Understanding Reciprocal Easement Agreements

In the case where more than one owner is interested in developing a shopping center, the most common scenario is that one of the owners acts as the developer and the other owner is a major retailer (for example, Target or Wal-Mart) in that shopping center. Often, the developer will lease a portion of the property to the major retailer, in which case an REA is not necessary, since the lease will provide for construction and operation of the shopping center. If, however, the major retailer desires to purchase a portion of the property, it will be necessary for the developer and the major retailer to enter into an REA. If not, there will be no contractual agreement between the developer and the major retailer governing such things as the construction of the shopping center, the architectural compatibility of the buildings, and the use of the common area. Without an REA, the developer or the major retailer could build whatever and whenever it wishes and could conceivably prevent the other party from using its parcel for parking, access or utility lines.

In the event that the developer and the major retailer enter into an REA, it will be recorded by the parties in the county in which the property is located and will create certain contractual obligations between the developer and the major retailer that will enable a shopping center to be constructed. Once constructed, the shopping center is operated as one integrated retail project. These contractual obligations will “run with the land” of the property that comprises the shopping center. In other words, the owner, and any subsequent owner, of all or any portion of the shopping center will be subject to the obligations contained in the REA and will benefit from those rights.