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Acquiring Rail Corridors:
Chapter 10: Closing the Deal
Now that you've completed your due diligence, it's time to reassess your original agreement with the railroad. If you're fortunate, the due diligence contained no surprises. However, most potential buyers discover something in their due diligence that requires further discussion with the railroad.
Renegotiating the Terms
There is no way to anticipate exactly what you will need to discuss with the railroad upon completion of your due diligence. The most important thing to remember is that your work is almost done. Don't let these issues turn into deal breakers. If there are little problems, don't get bogged down in the details. If there are big problems, don't be afraid to re-examine the structure of the deal to see if there are elements you can trade off to make it easier for you and the railroad to resolve your differences.
In some cases, you will need to raise new issues that have developed as a result of your due diligence. For example, you may have learned that the corridor shows signs of contamination, and your environmental engineer has recommended the completion of a Phase II assessment. In other cases, both parties may have initially agreed to put a discussion on hold until all the facts were available. Now is the time to discuss these issues and their effect on the final deal with the railroad.
Tools for Solving Title Problems
Should you learn that the railroad may not own the corridor outright, or should you find yourself challenged by an adjacent landowner claiming to be the rightful property owner, you have several options to resolve these problems:
- Quiet title action;
- Ejectment;
- Slander of title suit;
- Mediation; and
- Eminent domain.
Of these, a quiet title action is the most frequently used mechanism for resolving title disputes. Essentially, a quiet title action asks a court to evaluate competing claims to a piece of property to determine who has the more legitimate claim to ownership. Like a poker game, a quiet title action is a comparative process neither side has to prove absolute legal ownership; merely that its claim is better than the other party's. A quiet title action is generally accompanied by a request for "ejectment" having the other party and its possessions removed from the property. In certain instances, a quiet title action, may also be accompanied by a slander of title action a request for compensation as a result of losses incurred by the other party's claim to ownership.
If you're unsure of the legitimacy of your property claim, you may consider mediation or some other form of alternative dispute resolution to resolve a title dispute. While mediation can only occur if both parties voluntarily agree to discuss their ownership dispute in a non-litigious setting, it may be an effective way to develop creative solutions to the dispute.
Should these actions fail to resolve the dispute, a public agency may have the ability to exercise eminent domain to acquire the property through condemnation proceedings. Condemnation is an extreme measure that requires the government agency to demonstrate a compelling public reason for acquiring the property. Many public agencies are unwilling to exercise this power to acquire property for a trail.
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Renegotiation is a natural part of the acquisition process. In fact, you may find yourself returning to the negotiating table several more times before you are done. Remember the basic rules of negotiation: build on your successes; and work to keep everyone focused on completing the deal. The trust you've built with the railroad's representatives will begin to pay off now.
Closing the Deal
After a great deal of hard work, you've managed to iron out the final details with the railroad's representatives. While it's tempting to pat yourself on the back, you're not quite done. It is true that closing on the property is largely a pro forma exercise but you don't want to be tripped up by any last minute surprises.
Once you and the railroad have signed the agreement to transfer ownership of the property, you should hire an attorney, escrow agent, or experienced real estate agent to supervise the closing. As property transfers are governed by state laws, there is no single way to close on the property. There are, however, a number of standard actions likely to occur during this phase of the acquisition:
- Preparing escrow instructions (if an escrow agent is being used to handle closing arrangements);
- Reviewing the title report;
- Transferring ownership deeds from buyer to seller in exchange for payment;
- Paying any taxes that are due;
- Filing paperwork with appropriate local agencies; and
- Preparing a closing statement to account for all funds involved in the transaction (purchase price, any services that were required as part of the transaction, and a detailed list of all closing costs including taxes, notary, brokerage, escrow fees, and the like).
Obviously, hiring an experienced real estate professional to supervise the closing is the best way to ensure completion of the necessary closing tasks.
Wrapping Up and Celebrating
Congratulations!
Your rail-trail is well on its way to becoming reality. You, your negotiating team, your agency, the railroad's personnel, and many others have all put a great deal of time and effort into making this acquisition happen. You all deserve a pat on the back.
As this is a significant milestone for you and your project, take the time to celebrate your success. Schedule a media event to talk about how far you've come and what your next steps will be. Don't forget to publicly thank all participants from city councilmembers to railroad staff for their hard work. You may need these people to help with subsequent phases of the project, so make a special effort to let all participants know how valuable they were in achieving this milestone.
Before taking a well-deserved break, you have one more task to complete. Now that you own the rail corridor, it is important that you begin to act like its owner. If you let the corridor sit vacant and un-maintained, you may be fueling the anxieties of adjacent landowners and others who are skeptical about the value of a rail-trail. Make a concerted effort to maintain the corridor: mow it; schedule regular litter clean-ups; conduct frequent site visits; and ensure regular police patrols. You will send the message that your agency is committed to developing a high-quality community resource as quickly as possible.
What's Next?
Now that you own the corridor, it's time to begin developing it. For help with planning, design and development activities, RTC has developed a comprehensive guide to all aspects of trail development and management, called Trails for the 21st Century: A Planning, Design and Management Manual for Multi-Use Trails.
With this manual, and your continued hard work and dedication, you should be well on your way to completing your rail-trail. Happy trails.
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