To continue our discussion on partial takings in eminent domain, I’d like to discuss a concept called cost to cure.  The easiest way to illustrate this concept is to through the use of an example.

Assume that a road in a residential area is being widened, and as a result of the expansion the drainage field for the septic system will be destroyed and property owners in the area will need to install new septic systems.  The cost to install the new septic system is called the cost to cure.  In other words, the problem that was created as a result of this project is now cured by a cost to replace or cure it.  This example is very straightforward and fairly simple, but there are other issues or rules that need to be understood when considering the cost to cure.

In certain circumstances the cost to cure can be very expensive; for instance installing a new driveway, installing new parking, possibly installing features on a building that have been removed.  Let’s examine a partial taking for a fast food restaurant with a drive-thru window.  If a road project cuts off the access in such a way that it is no longer possible to utilize the drive-thru for this fast food restaurant, it will be necessary to reconfigure the restaurant to move the drive-thru elsewhere on the property, if that’s even possible.

In some cases, the change is so extreme that it may not be feasible to undergo the cost to cure.  In the fast food example I just provided, if the cost to move the drive-thru window and incorporate this into the building is more than the loss in value to the property if nothing is done to it at all, then the damages in this circumstance are limited by the loss of value.  In other words, the damages will be the lesser of the cost to cure the problem, or the loss in market value from the larger parcel in the beginning to the remainder parcel afterward, if the cost to cure is simply ignored and never completed.  This analysis is performed by an appraiser and recognized in eminent domain law.

Property owners who find themselves in a similar situation should know that eminent domain law recognizes cost to cure damages, but if the cost to cure becomes too expensive for the property, then the damages will simply be limited to the loss in the value to the property if the cost to cure is not undertaken at all.

• Property acquisition is essentially complete for the Francis to Market area with the exception of several properties that are undergoing condemnation.
• The I-90 “Collector Distributor” remains in a willing seller situation and will be that way for some time.
• The rest of the project has no funding, so timelines for property acquisition and construction do not exist.  If funding is not secured in several years, the DOT will shelve the remaining projects.

If you have questions regarding the project, don’t hesitate to call us at 866-339-7242.

Learn more about the North Spokane Corridor Project.

We evaluated an eminent domain taking a while ago on a commercial property at the intersection of a highway and city street located in a large metropolitan area.  The property is subject to a partial taking for an at-grade to grade-separated interchange project.  At the time of our initial evaluation, no offer had been made, so our case evaluation discusses the anticipated damages as a result of this acquisition.

The property owner has an approximately 2 acre parcel in the corner of the two roadways.  The parcel fronts on the city street along the eastern boundary and also has frontage on another local street along its northern boundary.  Until recently the owner had a tenant who was paying annual rent of $48,000 for the use of this site for his business.  The lease was triple net.  In addition, there is a cell tower on the site that is producing annual net rent of approximately $36,000.  When these combined rents are capitalized, the indicated value for the subject property is somewhere in the range of $1,000,000.

The taking for this project will be the front half of the property with the eastern property line of the remainder being at a distinct angle, rather than being parallel to the rear property line.  The issues resulting from this taking that should be included in the calculation of just compensation are as follows:

1. Because the overpass for the city street will be right in front of the property, there will no longer be any access for the subject property to the city street that has direct access onto the highway.  The only remaining access will be along the local street on the north side of the property.
2. The loss of access to the city street makes separate ingress and egress driveways, which are usually mandatory for many commercial operations that would otherwise desire this high visibility location, now no longer possible.
3. The size and orientation of the original parcel was such that the cell tower in the back corner of the property did not affect the use of his former tenant or any other possible user of this site.  The reduced depth of the site after the taking combined with the angular orientation of the east property line now causes the cell tower to interfere with any possible development options that remain for this site.
4. Finally, before the taking, the subject property had immediate access to the highway because of the at grade intersection which existed in the before condition.  After the taking there will be no access from the city street to the Highway, so the remainder parcel will have an entirely different highest and best use than it did before the taking, without even considering the detriments caused by the reduction in size and configuration of the parcel.

