Last week, we introduced our blog series on severance damages by discussing the loss of access and how it affects the total amount of just compensation that a property owner can receive when property is acquired by a condemning authority. As a reminder, severance damages relate to 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
Another issue in the area of severance damages and the relationship to access is the changing of access as a result of the taking, and whether or not the new access is still considered reasonable.
We talked about the situation where you lose access entirely, but now I’d like to examine the situation where access still exists, but the access from the property to the main road has been compromised thus making it more difficult to access. The impact of this scenario is obvious if the property undergoes a change in its highest and best use. An example is the easiest way to explain this.
If you own a vacant piece of property prior to the taking that is located at the end of an exit ramp off of a freeway, and your property has direct frontage access onto the road that leads onto the highway, then your property is extremely desirable for what we call an impulse commercial property such as a convenience store or fast food restaurant. Any reasonable buyer will pay top dollar for this land because the location receives a significant amount of visibility and it’s easily accessible on and off the freeway.
The local highway department decides to widen the road in front of your property and they acquire a piece of this land. The acquisition effectively closes off access to the main road that leads directly onto the highway and instead provides access to the rear of the property onto the frontage road which circulates traffic around for a quarter to half mile before providing access onto the main road that leads onto the highway. I have even seen changes in access that ultimately directs traffic for a mile or more before getting back to the main road that leads directly onto the highway. In this scenario, when drivers approach the end of the exit ramp, they can see the property, but they can no longer determine how to get to it.
In this situation, the highest and best use will change from an impulse commercial property to a less valuable highest and best use for what we call destination commercial, which would be significantly lower in value and therefore would increase the severance damages to this parcel.
For a property owner undergoing eminent domain, it’s important to understand that you are entitled to severance damages even if you haven’t lost access entirely. The loss of reasonable access that results in a change to the property’s highest and best use will allow for the recovery of severance damages.