The California High-Speed Rail Authority proposes to construct, operate, and maintain an electric-powered high-speed train system in California. When completed, the High Speed Rail System would connect the major metropolitan areas of California, extending from San Francisco and Sacramento in the north to San Diego in the south. The Merced to Fresno section of the complete 800-mile system is 60 miles long. It parallels Highway 99 through the northern stretch of the San Joaquin Valley. The stations will be in the city of Merced, where it will connect with the Merced to Sacramento section, and Fresno, where it will connect with the Fresno to Bakersfield section.
The project is divided into the following geographical areas:
San Francisco – San Jose
San Jose – Merced
Merced – Fresno
Fresno – Bakersfield
Bakersfield – Palmdale
Palmdale – Los Angeles
Los Angeles – Anaheim
Los Angeles – San Diego
Sacramento – Merced
Update on Property Acquisition
The Merced to Fresno high speed rail project will require the acquisition of property. Property owners will be contacted by the California High Speed Rail Authority regarding the purchase of their property. If a negotiation with property owners cannot be reached, the Authority will use eminent domain or condemnation to acquire the property they feel is necessary to facilitate the project. Property acquisition for the Merced to Fresno section of the high speed rail project is currently underway.
What does this mean for property owners?
Property owners affected by the project should know that the California High-Speed Rail Authority is like any buyer, they want to purchase your property as cheaply as they can. When the Authority makes you an offer, it will tell you that it represents full market value. It may even show you an appraisal. But be aware, appraisals can vary and the Authority’s may be a low one. The Authority is required by law to pay you just compensation for your property. Do not feel pressured to sell your property outright or accept less than you are entitled to receive. Also, a property owner’s attorney’s fees may be recoverable in the state of California under certain circumstances. The court may award attorney’s fees within 30 days of judgment and upon motion by the property owner if the court finds that the government’s final offer was unreasonable. (CA CIV PRO § 1250.410(b)). Contact us today for more information and a free consultation.
The North Carolina Department of Transportation issued an update for the highly controversial Monroe Bypass project. Not surprisingly, the schedule of the project has been delayed due to a legal challenge.
The Monroe Bypass (Also known as the US 74 Bypass) would extend from the Mecklenburg-Union line eastward to Marshville and while officials had hoped to have completed an environmental study document of the project by this spring, the revised schedule shows the new date as late 2013.
The Bypass project ran into legal problems via the Southern Environmental Law Center. The center forced the DOT to halt planning process on the project which includes the acquisition of property. The center’s concern, which a federal appeals court agreed with last May, is that the DOT failed to adequately study the impact of the road on the environment in Union County.
This delay also caused the U.S. Army Corps of Engineers to withdraw the environmental permit for the Monroe Bypass. This permit is needed for any road that crosses water or wetlands and the DOT will not be able to apply for a new permit until the new environmental study is complete.
The new schedule for the project released by the DOT is as follows:
Draft a supplemental environmental document — Summer
Public comment period on the supplemental environmental document draft — Summer
Final supplemental environmental document — late 2013
Typically in eminent domain cases, the court system seeks to achieve just compensation through the remedy of damages. It’s important for both property owners and attorneys to recognize the types of eminent domain damages that may or may not be available when calculating just compensation.
We’ve discussed direct damages in eminent domain cases in previous articles, but as a refresher, these damages consider the value of the land and any improvements to the land which are actually taken by a governmental entity. The market value must be determined based upon the highest and best use of the land and improvements which are being taken.
Generally speaking, commercially zoned property will have a higher value than property zoned as residential. When looking at the various subgroups of commercial zoning, retail generally has the highest commercial use, specifically “impulse commercial” as in fast food restaurants or convenience stores. The next highest commercial value is typically “destination commercial” such as an insurance agency or medical building. Industrial or multi-family residential typically produce the next highest value, followed by residential, and finally agriculture or recreational zoned land. Remember, the levels of use described here are general rules and there are always exceptions to the rules. For example, we’re working on an eminent domain case in New York City where the current use of the property is industrial, but the highest and best use is residential.
Having said all of this, if you as a property owner are facing an eminent domain taking in the future and the existing use for your property is not its highest use, should you rezone your property to a higher use before the taking occurs? The answer is maybe. You should first understand that in eminent domain cases, highest and best use is based upon the highest use for the property even if you are not currently using at this level. But, if you know for certain that you can get the property rezoned to the higher use, then it would make sense to rezone the property, recognizing that once it’s rezoned, your taxes will increase. There is an element of risk to rezoning if you have no immediate plans of actually utilizing the property for its higher use. If project plans change and the government no longer needs to acquire your land, then you’re now in a situation where you’re paying higher taxes and not utilizing your property to its highest use.
