Eminent Domain | Replacement Cost Valuation Approach

Eminent Domain Valuation of Property

There are generally three recognized methods of valuing property in eminent domain actions: sales comparison approach; replacement approach; and the income approach. Each method has its own strengths and weaknesses.

Generally, the sales comparison approach provides the greatest indicator of fair market value, as it relies on concrete evidence. It is hard to argue that a piece of ground did not sell for what it actually sold for. After learning the purchase price, it is simply a matter of analyzing the subject property (the property subject to eminent domain proceedings) against the comparable. If it has a lot of the same characteristics and is in the relatively same location chances are they are pretty close in value.

Replacement Cost Approach can Supplement Comparable Sales Approach or Replace it

Generally the replacement cost approach is used to supplement the comparable sales approach. Theoretically, in a perfect world, each of the three approaches would render exactly the same values for the property. Each is designed to determine the fair market value of the property, and there can only be one, so in a perfect world each method would come out the same. That doesn't happen, though, for several reasons, the primary reason of which is that each method requires some level of subjective analysis.

Using the replacement cost approach, the subjectivity shows itself in the amount of depreciation afforded to the property in question. To have depreciation there must be some depreciable asset on the property (land doesn't generally depreciate), usually a building. Assuming you have that, the replacement cost approach, in a nutshell, goes as follows: (1) determine the value of the underlying land, as if there were no building or other fixture on it; (2) determine what it would cost to replace the building or fixture exactly the way it is (there are books that provide replacement cost information); and (3) - this is the subjective part - depreciate the replacement cost to a present value (ie - get the new building in the condition of the actual building and see what the cost of that is).

I think this, as with other posts, shows not only how difficult analyzing a property can be, but also the advantages that can be gained by retaining an experienced eminent domain attorney. Your eminent domain attorney should not only be familiar with this methodology, but also the weaknesses associated with the method and the areas in which progress can be made against the condemning authority.

For example, a good eminent domain attorney would know not only about the subjective nature of each of these methods, but that if you can show that the building is made of materials superior to those used by the appraiser in their valuation using the replacement cost approach the value of the property can be substantially increased. Also, an experience eminent domain attorney would know how to attack the amount of depreciation given to the building to increase its value.

If your property has been valued using the replacement cost approach, please consult an eminent domain attorney. If they can't substantially increase the payment you receive from the government for them taking your property, at least you can have the piece of mind of knowing that you received just compensation for the taking of your property.

Eminent Domain Attorney

Eminent Domain: Is It Always a Bad Thing?

Because I'm an eminent domain attorney, I try to keep a close eye not only on the state of eminent domain law, but also eminent domain in the news. What I've seen, and this may be because only the suspect condemnation action make it into the news, is that generally everyone is against the eminent domain process. Citizens don't like it for obvious reasons, city and state governments don't necessarily like it because of the political implications, and everyone else is luke warm because of the surly reputation of condemnation.

I wanted to take this opportunity to point out that although this process is never easy on the landowner or the acquiring authority it is a necessary function of government and in fact may keep all of our lives running smoothly. Now, you probably think this is a crazy statement, but take a moment to think about this. Think about the roads you drive on, railroads that deliver goods, the buildings you do business in, the services you enjoy (heat in your home, electricity, running water, sewage, internet, phone, cable), the gasoline you use, and how you generally live your life. Without the power of eminent domain, little of this would be possible.

To lay all those utilities, build those roads, and erect those buildings (almost any government building, and as you have seen in the news, even some private ones) eminent domain was used. Without this power roads (and all other utilities) would have to go around single tracts of land or not be built at all. To get from one place to another or to get commodities from place to another would be impossible. Gridlock would ensue. Entire neighborhoods would be filled with empty run down houses that could not be cleaned up (I'm referring to blighted neighborhoods, which is an important aspect of condemnation, absent the economic stimulus side that makes people so angry).

So, although for each individual landowner it is a painful, sometime arduous process, eminent domain overall is necessary for the good of the overall public.

