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Rights of Landowners in Railway Right-of-Way Easements

Rights of Landowners in Railway Right-of-Way Easements

NCBA's The Property Line,
(October 31, 2014)

Since the 1800s, railroad right-of-ways have extended onto private property, prompting disputes over a landowner's ability to use areas located within the right-of-way. Whether it's an underground drainage system or a parking lot, a landowner's encroachment of a railroad right-of-way is a breeding ground for property rights disputes.

While railroads may hold different kinds of interests in their right-of-ways, this article explores only the rights of landowners in easement right-of-ways. North Carolina case law provides that a statutory grant of an easement is presumed where there are no deeds or condemnation proceedings granting the railroad any rights in the property and there are no actions for compensation within two years of track completion. See Norfolk S. Ry. Co.v. Smith, 169 N.C. App. 784, 786-88 (2005); Keziah v. R.R., 272 N.C. 299, 306 (1968); Carolina & N.W.R.R. v. Piedmont Wagon & Manufacturing Co., 229 N.C. 695 (1945). It sounds simple enough, but conducting the research necessary to confirm that all of these requirements are met can be difficult and time-consuming. It requires a full title search going back to the time of either the railroad charter or the track completion, which is often in the mid to late nineteenth century, and many of these records require the aid of a skilled translator.

Assuming you have overcome the hurdle to establish an easement right-of-way, the next question is who owns the railroad track. This is significant because North Carolina provides certain statutory protection for state-owned railroads. Specifically, North Carolina General Statutes § 124-12, implemented in 2000
(the "Statute"), gives state-owned railroad companies the power to lease, license, or improve property in existing right-of-ways, even if the right-of-way is only an easement. The North Carolina Rail-road Company ("NCRR") is North Carolina's primary state-owned railroad. NCRR is the sole owner of the 317-mile rail corridor from Morehead City to Charlotte that runs through Raleigh and Greensboro, and the Statute applies to this entire track.

The NCRR has taken full advantage of its powers under the Statute, and there have been numerous reports of the NCRR demanding rent from landowners. "The railroad, using the latest satellite-mapping technology, has been trying to enforce its right of way, claiming hundreds of businesses have encroached on the 200-foot-wide ribbon it controls."1 The NCRR "is demanding that they pay rent – in some cases $1200 a year – and carry liability insurance."2 In 2007, State Representative Jeff Barnhart, a Cabbarus County Republican, called for a legislative study committee to review the Statute.3 Barnhart was quoted saying that he "supported the railroad, but there's right and wrong" and that the rights given to railroads under the Statute "is just wrong[.]"4

Surprisingly, however, there are no reported cases challenging the Statute on its face. Thus, it appears that so far, landowners affected by the Statute have chosen to either accept the Statute and its broad scope, or if litigation has occurred, it has ended in settlement or at the trial level.

There are many areas of North Carolina where the rail tracks are not state-owned, such as the part of the State lying west of Charlotte and the entire area below the NCRR line. If a rail track is not state-owned, the landowner will likely have more rights in the easement area.

North Carolina is considered a "landowner-use" State, which means that, in general, landowners are permitted to use the unused portions of a railroad easement. See Atl. Coast Line R.R. v. Bunting, 168 N.C. 581, 581, 84 S.E. 1009, 1010 (N.C. 1915). A recent and seminal case on this issue is Norfolk S. Ry. Co. v. Smith, 169 N.C. App. 784, 788, 611 S.E.2d 427, 430 (2005). In Smith, the railroad brought an action against the landowner alleging that the landowner was performing construction work that could threaten the structural integrity of the roadbed. One of the key questions decided by the North Carolina Court of Appeals was the extent to which the landowner could use the land encumbered by the easement. The court held that the landowner may use portions of the servient estate that are not required for railroad purposes and in manners that are not inconsistent with the railroad right-of-way. Id. at 788.

The conclusion in Smith has provided landowners with additional support for using parts of the servient estate, but the court's holding is not without ambiguity. It would seem that the easement is "not required for railroad purposes" if the railroad is not currently using the right-of-way for anything other than track clearance. Additionally, railroads can assert a need to control the right-of-way in order to manage risk of injury or damages arising from a non-railroad use within the right-of-way. However, railroad companies are quick to argue that all parts of the right-of-way may be required for railroad purposes at some time in the future. Moreover, what uses are not inconsistent with the railroad right-of-way? If a parking lot is paved over the right-of-way, is this inconsistent? What about building a fence or storage shed?

Some older cases shed light on this issue, revealing that even building improvements within the right-of-way might be permitted. See Atl. Coast Line R.R. v. Bunting, 168 N.C. 581, 581, 84 S.E. 1009, 1010 (N.C. 1915). For example, in Bunting, the defendant landowner constructed a brick building within the right-of-way that was substantially in line with the other buildings on the street. Id. at 1010. The North Carolina Supreme Court held that the landowner had the right to build the building because there was no evidence indicating that it would "interfere with the proper and efficient operation of the [railway], or that it [would] sensibly increase the hazards incident to its operation." Id.

Another common concern is whether the railroad has the right to charge rent to the landowner for use of the right-of-way. Some North Carolina cases have held that railroads cannot lease part of their right-of-ways for private purposes that are unrelated to the business of the railroad. See Sparrow v. Dixie Leaf Tobacco Co., 232 N.C. 589, 594-95 (1950); Bunting, 168 N.C. at 581. Thus, regardless of whether the landowner's use passes the test under Smith, it's arguable that railroads should not be able to charge rent to landowners unless the railroad is state-owned or the use is railroad-related.

Curiously, a servient owner's rights may be the most protected underground. Indeed, landowner-favorable settlements across the Country have arisen from the issue of a railroad's subsurface rights, and North Carolina is beginning to follow suit. See Ferris, et al. v. Sprint Commc'n, L.P., No. 5:11-cv-00667-H (E.D.N.C.). In Ferris, Judge Howard of the Eastern District of North Carolina approved a settlement agreement, which provided the landowners with $0.21 per foot of land located within the right-of-way to compensate them for fiber-optic, copper, and coaxial cables placed by a telecommunications company under their land with the permission of the railroad but without the permission of the landowners. While most of these cases have resulted in settlements, in Tennessee, another landowner-use state, the Tennessee Supreme Court held that railroads do not have the power to permit installation of underground cables without the landowner's permission. See Buhl v. U.S. Sprint Commc's Co., 840 S.W.2d 904, 912 (Tenn. 1992).

In sum, if an easement in the right-of-way can be established, the next inquiry is whether the track is state-owned. If the answer is yes, then the railroad has statutory protection to charge the landowner rent. If the answer is no, the landowner's use may be permitted if it is not inconsistent with railroad purposes and is in an area not required for railroad use. On a practical level, however, use within a railroad right-of-way should be avoided if there is another part of the property suitable for the intended use. Railroad companies are quick to assert their rights and do not waiver lightly. Even if a landowner has the law on their side, negotiations or litigation with a railroad company can be costly. So stay out of the right-of-way, but if you do find yourself there, it might not be a total train wreck.

2 Id.
3 Id.
4 Id.

Article originally published in the North Carolina Bar Association's The Property Line, October 2014 issue, and is posted with the permission.

Catherine B. Mitchell
T (704) 384-2675
F (704) 384-2934
Associated Attorneys

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