There are many reasons a property owner could fail at their attempt to rezone their property. Sometimes local politics can play a role at blocking a rezoning action and other times there are competing uses for residential versus commercial. For whatever reason, if you fail at rezoning, this result may be used as evidence against you during your eminent domain case.
Another frequent concern of property owners is whether local authorities can deny a land use change because of a project. While legally local authorities can’t do this, it seems to happen quite frequently. If a property owner can establish on record that rezoning would occur if it was not for the project, then the Project Rule could be used to support the highest and best use. Under the Project Rule, the project can’t diminish or increase the value of the property, so a property owner can’t be denied just compensation based upon the property’s highest use if the only reason that the government denied the rezoning was because of the project.
An example of the Project Rule and its relation to highest and best use can be found with several eminent domain cases in Minnesota we’re currently working on. In these cases, a new highway is being constructed and the land on the South side of the highway will no longer be open for development because the city is making the new highway the de facto development limits. If the highway wasn’t constructed, the development patterns suggest that development would continue.
If you find yourself in a similar situation, make sure you seek legal assistance before taking any drastic measures on your own. You’re action or inaction should be decided through careful analysis by a professional.
The US Supreme Court has consistently held in condemnation cases that the government’s obligation is to “put the owner in as good a position pecuniary as if the use of their property had not been taken” Monongahela Nav. Co. v United States, 148 U.S. 312 (1893); Phelps v. United States, 274 U.S. 341 (1927); Olson v. United States, 292 U.S. 296 (1934). That is, property owners should receive fair and just compensation and not be at any financial loss resulting from the government’s action to seize their property. We believe that in order for this to be possible, property owners should be entitled to quality legal representation at the expense of the condemning authority provided their offer of compensation doesn’t adequately compensate the property owner under the rules of eminent domain law. Even a property owner who successfully pursues such a claim is not entirely happy when part of that just compensation (often one third) has to be paid to the attorney.
Over the next several years, a significant amount of private property will be acquired through eminent domain by the state of Oregon for numerous large transportation improvement projects. Fortunately for property owners, statues exist in Oregon that direct the government to pay property owner’s attorneys fees in eminent domain cases when the amount of just compensation assessed by the verdict in trial exceed the highest written offer in settlement submitted by the condemnor before the filing of the action (O.R.S. § 35.346(7)).
Although the statute seems relatively straightforward, we’ll interpret its meaning and application through the use of an example. In Oregon, the offer of compromise is a formal written offer that serves as a marker on the timeline of litigation for the calculation of recoverable attorney fees. The first offer of compromise is usually made to property owners after the government files for condemnation. Additionally, each subsequent offer establishes a time period for which attorney fees are potentially recoverable.
Let’s say for example the first offer of compromise is for $100,000. If the owner receives more than $100,000, attorney fees are recoverable at least up until the time of that offer. If the government only makes one offer of compromise for $100,000 before trial, then all fees would be recoverable so long as the judgment at trial exceeds $100,000.
However, condemning authorities in Oregon typically make multiple offers of compromise because settling a case will minimize their costs. In fact, the government can make offers of compromise until 10 days prior to trial.
Let’s examine a similar situation where the first offer of compromise is $100,000, and then a subsequent offer of $125,000 is made before trial. Now there are two relevant time periods and amounts. If the owners receive an amount in excess of $100,000 but lower than $125,000 at trial, then attorney fees would only be available up to the time of the second offer, i.e. from the beginning of the lawsuit until the time of the $125,000 offer. If, however, the owners received a judgment in excess of $125,000, then all attorney fees would be recoverable. Each offer thus has its own set of criteria applicable to a specific time period.
Although the Oregon eminent domain attorney fee recovery statute only directs the government to pay fees when the case proceeds to trial, a good eminent domain lawyer in Oregon will use this to their advantage during negotiations. Attorney’s fees can be negotiated into a settlement agreement, which makes an Oregon property owner financially ‘whole’ without having to proceed to trial. If however the negotiations do not lead to a satisfactory level of compensation, or the government refuses to pay fees during negotiation, then the option still exists to take the case to trial. We’ve said it before and we’ll say it again, as part of your strategy considerations in eminent domain, you’ll want to make sure you hire an eminent domain attorney with trial experience. For example, our attorneys prepare all of our cases in anticipation of going to trial which gives us maximum leverage against the condemning authority during negotiations. If negotiations fail, then the case is ready to proceed to trial.
