Project Influence Rule: Right-of-Way Setasides

Right-of-Way Setasides

We’ve been discussing Project Influence Rule in just compensation eminent domain claims.  In our previous article, we provided an overview of Project Influence Rule and discussed Condemnation Blight.  As a quick review, The project influence rule basically states that any damages you incur in an eminent domain case cannot be influenced by the project itself.

Increasingly we are seeing state highway departments and local governments establish what we call right of way set asides, or ROW preservation projects.  With these projects, government authorities are establishing regulations and ordinances that either limit a property owners ability to develop their property to its highest and best use, or allow government agencies to acquire property for projects that are planned in the distant future.

This situation arises when an agency such as a state highway department determines they will need to build a bypass around a growing city in the next 20-30 years.  They map out the area where the proposed road will be constructed and identify properties that will need to be acquired at a later time.  If you own a piece of land located within the proposed ROW, then these ordinances could prevent you from obtaining a permit to develop your property.  Thus, if you wanted to build a gas station on your land, these ordinances could prevent you from doing so, despite the fact the project is planned for the distant future.  Your property value in turn remains lower than if it had a business on it, thus allowing the DOT to offer a lower price for your property when they eventually acquire it.

From our perspective these regulations and ordinances are illegal and quite improper.  Condemning authorities are utilizing these types of procedures and are doing it in such a way to unfairly depress the prices of property they wish to acquire sometime in the future, while also restricting the ability of property owners to utilize the land they rightfully own.

We are currently litigating a case, which will likely be appealed, involving this very issue.  Our client owns a large parcel of land that was previously undeveloped.  He purchased the property with the intention of subdividing and developing the land.  When he sought the necessary permits and approvals to proceed with development, he was told by the State that a new intersection project was planned in the future that would require the acquisition of a portion of his land.  They therefore told him to set-aside a portion of land for this project and gave him approval to sub-divide the rest.  He agreed to this, and when the DOT approached him many years later to acquire this property, they valued the land as an out lot based upon its condition before the subdivided plat was filed.  Obviously that severely depresses the value of the property.

In this example, it is our contention that as a property owner, you are entitled to have your property valued as though the subdivision was in place and existed at the time of the taking because in fact it did.

This is a new area in the determination of damages that I call to your attention because we are seeing these ordinances appear more and more around the country and there is very little litigation on this issue.

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