Going Concern Issues and Loss of Business Value in Eminent Domain

Typically in eminent domain, a property owner is entitled to receive just compensation for the land taken, compensation for damages to any remaining parcel, and relocation benefits when necessary.  There are many instances where condemnation imparts far more damage than what is typically covered for in the appraisal and relocation process.  Business owners for example can suffer from a decline in business during the relocation process, or a business might be forced to close if they are unable to find a suitable replacement property to move into.  The million dollar question is whether the condemning authority is responsible to compensate a business owner for these damages.

As a general rule, the answer to this question is unfortunately no.  There are of course exceptions; for example, there are instances where the loss of business during relocation will be paid for by the condemning authority in the form of relocation benefits.   This would need to be evaluated on a case by case basis.  Minnesota for example has a statute which compensates business owners for loss of going concern when a business or trade is destroyed by an eminent domain taking. WI has similar language in their statute, although it has never been litigated.  Florida also has a unique provision in their eminent domain statute that compensates business owners for business damages. The compensation afforded by various going concern and business damage statutes differ and therefore cannot be interpreted generally.

MN statute 117.186, for example, defines ‘going concern’ as the benefits that accrue to a business or trade as a result of its location, reputation for dependability, skill or quality, customer base, good will, or any other circumstances resulting in the probable retention of old or acquisition of new patronage.  A business owner can receive compensation for loss of going concern when a business or trade is destroyed by an eminent domain taking, unless the condemning authority establishes any of the following by a preponderance of the evidence:

(1) the loss is not caused by the taking of the property or the injury to the remainder;

(2) the loss can be reasonably prevented by relocating the business or trade in the same or a similar and reasonably suitable location as the property that was taken, or by taking steps and adopting procedures that a reasonably prudent person of a similar age and under similar conditions as the owner, would take and adopt in preserving the going concern of the business or trade; or

(3) compensation for the loss of going concern will be duplicated in the compensation otherwise awarded to the owner.

In WI for example, going concern is a mutually exclusive situation.  WI eminent domain law states that in order for a condemning authority to gain possession of a property, they must find a suitable replacement property for the land owner or lessee.  If a business owner relocates, then there is no going concern and the law would not afford compensation.  However, if a business owner cannot relocate and therefore ceases operation, then there is a going concern issue.  This situation has yet to be litigated in WI courts.

If you are a business owner who cannot find a suitable replacement property that allows you to carry on with your business, or if the temporary loss of business during relocation will be grave, then you need to seek the advice of a trusted eminent domain lawyer who can provide you with additional answers regarding your situation based upon the state you are located in.

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