As I mentioned before, these feeling wouldn't affect me as an eminent domain attorney if I was representing a landowner in a condemnation case. I'd still do my best to get them what they deserve, to at least make them feel like they've been compensated for their loss. But the fact is, this is an important function of government. I'm just glad the founders of this country were smart enough to make sure people were paid for their loss (this is actually a primary reason the Revolutionary War ensued - people used to have their property taken and received nothing in exchange!).

Eminent Domain Attorney

Can Juries Adequately Evaluate Eminent Domain Cases?

Jury Trials. The symbol of the American justice system. Having twelve of your peers evaluate your case to render a fair and just verdict.

That is how juries are often described in America, at least in courtrooms in front of juries. Outside the courtroom, however, in law offices across the United States, juries are avoided like the plague. Why, you might ask? Don't juries hold this system together and generally do the best they can to be fair to everyone? Of course they do, but sometimes they just mess up. A perfect example is a jury trial I was at just last week.

The trial, as you might expect, surrounded an eminent domain taking. It was for a road improvement project (the road was being widened and flattened for safety) in which the nearest 25-30 feet of the landowner's property was being acquired in fee, with another 25-30 feet on top of that for a temporary easement (construction limits). Overall the taking amounted to 10 acres or so, of a 60 acre tract. With 50 acres left, it would seem that the landowner wouldn't be left so bad off.

But he had a house on the property, and it was right in the middle of the taking area. This means it had to go. As I've mentioned before, the formula for acquiring only part of a piece of land by eminent domain is to determine the value of the entire parcel before the acquisition, determine the value of the entire parcel remaining after the acquisition, subtract the first from the second, and you have your answer. With a house there before and gone after, the damages, as you can imagine, are going to be fairly substantial.

The main issue in this case, as you might imagine, was the value of the house. See, the house itself was right smack in the middle of being renovated. Sheetrock was missing, wires were exposed, the house was a mess (and therefore not very valuable in the eyes of the government agency). But the landowner was renovating the house himself, and had put much of his blood, sweat, and tears into it. Although it is not a compensible item, the jury heard about what the guy had done to his house - and he actually shed a tear on the stand!

As the case progressed, there were no big surprises. The landowner and his expert testified, and the government and their expert testified. I believe the landowners expert computed $220,000 in damages, and the government body's computed $80,000. At closing, the landowner's attorney did throw out a little fire and brimstone, making it clear that this taking was cutting them to the bone. But it wasn't anything out of the ordinary.

Then the jury is out. They deliberate for a bit and are ready to return their verdict. Here it comes... are you ready... $300,000!! Although in the grand scheme of things that's not a lot of money, consider that it is a full $80,000 over what the landowner's expert appraiser even testified to! The verdict was shocking to say the least.

When it was all over, we got a chance to talk to the jurors (if they want) and some did. What we found out was astonishing. They said they just disregarded all of the jury instructions because they weren't fair! So instead of using the formula they tried to determine what a brand new house would cost and gave him that!

This is why jury trials are scary, and why they may not be good for eminent domain cases. What the jury never heard was that relocation benefits, a completely different set of rules and regulations, takes care of re-establishing the landowner in a new home. Without that information the jury figured the landowner would be out on his own with nowhere to go. So they decided to fore go the rules and initiate their own justice.

And the crazy thing is that no one had any way of knowing they'd do this. And even worse, in the aftermath, as a (current) government attorney, it is going to be very hard in the future to try to get that information to the jury.

These cases are so complicated that even novice attorneys can screw up eminent domain cases (that is a story for a different day, but involves an appeal to the state Supreme Court and a new case filed in Federal Court, all to save an attorney who royally messed up).

Juries are the foundation of our Justice System, but sometimes they can do crazy things, both for and against landowners in eminent domain cases. Remember this when you take your case to a jury - you never know what might happen!

Eminent Domain Attorney

Eminent Domain for Private Use | A Jury Fights Back

Eminent Domain can be used for many things. Most of the time it is used for actual needs of the local, state, or federal government. Such public uses include sewers, government buildings (warehouses, maintenance buildings, courthouses, schools, etc.), roads, electric lines, gas lines, wildlife refuges. But the Supreme Court in a relatively recent court decision determined that public use included taking property for economic development purposes, which often means leasing acquired ground out to private developers who turn it into business parks, malls, speedways, water parks, and any other thing that will make money.

