Railroad Rights of First Refusal and Restrictions

Rhonda L Duddy

 

There are two Massachusetts statutes to be aware of that affect former railroad property:

MGL c. 161C, §7, which grants the Secretary of Transportation a right of first refusal on the proposed sale, transfer, or disposition of railroad property; and
 
MGL c. 40, §54A, which requires the written consent of the Secretary of Transportation before a building permit may be issued for any construction on land formerly used as a railroad right of way or related appurtenant property.

 

Right of First Refusal (MGL c.161C, §7)

In accordance with M.G.L. c. 161C, §7, all railroad rights of way or related

facilities offered for sale by railroad companies must first be offered in writing to the Commonwealth. The offer must include the proposed sale price of the rights of way or facilities, and any other terms proposed to be included as part of the sale. The railroad is free to sell its rights of way or facilities to a third party if the Commonwealth declines the offer, or 90 days elapse after the date of the offer without action from the Commonwealth. The railroad may not, however, sell the rights of way or facilities to a third party on more favorable terms than were offered to the Commonwealth.   It is common to see documentation recorded in the chain of title of properties that are impacted by the Commonwealth’s right of first refusal under this statute, to show compliance.  

From a title insurance perspective, if you are asked to insure title to land which was once a railroad right of way or railroad related facilities, and the record doesn’t disclose compliance with the statute, you should contact your Massachusetts state underwriting counsel for guidance. 

Construction Restrictions (MGL c.40, §54A)

In accordance with MGL c.40, §54A, no building permit may be issued for land that was formerly part of a railroad right of way or related property without first obtaining the written consent of the Secretary of the Department of Transportation (DOT).  The local building inspector must submit a formal request for consent and must include detailed information about the proposed project, including plans showing the former railroad and plans for the construction of the proposed project.  The DOT will then review the submission, may require a public hearing with notice in a local newspaper, and then issue a written decision approving or denying the request.  The entire process may take 10 to 14 weeks from receipt of a completed application to the issuance of a determination as to applicability of the statute and/or consent, or the issuance of a building permit for the proposed construction.   

Although the statute requires the local building inspector to file a notice with the DOT before development on former railroad property, in practice, it is often the property owner or their lawyer who submits the required notice.  This deviation from the statutory language reflects the realities of real estate transactions where the owner has a vested interest in ensuring compliance and avoiding delays.  Consequently, lawyers representing owners typically prepare and file the 54A submission with DOT, thereby facilitating the process and ensuring that any development can proceed without legal or regulatory obstacles.  Fortunately, the DOT has a very informative website that provides information as well as guidance and the required forms. 

For more information on DOT’s process of obtaining a right of first refusal pursuant to MGL c.161C, §7 as well as applying for consent for building on lands formerly used as railroads pursuant to MGL c. 40, §54A, follow this link:  https://www.mass.gov/orgs/rail-and-transit-division

With respect to title insurance and MGL c. 40, §54A, former railroad ownership is not considered a defect in title, but it may affect economic marketability.  This was affirmed in Somerset Savings Bank v. Chicago Title Ins. Co. (1995), where the court held that MGL c.40, §54A does not impact legal title; rather the statute regulates land use. 

In the Somerset case, the plaintiff bank issued a mortgage on the property located in Revere.  The land had formerly been used as a railroad right of way.  After the City of Revere issued a building permit to the owner to construct a condominium project, the Attorney General instructed the City to halt the construction because the required consent from the DOT under MGL c.40, §54A had not been obtained. The plaintiff bank then filed a claim under its title insurance policy. The defendant denied coverage on the ground that the effect of MGL c.40, §54A was not an insured risk under the policy.  The court held that the statute imposes a land use restriction, not a defect in title.  Therefore, the statute did not create an encumbrance, lien or defect that would trigger title insurance coverage.

Some railroad rights of way were granted in fee (full ownership), while others were easements (legal rights to use land owned by another party for railroad purposes).  MGL c.40, §54A defines “former railroad right of way” to include both land formerly owned in fee as well as easement based rights of way.  This can create a permitting problem because it relates to former railroad rights of way, which may not be revealed by an inspection or may have been further back in the chain of title than a 50-year title examination would reveal.  There have been instances where litigation or declaratory judgment actions seeking consent post construction were necessary because the title search failed to disclose that the land was subject to the statute.   

Massachusetts courts have held that if a right of way was granted as an easement and is no longer used for its original purposes, the easement may be deemed abandoned and terminated.  Many abandoned railroads in Massachusetts have been converted to rail trails under the federal Rails to Trails program.  These projects often involve the interim use of rights of way as public trails, preserving the corridor for possible future rail use.

Abandonment, however, can be difficult to establish.  In Murray v. Mass. Department of Conservation & Recreation (2016), the court was asked to decide whether an easement authorizing the running of a portion of an old railroad over a stretch that included the plaintiff’s property had been abandoned.  The plaintiffs filed a quiet title action in Land Court claiming that a railroad easement across their property had been abandoned and that the land should revert to them free of the easement.  The easement originated in the 19^th century and had not been used by a railroad since 1972.  Ownership of the railroad’s interests had since transferred to the Massachusetts Department of Conservation and Recreation, which sought to use the corridor for a public trail under the rails to trails program.  The plaintiffs were not able to provide evidence that a certificate of abandonment had been issued so they could not prove that the federal abandonment process had been followed.  The Land Court cannot determine whether a rail line has been legally abandoned unless a certificate of abandonment has been issued and since there was no proof, the Land Court lacked jurisdiction to grant the plaintiff’s request.  As such, the case was dismissed. 

Special care should be taken when former railroad property appears in your chain of title.  You should look for easement language, reversionary clauses, and any reference to railroad use.  A thorough title search should also include review of historical maps.  You will also want to confirm whether the right of way was formally abandoned and whether the federal government or the Commonwealth may retain interests. 

A member of REBA’s Title Insurance and National Affairs Section, Rhonda Duddy is a Massachusetts and New Hampshire Underwriting Counsel for Stewart Title Guaranty Company. She can be contacted at rhonda.duddy@stewart.com.