Many factors will contribute to the calculation of just compensation for this property owner, and in my experience, the DOT will neglect to consider some of these damages when they make their offer of what they determine to be just compensation.

They indicated that two companies are handling the property acquisition for the entire project, and they confirmed that acquisition was not occurring in sections or phases.  Instead, they are contacting everyone at once, initiating the appraisal process, and making offers to property owners affected by total takes first.

All affected land owners will be contacted by the end of April.  The appraisal process has been initiated for total takes, and several offers have been made for these properties.  The state will acquire the total takes first, followed by the partial takes. The state cannot acquire partial takings until the final plans are complete, because these plans will detail the exact amount of property to be acquired on these parcels.

They anticipate that the ROW process will be complete in late 2012 to early 2013.

Layouts of the Monroe Connector Bypass are available on our website, as well as additional information regarding North Carolina eminent domain.  Contact us with questions.

photo courtesy of www.illianacorridor.org

Study and Schedule

This project is currently in the study phase, which is divided into two tiers.  During tier one, the transportation needs will be identified, alternatives will be created and a preferred alternative will be selected.  Tier two will involve detailed engineering and environmental studies of the preferred alternative.  Currently, initial alternatives are being developed and evaluated, and the agencies involved are recommending a preferred alternative.

Property Acquisition

This project will require the acquisition of a significant amount of private property.  Because this is a public use project, both Illinois and Indiana can use eminent domain to acquire property if negotiations cannot be reached.  Property acquisition will not commence until a preferred alternative is selected and a record of decision is issued by the Federal Highway Administration (FHA).

Property owners affected by the project should know that the government is like any buyer, it will want to purchase your property as cheaply as it can.  When the government 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 governments may be a low one.   Do not feel pressured to sell your property outright or accept less than you are entitled to receive.

The government is required by law to pay you just compensation for your property.  Typically, an owner will only receive just compensation by allowing condemnation to occur. In condemnation an owner can show that the rules for highest and best use will produce a higher price than the amount offered by the government.  If you’re instincts tell you the offer is too low, it probably is.  Do not feel pressured to accept a lesser amount by the threat of eminent domain.

Eminent Domain Process

The eminent domain process varies by state.  The Indiana eminent domain process involves the government first making an offer to property owners and providing them with an appraisal report.  If the property owner refuses the offer, the government has 2 years to initiate an eminent domain claim to acquire the property.  If negotiations cannot be reached and the government initiates the eminent domain process, they are required to make a settlement offer no later than 45 days before a trial involving issues of damages.  If the property owner rejects this offer, the court will appoint three property owners (one disinterested land owner and two appraisers), to evaluate the damages and submit their report on compensation with the court.  If the property owner rejects the appraisal report, the government may deposit this amount with the court and take immediate possession of the property.  A jury trial on compensation will then occur to determine just compensation.

The Illinois eminent domain process involves the government first contacting the property owner in writing or in person to provide them with information regarding the acquisition.  At least 60 days prior to initiating the eminent domain process, the government must make an offer and provide information to substantiate their offer.  If negotiations cannot be reached, the government will initiate the eminent domain process.  Illinois has a quick-take process whereby the government can petition to take immediate possession of a portion or all of the property.  This process can occur anytime after the eminent domain process has been initiated and before judgment is entered in the proceeding.  If a quick-take occurs, the court will schedule a hearing to determine compensation.  Once just compensation as determined by the court at the hearing has been established, the government can take control of the property once they deposit this amount with the court.  If the property owner is not satisfied with the amount of just compensation as determined at the quick-take hearing, then they can apply to withdraw this amount and proceed to trial.

Legislation was passed last year calling for the Illiana Expressway to be developed as a public-private partnership. This would allow a private entity to finance, construct and operate the Illiana Expressway as a tollway.  This legislation expressly prohibited the state from using quick-take, but a new bill introduced in February would give the Illinois Department of Transportation the authority to undergo the quick-take process for this project.