When that case was decided, many states immediately changed their laws to diminish the chances that private land would be taken for economic development purposes (this does not mean that "blighted" land cannot be taken by government entities - there is a time and place for razing old buildings). Some place still allow it, although they are feeling the consequences of trying to take property for what appears to the public to be a private use.

A perfect example of this is in Jacksonville Florida, where a man recently had eminent domain exercised against him so the local governing authority could turn the land over for private development. Tom Scholl bought some ocean front property several years ago for 8 million dollars to use for a coal and cargo business. Shortly after that, Jaxport decided they would condemn the ground to lease it to private developers. They offered Scholl his 8 million dollars and he declined.

Eminent domain proceedings ensued and a jury returned a verdict of 67 million dollars for just compensation to Mr. Scholl. As would be expected, Jaxport is outraged by this and has threatened to ask for a new trial.

What is the moral behind all of this? Don't try to take property via eminent domain for economic development. It is open season for the landowner's eminent domain attorney to point out again and again, especially in this case, that the current property owner wants to use the land for the exact purpose the city wants to use it for, only the city doesn't get the money when they don't own the property. It makes the city look like a bully, and it really fattens the wallet of the property owner.

Was the property worth 67 million? Probably not. But that is the chance you take as a governing body against a landowner with an experience eminent domain attorney. You take the chance of being burned.

Eminent Domain

Eminent Domain | Sales Comparison Approach

Eminent Domain - Sales Comparison Approach Most Common Method of Determining Fair Market Value

As I've mentioned before, there are three traditional methods of determining the fair market value of property in eminent domain: sales comparison approach; income approach; and the cost approach. Although in many situations all three valuation methods can provide some insight into the fair market value of the property, the sales comparison approach is universally recognized as the most accurate indicator of value (when sales in the market exist).

In addition to the sales comparison approach being the most accurate indicator of fair market value, it is also the easiest to gather information on and the easiest to gather significant information on. It provides concrete, tangible information and is based the least on the subjective determinations of the appraiser. But, it is also the easiest to manipulate if you are a good eminent domain lawyer.

Sales Comparison Approach Explained

The sales comparison approach is a very easy concept to grasp. Wherever your property is, there are bound to be other properties like it. Properties that have about the same lot size, about the same square footage, about the same number of bedrooms and bathrooms, about the same condition as your house, and about the same amenities. And chances are that some of the houses are being put into the real estate market and are being bought and sold for agreed to prices in arms-length transactions.

The theory behind the sales comparison approach is these arm-length transactions provide evidence of what the market will bear for that specific type of property. And it makes sense if you think about it. When a house is put up for sale, a homeowner traditionally sets the price at at least the amount they would sell the house for. What I mean is no one usually lists their house for less than an amount they would take if someone accepted their offer. On the other side, no buyer is going to make an offer on a property for more than they think the house is worth. It would be a waste of money.

Therefore, when the two parties come to an agreement on the price to buy and sell a house for, it can be assumed that the buyer is paying a price they believe the house if worth and the seller is accepting a price they think the house is worth. Or said another way, they have agreed on the fair market value of the price of the house.

Now, one sale may be enough to provide a basis for the fair market value of your eminent domain taking. But four sales provides a great basis. And ten assures you have the information necessary to make a complete determination of fair market value. More is better because there are going to be things about each of the comparable sales that are both alike and different from the eminent domain taking. The more sales you have, the more you can extrapolate the differences, focus on the similarities, and arrive at a true fair market value for the property.

How Can an Eminent Domain Lawyer Help Get you More Money?