Over the past several years, we’ve discussed strategy considerations in eminent domain cases. About a month ago, we discussed the simple strategy of accepting or not accepting the offer. We’ve also discussed the 3 things to consider when speaking to the authorities, how to select an appraiser, and what to look for when hiring an eminent domain attorney. Through our articles and videos, we hope you’ve learned the importance of knowing and understanding your rights in eminent domain, and setting yourself up for success by seeking the advice of experts. You wouldn’t file for bankruptcy without the help of a professional, nor would you file a personal injury claim on your own. Eminent domain is no different; you only have one shot at obtaining just compensation, so speak to an expert before tackling this issue on your own.
As part of your strategy considerations, you’ll ultimately need to decide if you’re going to hire the attorney that you’ve been consulting with to pursue your claim. In making that decision, you need to determine if your case is large enough to pursue. Although most attorneys work on a contingent fee basis, the property owner is usually responsible for costs. Costs and fees are only recoverable from the government in a handful of states (learn more about recovering attorneys fees and costs in eminent domain cases), so for small claimants, pursuing a claim might be cost prohibitive.
If you do have a case worth pursuing and you’re listing the pros and cons of hiring an attorney, remember that the condemning authority is an expert in this area; this is their job. They know how the rules apply to them, and they know how the rules apply to you. In order to properly interface with the condemning authority on your own, you have to appreciate all the factors that contribute to determining what just compensation really is. You need to determine all the highest and best use issues, all the severance damages issues (which could pertain to anything from access issues, to proximity damages, to cost to cure, to loss of parking, etc). Basically, any and all eminent domain damages need to be considered when calculating just compensation. Furthermore, the value determination is generated through legal rules. These legal rules are not necessarily black and white. In fact, there are a lot of gray areas when it comes to valuation in eminent domain cases, and whether the ultimate valuation favors the condemnor or you the property owner may hinge on how well the arguments are presented with regards to the legal issues and their affect on your eminent domain claim.
Are you as a property owner going to be able to do that? No, you’re not. These issues are complicated. They’re difficult to identify and difficult to articulate if you do not have a firm and complete grasp of eminent domain law. So do you need a lawyer? In my opinion you do need a lawyer particularly if you have a substantial claim, or a claim that involves a variety of legal issues. Without a lawyer, you may never know the full complement of legal issues in your case.
Now should you just go out and hire any lawyer? I would personally recommend no. Eminent domain is an oddball area of the law; few attorneys can claim it as a ‘specialty’. If you’re going to be successful in developing your strategy to successfully pursue an eminent domain claim, then you should make sure that your lawyer has significant experience dealing with eminent domain claims and particularly eminent domain claims on behalf of property owners.
We place significant emphasis on educating property owners in recognizing damages in eminent domain cases. Why? Because damages determine the amount of just compensation a property owner receives, and they are frequently overlooked by appraisers.
The concept of valuing excess land in eminent domain cases rarely occurs, but when it does, it is a notion commonly ignored by appraisers. What do we mean by excess land? Take for example a large tract of commercial property with all improvements and parking situated on the far west side of the parcel. The east side of the parcel contains a sizable amount of vacant land that abuts the main highway. In this scenario, we place added value on the excess land if development potential exists through a ground lease or through parceling it off. In our experience, we have found that government hired appraisers typically overlook the concept of excess land. They find comparable properties in terms of size and location but fail to recognize the relative worth of the excess land.
It’s important to understand that not all excess land adds value to a parcel. Take for example a 1.5 acre commercial lot with the improvements and parking situated in the middle of the parcel. While excess land certainly exists, this land cannot be further developed because it surrounds all sides of the improvements. As another example, improvements and parking are on the front side of the parcel with immediate access to the main road. The excess land is located on the back side of the parcel with access to a side road receiving minimal traffic. Access and visibility are not ideal for this excess land and consequently doesn’t add a lot of value to the parcel. The main point to consider when determining the relative worth of excess land is its location in relationship to the improvements and access.
The most common method of calculating the value of excess land is on a price per square foot basis, assuming it can be parceled off. If city or county zoning ordinances don’t allow for this, the land could alternatively be valued based upon a ground lease. Price per square foot is a preferred method because sufficient data usually exists to accurately determine this value. When calculating value based upon a ground lease, finding sufficient and actual transaction data can be difficult, and further analysis would be required to determine the value of the excess land, unless the property owner has received a proposal from an interested party.