Attorney-Fee Recovery

Some state’s eminent domain statute direct the government or condemning authority to pay attorney’s fees incurred by the property owner in their pursuit of just compensation once statutory thresholds are met.  In Indiana, if the amount of damages awarded is greater than the amount of the last settlement offer, than attorney’s fees are recoverable up to $25,000 or the value of the property, whichever is less.  Unfortunately, Illinois does not have a standard attorney fee recovery statute for public use just compensation eminent domain claims.

For more information about the project or the eminent domain process in Indiana and Illinois, please contact us.

We have been discussing partial takings in eminent domain over the past couple months, specifically addressing different valuation concepts that contribute to the determination of damages for a property owner affected by a partial taking eminent domain case.

The next example I’d like to discuss involves a situation where the partial taking creates a non-conforming use.  Let’s imagine a road is being expanded or widened in front of a commercial property with a setback of 30 feet from the roadway, which is in compliance with zoning and city ordinances.  As a result of the acquisition, the new setback is only 15 feet, or maybe down to as low as 10 or 5 feet from the front of the building, which is no longer in compliance with the zoning.  Frequently, the condemning authority will only pay for the direct damages (value of land actually acquired), and fail to acknowledge severance damages resulting from the building that is now non-conforming.  Instead of compensating the land owner for the severance damages, the condemning authority will recognize that as long as the property maintains its current use, then it will be grandfathered, and the property owner can carry on with business as usual.

However, the astute property owner needs to understand that grandfathering can limit the building and business to its existing use and condition, because ordinances might prevent a non-conforming property from expanding or making improvements.   Consequently, if you have a property where a non-conforming use has been created, then you need to understand that you might not be able to expand or make improvements to the existing building without first tearing it down.   This can significantly reduce the value to the remainder, a concept that is typically ignored or neglected by the condemning authority when they determine the amount of just compensation that a property owner is entitled to receive.

Any situation that results in a non-conforming use will or should generate a level of damages that are frequently ignored or not factored in by condemning authority.  Property owners need to be vigilant about determining what types of non-conformity might exist as a result of a taking, because if that claim is not made at the time the taking occurs then any future claim for damages cause by that non-conformity will be lost against the condemning authority.

The NC Turnpike Authority received a Record of Decision for the Garden Parkway from the Federal Highway Administration, signifying final federal approval of the project’s route -Detailed Study Alternative 9. Approval of the construction permits and final plan of finance is anticipated this summer, followed by contract award. Right-of-way acquisition is scheduled to begin later in 2012, with construction beginning mid-2013 and the project opening to traffic in 2015.

We have spoken to several property owners affected by this project who have indicated that appraisals are not complete.  However, survey stakes are being placed in properties, and some property owners anticipate that offers will be made later this summer.

The Preferred Route can be viewed here (file is large and may take time to download):

Layout of the Preferred Alternative

Property Acquisition and Eminent Domain

The State of North Carolina will have the authority to use eminent domain to acquire property if negotiations with property owners cannot be reached.  Property owners affected by the project should know that the government is like any buyer, it will want to purchase your property as cheaply as it can.

When the government 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 governments may be a low one.   Do not feel pressured to sell your property outright or accept less than you are entitled to receive.

The government is required by law to pay you just compensation for your property.  Typically, an owner will only receive just compensation by allowing condemnation to occur. In condemnation an owner can show that the rules for highest and best use will produce a higher price than the amount offered by the government.  If you’re instincts tell you the offer is too low, it probably is.  Do not feel pressured to accept a lesser amount by the threat of eminent domain.  Learn more about the North Carolina Eminent Domain Process.

Recommended Reading:

Eminent Domain Cases: Selecting an Appraiser

Speaking to the Authorities

Highest and Best Use Valuation

Before and After Valuation

We previously discussed the three unities valuation concept and its significance in determining just compensation in favor of the property owner, and also discussed how it can be used against the property owner with regards to a partial taking eminent domain case.  I would be remissed though, if I didn’t at least highlight an example of how the three unities can be used by a condemning authority with regards to a total taking eminent domain case.

