Title and Survey Red Flags Unique to Industrial Sites
When evaluating an industrial site—whether for acquisition, development, or leasing—the title report and survey can reveal issues that aren’t as common in other asset classes. While every commercial property raises the usual concerns of access, encroachments, and easements, industrial facilities often carry unique operational requirements. Three issues that typically require review are rail access, truck circulation, and utility easements.
Rail Access Rights
For properties with rail service, the title and survey review should go beyond confirming the presence of a rail spur or siding. Important considerations include:
- Ownership and Control: Does the landlord or tenant actually own the spur, or is it subject to rights held by the railroad? Many spurs lie on railroad-owned land or within exclusive easements that restrict use.
- Permitted Users: Is the rail service exclusive to the site, or can the railroad (or others) access the spur for third-party benefit?
- Maintenance Obligations: Who bears responsibility for maintaining the track, crossings, and related improvements?
- Termination Rights: Railroads often reserve the right to terminate spur agreements or easements with notice, which can significantly impact site operations. Failing to confirm these details can result in costly disruptions to supply chain operations.
The presence or former presence of a rail spur or other railroad ownership is of particular consequence in Massachusetts. Many urban and suburban areas, particularly around Boston, contain disused railroad lines whose historical use may not be apparent from a visual inspection or standard title search. Two state statutes create specific obligations:
- G.L. c. 161C, §7 – Right of First Refusal: The Massachusetts Secretary of Transportation has a ninety-day right of first refusal on proposed sales or transfers of railroad property. Sales from a railroad company cannot proceed until the Secretary either accepts or declines the offer.
- G.L. c. 40, §54A – Secretary’s Consent for Construction: Any proposed construction on former railroad land, or property appurtenant thereto, requires the Secretary’s consent. This statute applies broadly, potentially covering land outside the precise former right-of-way.
While the existence of a former railroad right-of-way is not considered a defect in title, it can affect marketability and project feasibility, as standard title insurance policies typically exclude governmental regulations that restrict land use. Developers and purchasers must therefore conduct thorough, targeted title investigations to identify potential regulatory hurdles before committing to construction or acquisition.
Truck Circulation and Access
Efficient truck circulation is central to industrial functionality. Title and survey reviews should confirm that circulation patterns are legally and physically workable:
- Ingress and Egress: Are driveways and curb cuts located on land the owner actually controls.
- Cross-Access Rights: Many industrial parks rely on reciprocal easements for truck movement. If missing or poorly drafted, trucks may be forced into inefficient or noncompliant routes.
- Encroachments: Utility poles, fences, or neighboring improvements can obstruct truck paths. A survey should identify these early.
These circulation issues are not always obvious during a walk-through, but can be deal-breakers if discovered after closing.
Utility Easements and Infrastructure
Industrial facilities often have heavy utility demands—electricity, water, sewer, natural gas, and sometimes specialized utilities like chilled water or fiber optic lines. Easements and survey findings can impact these in several ways:
- Location of Easements: Utility easements running through key yard or building areas may limit expansion or restrict building footprints.
- Access Rights: Easements typically give utility providers broad rights to access and maintain their lines. For industrial users, this can mean unexpected disruptions in critical operational areas.
- Conflicts with Improvements: Surveys sometimes reveal utilities running under loading docks, parking areas, or proposed expansion pads—issues that can complicate site planning and add unexpected costs.
Takeaways
Title and survey diligence should occur early in the transaction or development process, before significant assumptions are made about site design, permitting, or operations. Identifying constraints at the outset allows for strategic decision-making through redesign, negotiation of curative measures, or reallocation of risk.
Structuring Protections in Transaction Documents
Where issues cannot be fully eliminated, buyers and tenants should seek contractual protections, specialized endorsements, or insurance coverage to address specific issues.
