This article was written in November 2018, now there are some important updates to share.
Many properties in Wisconsin have some form of shared access. It can be as simple as a portion of the driveway crossing the neighbor’s property to more complicated scenarios where an access road crosses multiple properties and provides access to numerous lots. Sometimes a “private road” may have been created when the land was subdivided.
As statutory and zoning requirements have become more sophisticated (and developers more aware), it is now more common to see properly-drafted legal documents describing road access rights and obligations at the time new lots are created. However, this is certainly not always the case. In addition, there are many joint driveways, access roads, and private roads that were created when the statutory and zoning requirements were not as stringent.
Where neighbors are friendly and know each other well, informal arrangements regarding shared access often work for years without problems. Of course, if an owner dies or moves away, the dynamics may change. However, even where the parties continue to get along, the lack of a formal arrangement may become an issue if an owner desires to obtain a mortgage on their land. Most banks that offer long-term, fixed-rate financing sell their mortgages in the secondary market. This is true even if the bank continues to service the mortgage. For the bank to be able to sell mortgages, they must comply with certain requirements. Those requirements can differ depending on whether the bank uses organizations created by Congress to buy mortgages such as Fannie Mae and Freddie Mac, or some other source to access the secondary mortgage market.
Why does all this financial mumbo-jumbo matter for shared access? Fannie Mae requires a legally enforceable agreement or covenant for the maintenance of any privately owned and maintained street that addresses: (i) responsibility for payment, (ii) default remedies if someone does not comply with his or her obligations, and (iii) an effective term of the agreement, which often is perpetual and binding on future owners. Without a recorded agreement, the bank will not provide financing. UPDATE unless there are default statutory provisions that provide basic rules regarding maintenance and repair of private roads. Wisconsin Act 99, passed in 2021, created Wisconsin Statute Section 710.20 that now satisfies this requirement! That new statutory provision provides, with certain exceptions, that “the beneficial users of a private road or driveway shall contribute to the reasonable and necessary costs of maintenance and repair of the private road or driveway”. According to that statute, if there is no written agreement, “the beneficial users shall contribute to an equitable share based on the amount and intensity of each beneficial user’s actual use in proportion to the amount and intensity of all beneficial users’ actual use.”
While the new statutory provisions help fill a void for Fannie Mae purposes, having a well-drafted agreement in place can also provide owners with peace of mind that their property can be transferred or sold as part of their estate without undue complications. A properly drafted agreement may also help minimize disputes between neighbors. If you own a property with shared access or are thinking about buying a property with shared access, call one of our real estate attorneys to find out what you can do to protect yourself and your investment.