The example that I want to share with you is based upon a case I handled previously that involves a total taking of land that was subdivided into three separate lots.  With the exception of a drainage pond and recorded plots, the land had not been developed at the time of taking.   The condemning authority treated the three lots as one large undeveloped piece of land utilizing the three unities.  All three parcels were owned by the same owner, they all had the same vacant use, and they were all contiguous; so the condemning authority rationalized that these three parcels should be added together so that the larger parcel would be one parcel.

Under the three unities, that particular analysis worked to the detriment of the property owner.  I think you can appreciate that the value of commercial property based on three developable lots is going to higher on a per acre or per square basis then if you treat all those lots together as one parcel.

Property owners facing a similar situation should be aware that the condemning authority may attempt to use the three unities rule to create one larger parcel in order to lower the unit value, thus leaving the property owner with a lower amount of just compensation then what they are entitled to receive.  This is an example where the three unities can be utilized by the condemning authority against the property owner unless the property owner is alert to what is actually happening.

As an eminent domain law firm, we review appraisals from property owners around the country on an ongoing basis.   We quickly assess the strengths and weaknesses in appraisal reports and provide a thorough case analysis to property owners.  To further our efforts in providing valuable information to property owners on the subject of eminent domain, we decided to publish some of our case evaluations to our blog.  Many property owners settle with the condemning authority because they don’t realize the extent of damages that can occur in eminent domain takings.

For our inaugural published evaluation, we selected an appraisal that we reviewed for a property owner located in the midwest.   A portion (7.5 acres) of his property will be acquired for a new waste treatment facility.  The appraisal report lists damages amounting to $67,000 and after our review of the case, we’ve determined that the damages amount to $500,000.

The appraisal was prepared for the City and values the subject property as a piece of land being used solely for farming purposes.  While the property owner believes that the agricultural land sales and the adjustments used reflect a price per acre that is too low for this land, as agricultural land, the differentiation would probably not be large enough to warrant pursuing this case if the highest and best use for the property is truly agricultural.  After talking with the property owner though, it is very clear that the agricultural highest and best use utilized by the City is incorrect for this property.

There are some very important characteristics of the subject property that indicate that its highest and best use is not agricultural.  First, the property is entirely located within the city limits.  Second, the entire property is zoned for residential, not agricultural.  Third, municipal water and sewer abut the property line of the subject property.  Fourth, the local hospital and a Baptist church are right across the road at two different locations for the subject property.  Consequently, the highest and best use for this property is for residential development and not for agricultural production.  Agricultural use will simply be an interim use until residential development is warranted.

Since the appraisal by the City only evaluates other agricultural land sales, there is no data in that report to determine the likely value range for residential development land.  I told the property owner that, based upon my experience with residential development land in other similarly sized municipalities in the region, the per acre value for his land could be anywhere from $10,000 to $20,000.  Since the subject property is on existing municipal public utility service, I would expect the indicated unitary value to be toward the upper end of that range.

The subject property has a creek running through the middle of it which the property owner believes would be a desirable amenity for any residential development that will occur on the site.  While land close to the creek may be in a floodplain, he is not aware of any formal mappings of his property that would suggest large portions of his property being in the floodplain.

The property owner explained to me that, during the process for determining the location of this waste treatment facility, it was determined that its location should be at least 1,000 feet from the nearest residence.  This determination is significant for this case, because it quantifies that any residential property located within that distance from the facility will be stigmatized by the existence of that facility.  Based upon the planned location for this waste treatment facility, nearly all of the property owner’s land will now be within the 1,000 feet radius around this new plant.  Consequently, all of this land being owned by the property owner will now be stigmatized because of the placement of this waste treatment facility at the designated location.

