An REA contract in commercial real estate, short for reciprocal easement agreement, is a recorded contract among the owners of neighboring parcels in a single commercial development that grants each owner cross-parcel rights to use the others’ land and sets shared rules for how the whole site operates. Shopping centers, mixed-use complexes, and office parks are almost always carved into multiple separately owned lots, and the REA is what lets them function as one project instead of a cluster of disconnected properties. It binds the people who sign it and every future owner who takes title to a parcel.
What the Agreement Grants
The practical problem an REA solves is simple. A shopping center with three separately owned parcels needs customers, delivery trucks, and utility lines to cross property boundaries freely. Without a binding agreement, one owner could block access to another’s building or refuse to let a water main cross their lot. The REA removes that risk by granting each party a set of easements, which are legally enforceable rights to use another person’s land for a specific purpose.
The easements typically fall into a handful of categories:
- Pedestrian and vehicular ingress and egress across every parcel, so shoppers and employees can move through the whole development regardless of which lot they are technically on.
- Shared use of parking areas across parcel lines, so no single owner can claim the stalls on their lot are for their tenants only.
- Utility runs for water, sewer, electrical, and telecommunications lines that cross parcel boundaries to reach every building.
- Rights to install and maintain signs, accent lighting, and wayfinding that extend beyond a single owner’s parcel.
- Temporary construction and maintenance easements that let contractors stage equipment or access neighboring areas during major work.
Alongside those physical rights, an REA sets up a governing framework for the development: construction standards, architectural guidelines, maintenance obligations, permitted uses, and site plan controls. Part property contract, part community rulebook.
Operating Covenants and Use Restrictions
An REA also controls what each owner or tenant can do on their own parcel, because what happens on one lot directly affects the value and foot traffic of every other lot.
Continuous Operation
Smaller tenants in a shopping center depend on the anchor to pull customers. When a major retailer goes dark, meaning it closes its doors but keeps paying rent and holding its lease, foot traffic across the whole center can collapse. Continuous operation covenants require anchor tenants to keep their stores open and operating through the lease term. These clauses can be general or very specific, sometimes dictating minimum hours, required merchandise levels, or categories of services the tenant must offer. Some agreements include a use-it-or-lose-it provision: if the anchor closes or changes its use, protections it enjoyed under the REA, such as exclusive use rights, automatically expire.
Exclusive Use and Prohibited Uses
Exclusive use provisions keep the development from cannibalizing its own tenants. A coffee shop with an exclusive would be protected from another coffee shop opening elsewhere in the same center. These restrictions are usually written into the REA itself, so they bind all parcel owners rather than only individual landlords and tenants.
Drafting matters. An exclusive broadly worded as a prohibition on any business “selling coffee” could inadvertently block a restaurant or grocery store from offering coffee as a secondary item. Careful drafters tie the restriction to a tenant’s principal line of business rather than an absolute product ban. Many REAs also include a list of specifically prohibited uses for the whole development, such as junkyards, adult entertainment, or industrial operations incompatible with a retail environment.
Who Pays for What
Keeping a commercial development in good shape requires snow removal, landscaping, parking lot repaving, exterior lighting, and dozens of other recurring tasks. The REA assigns responsibility and, more importantly, splits the cost.
The standard tool is a common area maintenance formula, usually called CAM. Each owner pays a proportionate share of total maintenance costs based on the square footage they occupy relative to the entire development. An anchor occupying 60 percent of the leasable space pays 60 percent of the shared bill. Smaller retailers split the remainder according to their own shares. The concept is clean, but friction shows up when owners disagree about whether a specific expense is a shared cost or belongs to a single parcel.
REAs usually separate building maintenance, which each owner handles for their own structures, from common area maintenance, which covers shared infrastructure such as parking lots, sidewalks, drainage, and landscaping. One party, often the developer or a management entity, is designated to run the common area work and bill the others under the formula.
