Eminent Domain Comment
Double compensation?
In acquisitions for right of way widenings the question sometimes arises whether double compensation is being claimed.
Assume there is an acquisition of a 20 foot swath off the front of a commercial property for a street widening project. The acquisition includes the entire landscape area along the larger parcel's frontage. The owner will be compensated for the property taken, including the landscaping improvements if they contribute to the highest and best use. Should severance damages include the cost of creating a new landscaped area along the remainder's new frontage? It depends.
Under California law "[c]ompensation shall be awarded for the property taken" and, "[w]here the property acquired is part of a larger parcel, in addition to the compensation awarded... for the part taken, compensation shall be awarded for the injury, if any, to the remainder." (Bold added.) (Code Civ. Proc., §1263.310 and §1263.410, subd. (a).) Compensation for the property taken and severance damages are "separate and distinct" and are to be assessed separately. (People v. Logan (1961) 198 CA2d 581, 590-591.)
In the above hypothetical, if the cost to install landscaping on the remainder exceeds the reduction in market value of the remainder resulting from the removal of the preexisting landscaping, these costs are not recoverable. But if the cost to install replacement landscaping on the remainder is less than that decrease in value of the remainder, that cost to cure those damages is relevant to the issue of severance damages. "[C]ost to cure is a measure of damage only when it is no greater in amount than the decrease in the market value of the property if left as it stood." People Ex Rel. Dept. of Pub. Wks. v. Flintkote Co. (1968) 264 CA2d 97, 106.
One might ask, if the condemnor paid for the landscaping improvements that it acquired why does it also have to pay for the cost to landscape the remainder? Isn't this double compensation? Assuming the cost of replacement landscaping is less than the decrease in value of the remainder that would otherwise have occurred, it is not double compensation. Under this hypothetical the owner is mitigating his damages. If the owner did not install landscaping on the remainder, the severance damage would be greater. This cost to cure measure of damages for loss of the preexisting landscaping on the property frontage is "separate and distinct" from and in addition to the compensation for the property taken.
(February 2012, by Andy Turner)
High Speed Rail Impacts on Property Value
During the last 18 months I have given numerous presentations to community groups, attorneys, realtors and appraisers in the Bay Area and in the Central Valley about eminent domain in general and specifically about the rights of owners whose property interests may be acquired for the California High Speed Rail Project ("Project") by the California High Speed Rail Authority ("Authority").
Frequent questions I hear relate to an owner's entitlement to compensation for the damaging impacts from the Project. The good new is that if any portion of an owner's property is taken ("severance of the remainder from the part taken"), under California Eminent Domain Law he or she is entitled to:
"Damage to the remainder... caused to the remainder by either or both of the following:
(a) The severance of the remainder from the part taken.
(b) The construction and use of the project for which the property is taken in the manner proposed by the plaintiff whether or not the damage is caused by a portion of the project located on the part taken." (CCP Sec. 1263.420.)
These damages may be caused by negative impacts such as noise, vibration, loss of privacy, shape of the remaining property, etc.
If your property is adjacent to the new Project line but none of it is being acquired for the Project, it is much more difficult to obtain compensation for the damages caused by the Project. To obtain compensation in this scenario, the landowner/business owner must bring an action against the Authority, most likely an inverse condemnation action, and prove the Project imposes a direct, peculiar and substantial burden on the property or business to be entitled to damages.
Another question I often hear is the following:
"I want to sell my property today but the value has already diminished due to public awareness that a portion of my property may be acquired for the Project and, if so, the high speed trains will be running right next to my house. What do I do?" Unfortunately, this places an owner in a difficult situation. A way to describe that owner's predicament is provided by the following hypothetical.
Assume there is a home on a 10,000 square foot lot on the Peninsula somewhere between San Francisco and San Jose and a portion of the back yard is within the future proposed Project right of way. Assume also that, ignoring the anticipated impact of the proposed Project, the value of the portion not within the proposed right of way is $1,000,000. However, due to the expectation that a portion of the backyard may eventually be acquired for the Project and the home will then be adjacent to the Project rail line, the value of that remaining property is thereby reduced from $1,000,000 to $800,000. Therefore, if the owner sells now he will receive $200,000 less because of the anticipated Project. And, unless otherwise agreed, the buyer, assuming he is still the owner at the time the Authority acquires the property for its Project, will receive the severance damage award. Unfortunately, many owners will not able to wait for the Authority's acquisition or may decide to sell at a reduced price today just to avoid the uncertainties and potential litigation resulting their continued ownership of the property.
If the owner delays selling until after a portion of the land is acquired for the Project he will receive compensation from the Authority for the portion of his backyard taken plus the $200,000 damage to the remaining property caused by severance of the remainder from the part taken and/or from construction and use of the Project. (If there are benefits from the Project, these would be offset against the $200,000 severance damages.)
I recommend that before making decisions related to the sale or retention of property that may be affected by the proposed Project, that you contact an attorney with significant eminent domain experience for advice.
(December 2011, by Andy Turner)
How should an appraiser to treat project impacts in an eminent domain appraisal?
What should an appraiser do if the public project for which the property is being acquired (and appraised) has affected the value of that property? Ignore that effect, sometimes. This is established law but something that is often overlooked in eminent domain appraisals.
Section 1263.330 of the California Code of Civil Procedure, which governs eminent domain appraisals, provides as follows:
"The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to any of the following:
(a) The project for which the property is taken.
(b) The eminent domain proceeding in which the property is taken.
(c) Any preliminary actions of the plaintiff relating to the taking of the property."
Government Code section 7267.2 provides a similar rule.
So why do I say sometimes? Because there is an exception. The appraiser should not always ignore the positive effect the project has had on the value of the subject property (i.e., project enhancement).
In Merced Irrigation District v. Woolstenhulme (1971) 4 C3d 478, the California Supreme Court explained when "project enhancement" should be considered by an appraiser in the eminent domain setting.
"During that period when it was not likely that his land would be condemned, the fair market value of the property may have appreciated because of anticipation that the land would partake in the advantages of the proposed project. The owner would be entitled to such increase in value. On the other hand, once it becomes reasonably foreseeable that the land is likely to be condemned for the improvement, ‘project enhancement,' for all practical purposes, ceases. FN11 Thus, in computing ‘just compensation' in such a case, a jury should only consider the increase in value attributable to the project up until the time when it became probable that the land would be needed for the improvement." (Bold added.) (Id. at 498-499.)
Why is this fair? The Court in Woolstenhulme explained it as follows:
"We have determined that it would be unfair, in computing just compensation, to eliminate the appreciation in market value which a specific piece of property in fact enjoyed before it was designated for condemnation, since that would in effect deny to the owner the market value of his property prior to the time it was pinpointed for taking." (Id. at 484.)
(See also, People ex rel Department of Water Resources v. Andresen (1987) 193 CA 3d 1144 and City of San Diego v. Barratt Am. Inc. (2005) 128 CA4th 917.)
(November 2011, by Andy Turner)
Disclaimer
The information in these Comments is not intended to provide specific legal advice. You should consult with an attorney and not rely on any specific information contained herein regarding your specific situation.