If this information can be verified, the after highest and best use will only be for agricultural purposes. Given the land’s location within the city limits, the value for this agricultural land will be diminished, not only because of the waste treatment facility being placed in the middle of it, but because agricultural operations become incompatible with residential development as that development encircles agricultural land.

The larger parcel has approximately 73 acres.  Approximately 7.5 acres are being acquired for the waste treatment facility.  At $15,000 per acre, the direct damages will be about $110,000. Assuming the agricultural value for the land after the project is completed has a value at $7,000 per acre, there will be severance damages of about $8,000 per acre for the approximately 65 acres that remain after the taking occurs.  The damages at this amount are about $500,000.  Clearly this potential claim is substantially more than the damages listed in the appraisal report of approximately $67,000.

In this case, the state alleged that our client, Basil E. Ryan, Jr. unlawfully placed and maintained a sunken barge on the bed of the Menomonee River in violation of Wis. Stat. ch. 30 (2009-2010).  The circuit court concluded that the doctrine of judicial estoppel precluded Ryan from asserting that he did not own the barge, and granted the State’s summary judgment motion  leaving only the penalty/remedy phase of this forfeiture action where the circuit court imposed a penalty of $37,691.25 under the forfeiture statute against Ryan.

Basil E. Ryan, Jr. (“Ryan”) was the previous owner and one the occupants of the property located at 260 North 12th Street, in the City of Milwaukee, Milwaukee County, Wisconsin, until the Wisconsin DOT took the property through an eminent domain proceeding for the Marquette Interchange Project.

The title to the barge in question was not under Ryan’s name, nor under any entity that he was related to.  The owner of the barge, KO OP Marine, paid Ryan’s corporation, B.E. Ryan Enterprises, Inc, a fee in exchange for storing the barge on Ryan’s property at 260 North 12^th Street.  Eventually, KO OP Marine stopped paying the storage fee and Ryan’s corporation maintained possession of the barge and corresponding lien rights for the unpaid storage.  However, Ryan’s corporation never foreclosed its lien rights against the barge to gain title to it.  Ryan never personally owned or controlled the barge in any way.  Additionally, Ryan’s employees maintained the barge during the duration it was stored at their docks until the property was ultimately acquired by the Wisconsin DOT in 2005 during the eminent domain action.

Shortly thereafter, at a hearing to determine whether the DOT made available a comparable replacement property for Ryan, the court ordered that Ryan remove all if his belongings from the property, including the barge, and vacate the premises.  The issue of barge ownership was never discussed at this hearing and later, the state agreed to store the barge for the next 12 months in a verbal agreement made between the state and Ryan’s attorney at the time.

On or about July 13, 2006, after the WisDOT acquired Ryan’s property at 260 North 12^th Street by eminent domain, the barge partially sank into the Menomonee River and became moored on the river bed.  After the barge sank, the state filed a complaint arguing the sunken barge was obstructing a navigable waterway and the state asserted that the “undisputed facts establish that Ryan owns the barge and has maintained an obstruction and structure in the form of the barge on the bed of the Menomonee River without a permit.”  The circuit court concluded that the doctrine of judicial estoppel precluded Ryan from asserting that he did not own the barge, and granted the State’s summary judgment motion .  In applying the doctrine, the circuit court relied on documents submitted in the earlier eminent domain proceedings, which suggested Ryan was the owner of the barge.

None of the evidence suggesting that Ryan was not the owner of the barge was ever considered by a jury, because Ryan was denied the right to a trial when the trial granted the summary judgment motion on judicial estoppel grounds.

The supreme court concluded that documents relied upon by the state to establish Ryan’s “undisputed” ownership of the barge were not enough to allow application of the judicial estoppel doctrine and, in any event, summary judgment is not allowed in ch. 30 cases.

Read our Supreme Court Brief

Read the Supreme Court Decision

Forward, Joe.  “Defendant in sunken barge case gets second chance to disclaim ownership“. The Wisconsin State Bar [Madison]1 March 2012.