The Southern Star Central Gas Pipeline Company is expanding their Alden Gas Storage Field located in Rice County, Kansas. Southern Star feels this is necessary to ensure the field’s integrity and protection. The expansion of the field means Southern Star must acquire gas storage and mineral rights in the Simpson Sandstone from property owners falling within the 3,272 affected acres. The property acquisition process for the expansion is underway and if negotiations cannot be reached, Southern Star will use eminent domain to obtain the necessary property and mineral rights. Read more about the project through their application for certificate of public convenience and necessity and request for expansion.
Update on property acquisition
In a recent filing with the Federal Energy Regulatory Commission (FERC), Southern Star stated that they have made significant progress in the negotiations for the property and mineral rights needed to further secure the storage facility and its contents. The addition of mineral rights being sought for the expansion project added numerous parties to the list of affected property owners so the negotiation and property acquisition process remains ongoing; however, Southern Star anticipates making final offers and initiating the condemnation process for all remaining property not acquired through negotiations before the end of 2013.
Problems with valuation
Biersdorf & Associates is working on several eminent domain cases involving natural gas storage facility expansions and we are finding issues with the valuation process done by the utility companies. Typically these companies are offering low land values for easement rights across the surface of the land and these easements have no relationship to the value of the underground storage facility. We feel property owners should not look at this as easements across the surface of their land, but as ownership of a portion of the underground storage facility and are therefore entitled to a proportionate share of its value. The value of a surface easement will be much less than the value of a share of a natural gas storage facility and we believe property owners deserve the most when these cases arise. Learn more about the valuation of natural gas storage facilities in eminent domain cases.
What does this mean for property owners?
Property owners affected by the project should know that utility companies are like any buyer, they want to purchase your property as cheaply as they can. Easements for natural gas facilities and the acquisition of mineral rights are complicated issues; hiring a knowledgeable and experienced attorney can help ensure you are receiving just compensation. Contact us today for more information and a free consultation.
In eminent domain, all states require that before a taking can occur, the condemning authority must conduct negotiations with the property owner and/or their eminent domain lawyer prior to initiating the eminent domain process. With the understanding that this mandate is contained within the statues, property owners should expect direct contact from the condemning authorities to discuss their willingness to sell their property outright.
In many cases, the first formal contact that you receive from the condemning authority might be their written offer. This offer letter might precede any informal telephone or in-person communication. Once you receive a formal written offer, you need to decide if you’d like to settle, negotiate, or choose to ignore them and wait for the government to initiate the eminent domain process. Before making any decisions regarding your property, consult with an eminent domain lawyer. They can provide you with a thorough case analysis and discuss strategy. Remember, when it comes to eminent domain, the condemning authority is playing in their arena; they do this every day. They know what the rules are, they know how the rules affect them, and they also know how the rules affect you. Also, be mindful that anything you say can be used against you as an admission if you cannot reach an agreement and ultimately file an eminent domain claim for additional just compensation.
If you’re not happy with the government’s offer and your discussions never lead to a level of compensation that you think is fair, do not feel pressured into accepting the offer under the theory that if you don’t accept then you won’t get paid that amount. This is not true. In eminent domain, it’s fine if you don’t accept the offer; the condemning authority always has the right to exercise their eminent domain power to take the property from you. However, prior to the government taking your property, they are required to either pay you their full offer amount, or deposit that money in court where you can petition to have it released, subject to any liens or mortgages that you might have on your property. The property owner can then pursue additional just compensation under the rules of eminent domain law.
We’ve said it before and we’ll say it again. The government is like any buyer, it will want to buy your property as cheaply as it can. Also, their offer of compensation will be based upon a valuation made by an appraiser hired by the government. These appraisers often have long-standing relationships with the government, and their appraisals may contain errors such as using incorrect comparables, or they may not value your property at its “highest and best use”. Frequently, they ignore severance damages or dramatically understate its significance and impact. Before accepting the government’s offer, seek professional assistance for advice on your potential eminent domain claim. Learn more about selecting an eminent domain appraiser and read more about the importance of strategy considerations.
In a recent blog post, we discussed one of our current New York eminent domain cases that involved Transferable Development Rights, or TDR’s. The case recently settled favorably for our client after the trial was complete.
This case was one of two that we’re handling that involve eminent domain takings for the Atlantic Yards Project in Brooklyn, NY. If you’re not familiar with the project, you can read more about it here.
In our previous discussion, we stated that in order for TDR’s to have measurable value, the receiving site must also have the ability to utilize the TDRs. The ability is dependent upon a zoning lot merger, where the parcels are to be treated as a single zoning lot. Because of this, we valued the subject property as an assemblage with the neighboring lot.
