When determining damages in an eminent domain taking, one must consider direct damages, the value of the land and any improvements to the land which are actually taken by a governmental entity in an eminent domain proceeding; and severance damages, the loss of value to the remainder (portion of property left after the taking) above and beyond the value of the land and structures taken by the government. Severance damages play an important role in the valuation process because they are not always obvious and they can produce a significant amount of just compensation for a property owner. In this blog series, we are going to explore the different areas of severance damages.
One of the most obvious areas of severance damages relates to the loss of access that can occur when property is taken from an owner by a condemning authority. As you can probably imagine and very well appreciate, having access to a property contributes to the overall value of the property. In fact, if you don’t have access, it will be difficult to generate any value at all for the property.
The loss of access is a phenomenon that happens more frequently than one might expect in the area of eminent domain. Take for instance the conversion of an existing 4-lane road into a restricted access or limited access highway. When driving down an existing 4-lane road, you can typically access all of the property that abuts the road. However, when driving down a limited access highway, your entrance and exit off the road is restricted to controlled intersections.
If you own property that fronts a 4-lane road and the only access to the property is from this road, then you will either lose all or the front portion of your property if the highway department converts this road into a limited access highway. If the front portion of your property is acquired, then you will lose access to the road and will therefore be left with a landlocked piece of property. This will prevent you from utilizing your property to its highest and best use. Consequently, your value to this parcel will be substantially reduced as a result of this partial taking.
There are two concepts used in eminent domain law to value the remainder when access is lost. One is how many land owners abutting your property might be interested in buying it. In other words, your universe of buyers is now going to be relatively limited. Two, does the size, shape, and configuration of the property make it useful to a neighbor and would they therefore want to purchase it? For instance, let’s say your remainder is 30 acres and you are in an agricultural area. The neighboring property owner might want a 30 acre parcel to incorporate into his adjoining farm so that he can utilize it for growing crops. On the other hand, if the remainder is long and only 50 feet wide, then it won’t provide significant value to the neighbor’s land, so he’ll buy it from you but he won’t pay you very much for it.
As you can see, the number of owners that surround this remaining parcel, plus the configuration of that parcel are two factors that determine the value of the remaining parcel. The severance damages will be high when the value of the remaining property is low. In fact, they can be as high as ninety percent of the original value if there is only one potential buyer and the configuration of the land is unusual and therefore not useful to your neighbor.