owners never have to deal with a loss caused by an old government Patent grant because roadway and utility easements are not required along their boundary lines. Others may find, however, that Patent grants have been provided along more than one of their boundary lines and significant losses can be incurred when the property is taken for roadway or utility purposes. The government agency or public utility company acquiring property of this type will reasonably claim that the property in the grant area was purposely reserved for a public use, and thus the owners remaining interest in the property has a relatively small or nominal value.
As a real property appraiser I have noted that losses of this type often come as a shock to property owners who paid a market price for all of their property. They expected to receive a reasonable investment return on their entire purchase, and find out that a portion of what they own will be lost with little or no compensation. Eminent Domain acquisitions for roadway or utility improvement projects are usually the impetus behind the government's or power company's desire to acquire property. Understandably, the government does not want to pay for rights or interests that it believes it already holds.
Appraisers are contracted to form an opinion of the value of an owner’s interest in a property, and they must consider existing right of way grants that may significantly diminish what is paid to an owner in their appraisal reports. Real property acquisition appraisals for roadway and utility projects can become quite complex. Consideration must be given to the value of a property "before" its acquisition, the value of the acquisition parcel itself and the value of the remaining property "after" the acquisition. A property in its "after" acquisition state could suffer a loss in value or become damaged due to the acquisition, and an appraiser must consider whether this will occur.
In conclusion, real property affected by one or more right-of-way grants detailed within a Patent could be the cause a land owner to suffer a significant loss in value if a governmental agency or public utility requests the reserved area for a public project. Thus, it is important for appraisers to consider whether there are risks associated with grants made in a Patent for public use, and if those risks have a negative effect on value.
For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.
 

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