Insurance is handled similarly. A slip-and-fall in a shared parking lot or a fire that spreads across buildings can pull every owner into liability. REAs require each owner to carry commercial general liability coverage with per-occurrence limits that reflect the size and risk of the project, often in the range of one million to five million dollars per occurrence, with higher floors on larger or busier sites. Each party has to provide proof of insurance to the others, usually annually, and failing to maintain coverage is treated as a default under the agreement.
Why Future Owners Are Bound
An REA does not expire when the original owners sell. It is drafted as a covenant that runs with the land, meaning the rights and obligations attach to the real estate itself rather than to specific individuals. When a parcel changes hands, the new owner steps into the same duties and benefits the prior owner had.
Three conditions make this work in law. The original parties have to intend for the agreement to bind successors. The covenant has to touch and concern the land, meaning it directly affects how the property is used rather than imposing purely personal obligations. And the required privity of estate, the legal relationship between the parties through their shared connection to the land, must exist. REAs are drafted to satisfy all three.
The step that makes it practical is recording. Once the signed, notarized REA is filed with the county recorder’s office, it becomes part of the public land records. Recording creates constructive notice, which means the law treats every future buyer as if they know about the agreement whether anyone told them or not. A buyer who never reads the recorded REA is still bound by it. In practice the agreement shows up on title reports during any sale or refinancing, so buyers and their attorneys see it long before closing.
Default and Remedies
When an owner stops maintaining their parcel, refuses to pay their CAM share, or violates a use restriction, the REA’s default provisions take over. Most follow a structured escalation: written notice of the default, a cure period of a set number of days, and remedies if the default goes uncured.
The most practical remedy is self-help. If one owner lets their parking area deteriorate and refuses to repair it after proper notice, the non-defaulting owners can do the work themselves and bill the defaulting party for the cost. Some REAs go further and grant the non-defaulting party a lien against the defaulting owner’s parcel to secure repayment, similar to a mechanic’s lien.
One remedy REAs deliberately exclude is termination. Unlike many contracts where a material breach lets the other side walk away, an REA cannot be terminated because of a single owner’s default. The reasoning is practical: ending the agreement would strip every owner in the development of their access and parking rights, so one owner’s failure to repave a lot cannot be answered by destroying the legal framework that lets customers reach every other store. Monetary damages, injunctive relief, and self-help with cost recovery are the tools instead.
Amendment and Termination
Changing an existing REA requires the consent of every party whose rights would be affected. In most agreements that means the developer, if it still holds an interest, plus any major anchor tenant. The question of which owners need to consent gets complicated when parcels are subdivided or ownership fragments over time, which is why well-drafted REAs spell out exactly who holds amendment approval rights and what happens to those rights when parcels change hands.
Any amendment has to be executed with the same formality as the original: signatures, notarization, and recording with the county recorder’s office. An unrecorded amendment, even one all parties signed, does not give constructive notice to future buyers and may not be enforceable against someone who later buys a parcel without actual knowledge of the change.
Outright termination is rare and typically requires unanimous consent of all parcel owners. Some agreements allow termination if the development is substantially destroyed or condemned, but even then the access and utility easements often survive in perpetuity because they are essential to basic property access. REAs are designed to last as long as the development does.
What Lenders Watch For
Any time a parcel is used as collateral for a mortgage, the lender has a direct interest in the REA. If the borrower defaults and the lender forecloses, the lender steps into the borrower’s shoes as the new parcel owner and takes on the REA’s obligations.
Lenders focus on a few points. They want confirmation that the REA cannot be terminated as a remedy for default, because losing the easement rights would gut the collateral’s value. They look for provisions requiring that the lender receive notice of any default by their borrower and an independent chance to cure before other remedies kick in. And they pay attention to estoppel certificates, which are written statements from other parcel owners confirming the current status of the agreement, including whether any defaults exist. Those certificates are often required to close a loan, so lenders want a clear mechanism to obtain one within a workable timeframe.
Priority matters too. If a mortgage was recorded before the REA, the mortgage has priority, and a foreclosure could wipe out the REA’s easements. To avoid that, lenders whose mortgages predate the REA are typically asked to sign a subordination agreement that places the REA ahead of the mortgage in priority, protecting the development’s operational framework even if a foreclosure occurs.