Call 07 834 6000

Contract for unregistered easement binding

28 February 2018

An easement is the right of one person to use another’s land for a specified purpose – for example: rights of way, rights to use another’s land for electricity supply, water supply, drainage, telecommunications and support. Easements are also “contracts” between the owners of the land who create them. Future owners of the land who are not parties to the original contract will be bound if the easement is registered against the titles.  If the easement isn’t registered then future owners will only be bound by the easement in certain circumstances.

A recent High Court case is of interest to property lawyers because of the legal issues it raised. It will also be of interest to landowners.

Disputes Tribunal entitled to determine dispute over electricity supply

The Rasmussens and the Cryns were neighbours. The electricity supply to the Cryns’ house flowed from a pole on the Rasmussens’ property to the Cryns’ house. The previous owners of the Cryns' property had made an oral agreement with the Rasmussens allowing them to lay the power cable from the Rasmussens' property to their property. This easement was not registered against the titles.

The Rasumussens and the Cryns fell out. The Rasmussens cut off the electricity supply. The Cryns’ tropical fish died, they had to empty their freezer and, because their house was uninhabitable, they shifted into rented accommodation.

The Disputes Tribunal awarded the Cryns $6,000 in damages. It found the Rasmussens had breached a contract with the Cryns to supply electricity. The Cryns were entitled to the benefit of the agreement between the Rasmussens and the previous owners of the Cryns’ land by the Contracts (Privity) Act 1982. This Act permits people who are not parties to a contract to claim the benefit of it so long as certain prerequisites exist.

When the Rasmussens appealed the Disputes Tribunal on the basis it did not have jurisdiction to determine disputes relating easements as they amounted to disputes relating to land, the High Court agreed with the Disputes Tribunal. The judge said the Tribunal’s decision did not require it to determine a dispute in relation to land. Its decision was based on a breach of the original contract between the Rasmussens and the previous owners of the Cryns’ land and the Cryns were entitled to the benefit of that contract. The judge stated that there can be a contract for the use of another’s land without there being the granting of an interest in land. The judge also noted that the electricity supply cable was a fixture and the Disputes Tribunal had jurisdiction to determine disputes regarding fixtures.

Registration is best

Although the Cryns were successful despite the easement not being registered, there would have been little doubt the Rasmussens would not have been entitled to cut off the electricity supply if this easement had been registered. Registration of an easement involves some cost, but that cost could easily be outweighed by the cost of litigation if there is a dispute.

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.

 

Barbara McDermott