The case took an interesting twist when the condemning authority tried using the Project Influence Rule against us. The Project Influence Rule basically states that damages you incur in an eminent domain case cannot be influenced by the project itself. In the case of our client, the condemning authority tried arguing that we erred in valuing the subject property as an assemblage because there was no market for assembled properties in the area without the project. They argued that this type of development situation only exists because of the project itself.
The following passage from Ch. 4 of the FEIS relates to the condemning authority’s opinion that the increase in office space resulting from the project will have no impact on current economic conditions in the area.
“Viewed in the context of the existing office inventory and the continued trend towards office development in the future without the proposed project, the introduction of between 0.3 million and 1.6 million square feet of office space under the proposed project would not represent a critical mass that would make the study area more attractive as a residential location.”
Furthermore, they discuss the estimated increase of retail commercial space absent the project by stating:
“…..it is expected that the ¾-mile study area would gain a total of 868,860 sf of retail space by 2016 in the future without the proposed project. Therefore, by 2016, absent the project, the study area would contain approximately 8.7 million square feet of retail, and the 247,000 sf of retail built under the proposed project would represent less than 3 percent of all retail in the ¾-mile study area.”
They continue to discuss the expansion of office space absent the project by stating:
“According to the NYC Department of Finance’s RPAD, the ¾- mile study area currently contains approximately 8.3 million square feet of office space. Under the future without the proposed project, it is anticipated that by 2016, an additional 4.2 million square feet of office space would be added to the ¾-mile study area……. the commercial mixed-use variation would represent a reasonable continuation of an existing trend towards office development in the study area, rather than the introduction of a new trend or the acceleration of an ongoing trend that changes existing economic patterns in the ¾-mile study area.”
Given the projected increase in office space and retail development in the study area without the project, we argue that valuation as an assemblage is perfectly reasonable for this property. What greater evidence supporting our analysis than the condemning authority stating the same thing through the FEIS?
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In 2005, when the Supreme Court revealed the decision in the now infamous eminent domain case, Kelo v. City of New London, they opened a Pandora’s Box for property owners. Kelo expanded state and local government’s ability to seize property for economic development. After Kelo, a flurry of activity occurred at the state level where legislators, concerned citizens, and civil rights groups worked together to pass legislation prohibiting eminent domain for economic development.
Although the state of North Carolina has not seen much improvement since Kelo, a few measures have helped property owners. The General Assembly commissioned a Select Committee to evaluate eminent domain in North Carolina. Instead of proposing a Constitutional amendment that expressly prohibits the use of eminent domain for economic development, the Committee instead opted to amend their state eminent domain laws. House Bill 1965, which was proposed by the Committee and passed by the General Assembly, states that all municipalities must go through the General Assembly if they want to condemn land for economic or commercial development. The bill did not, however, narrow the definition of blight, but does require blighted properties to be evaluated on a parcel by parcel basis. Although North Carolina took some measures to reign in eminent domain abuse, they failed to amend their constitution to include eminent domain.
Currently, North Carolina is the only state that does not address eminent domain in its Constitution. North Carolina’s Constitution also does not mandate jury valuation of condemned land. However, this may soon change. North Carolina State Representative Chuck McGrady has introduced legislation, House Bill 8, to amend the state Constitution to ensure that eminent domain takings are limited to public use. This is not the first time a Constitutional amendment has been contemplated by in North Carolina – in 2007, 2010 and 2011 similar bills passed the House, with strong bipartisan support, but stalled in the Senate. This bill preserves the exercise of eminent domain powers to build streets and public buildings, but prevent takings solely for economic development. The bill passed the house earlier this month by 110 to 8. If passed by the Senate, this amendment would be on the 2014 ballot for voter approval.
Although North Carolina does have some statutory protection, the problem with statutes, however, is the tendency to define terms broadly, rendering many protections meaningless. While many argue that statutory reform alone is sufficient, Constitutional amendments are a more permanent resolution of an issue because of the difficulty in their repeal. For property owners fearing eminent domain seizures, a Constitutional amendment better clarifies their rights. Additionally, Constitutional amendments require voter approval, avoiding politicking between parties. For North Carolina, while some property protections exist, the lack of any constitutional eminent domain protection is troubling.
Hopefully, North Carolina’s Senate will pass the Constitutional Amendment this session. Constitutional protection is important for property owners who want to ensure proper valuation and treatment during a North Carolina eminent domain proceeding. This amendment provides an opportunity to set down a baseline of eminent domain protection and bring North Carolina into line with the rest of the United States that have already granted similar protections to their property owners.