Severance damages in eminent domain cases consider 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. Dan Biersdorf gives an overview of Severance Damages in the video below.
Eminent Domain Severance Damage cases can result from the following issues
An 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.
Any additional land that might be outside of that which is actually necessary will only be acquired if there is an agreement between both the condemning authority and the property owner.
To better understand the importance of severance damages and how they can be hidden from the casual observer, consider the following examples of eminent domain situations:
Situation #1: Strip Taking Diminishes Property Usefulness
The property: A small car dealership is located along a busy highway that is being widened. Cars can only be displayed to the highway in a single row along the highway in front of the building. All other inventory must be stored behind the building.
The taking: A strip of land across the entire front of the property. The strip of land is all of the display area for cars.
Obvious damages: Direct damages will equal the value of the land being taken.
Hidden damages: The ability to view vehicles from a fronting roadway is critical to the operation of a car dealership. Severance damage occurs to the property because the remaining dealership can no longer display vehicles for motorists to see from the highway. The loss of this feature makes the remainder parcel much less valuable than the mere loss of the value of the land being taken.
Situation #2: Government Easement
The property: A small commercial property sits on 25,000 square feet of land. A public easement covers 15,000 square feet of the land so that the owner cannot use the land under the easement for any private purposes. The property is served by a 50+ year old septic system that will need to be replaced in the very near future. The municipality has a 20,000 square foot minimum lot size for use of a septic system. The property is not served by a public sewer system and holding tanks are prohibited.
The taking: The government converted its easement rights to ownership rights. No additional property was taken from the owner. The owner continues to use his property after the taking just like he did before.
The obvious damages: Since the owner had no right of private use to the land subject to the easement, the conversion of that interest to one of ownership for the government does not require compensation. There are no other direct damages, either, because no additional land was acquired by the government.
The hidden damages: After the taking, the owner’s remaining property only contains 10,000 square feet of land. When the septic system fails, it will be impossible to replace because the zoning code requires a 20,000 square foot minimum lot size for a septic system. Therefore, the owner will no longer be able to use the property. The damages to the owner will equal the present value of the remainder property at the time the septic system fails. The failure time will be determined by the use of an expert witness who is knowledgeable about septic systems.
Situation #3: Non-contiguous Parcels
The property: A lumberyard is located on 2 parcels of land. The main building and parking are on one parcel, while the storage buildings and open yard are on the second parcel. The parcels are separated by a street. The lumberyard business requires both parcels to effectively operate the business.
The taking: The government plans to condemn the parcel with the storage buildings and open yard.
The obvious damages: Direct damages will equal the value of the land and buildings on the parcel to be acquired.
Hidden damages: Without the parcel containing the storage buildings and open yard, the main parcel can no longer operate as a lumberyard. Thus, there will be a loss of value to the main parcel because it no longer has support from the parcel which is taken. This value loss can be substantial.
Situation #4: Taking Makes Property Nonconforming
The property: A commercial building is located on a parcel 35 feet away from the road. The building is undersized for the parcel and could easily accept an addition. The municipality where the property is located has a 25-foot front yard setback requirement.
The taking: A road-widening project will result in the property losing 20 feet of depth across the entire front of the property.
The obvious damages: The value of the land being acquired for the road widening.
The hidden damages: The acquisition will cause the front yard setback to be only 15 feet. Since zoning requires a 25-foot minimum front yard setback, the condemnation has caused the property to become a nonconforming use. As such, additions cannot be made to the building without a zoning variance. Since obtaining a variance is never assured, the remainder is damaged due to the inability to build an addition.
Situation #5: Loss of Access
The property: A parcel of land is located along a two-lane highway. The highway is being widened to expand the highway to four lanes with limited access. Before the taking the only access to the property is from the highway.
The taking: A narrow strip of land will be acquired to expand the roadway. The access to the highway will be eliminated.
Obvious damages: The direct damages will be the value of the strip of land to be acquired. Damages will also include the cost to acquire and construct a new access, if the possibility of acquiring a new access is likely to occur.
Hidden damages: If a new access will not be readily obtainable or is extremely expensive, the damages can equal the value of the entire property before the taking occurred.
Situation #6: Loss of Visibility
The property: A commercial property along a four-lane highway possesses excellent visibility. The highway is being upgraded with the construction of overpasses and ramps. The upgrade will result in the roadway being lowered by 20 feet in front of the property.
The taking: To build the retaining wall for the highway upgrade, a strip of land will be acquired from the property. The building on the property will no longer be visible from the highway because of the lower grade.
Obvious damages: The value of the land being acquired will be direct damages.
Hidden damages: Many states will allow the loss of visibility to be considered in the determination of severance damages. Note: If the same loss of visibility occurred but there was no accompanying taking of land, the loss of visibility itself is not compensable.