Before insuring property wherein the chain of title shows that the land was formerly owned by a railroad company, the agent must carefully review the instrument by which the railroad company acquired its interest in and to the land to determine the intention of conveyance of the parties.
Generally, a grant or conveyance of real estate to a railroad company is intended to vest title or interest as an easement rather than fee simple title, depending on the language used. Unless the agent has proven that the railroad company acquired fee simple title, the estate as insured on Schedule A should list “EASEMENT” rather than fee simple title and the following exception shown in the commitment and final title policy:
“The interest herein insured is an easement only, and not fee simple title.”
Caution: Land Grant railroads which received their right-of-way by grants from the federal government by congressional act are subject to reversionary interests. If the railroad abandons, sells, or ceases to use the right-of-way for a railroad, the property may revert to the federal government. It is always necessary to determine the source of a railroad’s title or ownership before insuring a conveyance out from a railroad or property formerly owned by a railroad.
Any of the following situations would infer that the interest was intended as an easement only:
• Lack of adequate consideration.
• Deed contains a reversionary clause.
• The railroad company charter does not authorize the acquisition of property other than for railroad purposes.
• The property conveyed is a small strip of land.
• Phrases are found in the instrument which restrict the use of the land: e.g., conveyed as “an easement/right-of-way only” or “for railroad or depot purposes only.”
• The instrument contains a right of reverter or provides conditions for its conveyance: e.g., “as long as used for railroad purposes”, “as long as the same shall be used for a railroad”, or “on condition that a crossing be maintained.”
For additional information, contact Agents National Title underwriting counsel.