What an eminent domain attorney has the ability to do is see the hidden potential in your property so that you are using the right comparables in your analysis. For example, let's say you are a farmer, and you own some ground that is near the city limits of a fairly large sized metropolitan area and the city is growing your way. Even though you as a farmer would never want to develop your ground commercially, there is probably an argument that your properties highest and best use is for commercial or residential development. This means that instead of looking for agricultural and rural residential comparable sales, you would want to look for commercial and residential development site sales - a huge increase in value. So long as the highest and best use is not speculative, conjectural, or remote, it is allowed to be argued for fair market value purposes in eminent domain proceedings.

What is your land is clearly residential or agricultural? How can an eminent domain attorney help you get the most money for the taking? The benefit of an eminent domain attorney in this case is they have the ability to spot the flaws in the comparables the other side is using to promote their theory of fair market value and locate those comparables that most accurately represent your property's value. This can result in a significantly higher amount of money at the eminent domain proceeding.

When going forward through this arduous journey that is the eminent domain process, remember that there are ways to increase your just compensation award. The best way to do this is to become familiar with the process and use all of the tools at your disposal. This means hiring an eminent domain attorney.

Eminent Domain | When does a Taking Occur?

When Does Interference with Property Constitute a Taking for Eminent Domain Purposes.

I got a question the other day from one of my clients regarding when a taking actually occurs. What has happened in this particular case is a highway project has been designed that requires more right of way than is currently owned by the state. Through the design process, the precise amount of right of way needed has been figured out and a map of the new right of way limits has been drafted and is available to the public. Several property owners have seen this and are now worried that: (1) their property values are going to be greatly diminished because there are plans to put a highway through their house; and (2) they will not be able to sell the house because no one want to buy a house that some day will have a highway run through it.

My clients came to me to find out at what point a taking has occurred and compensation must be paid to a landowner. They don't want to start a fight they will lose if they don't have to.

This question regarding taking property and when it actually occurs is a common one faced by both governing bodies and landowners. Often designs are put together when no money exists to carry the design to fruition. What happens then is landowners are unhappy because they can't sell their house and the government isn't happy because they have unhappy landowners and no money to make them happy. The short solution to this problem, and what I was forced to tell my client, is that the property owners lose this battle (unless a couple of specific things happen).

Diminution in Value is Generally Not a Taking under Eminent Domain Law

The general rule of law, at least in the state I am practicing in, is that planning and plotting alone does not constitute a taking for eminent domain purposes. Other eminent domain attorneys may take your case and argue as hard as they can otherwise, but generally they will lose if only planning or even plotting has occurred. This means that in my footprint example above, even though in reality the landowner most likely can not sell his property or must sell it at a much lower price than prior to the footprint identification, no taking for eminent domain purposes has taken place.

As a practicing eminent domain attorney, I can assure you that some diminution in value does occur in this instance, and the courts even recognize that. The courts also understand the gridlock that would ensue if every landowner effected by a public improvement project could receive compensation for the loss in value of their property. No state would be able to pay for that loss in value, and the infrastructure of the country would likely crumble.

Prohibition from Land Use Can Constitute a Taking under Eminent Domain Law.

Now, the situation changes though, if you want to do something to your property that is legal, but only because of the identified footprint you are prohibited from doing it. As an eminent domain attorney, I could see a great argument for a taking under that circumstance.

For example (and this factual situation is straight of a real case), if you, as a landowner, wanted to put a Blockbuster on your property, or plat it for a residential development, you first have to go through the planning process and have it approved by the City Commission. One of the things the city commission looks at is whether or not the proposed plat conforms to zoning regulations, and other things of that nature - these are legally permissible. If, however, the commission sees that your planned subdivision is directly in the footprint of right of way needed for something else and they only allow the plat if you agree not to build in the area needed by the city, a taking has occurred. What they have done is prevent you from using and enjoying your property to its highest potential.

The reason for success in the second scenario is obvious - in addition to the loss in value caused by the public improvement footprint, the governing body is actually preventing you from using your property in a way that would normally be permissible simply because they want to protect right of way for a future project.

As always, when faced with these issues, contact an experience eminent domain attorney.

If you have any questions or comments, please feel free to leave them below.

Eminent Domain | Do You Need an Attorney?

Eminent Domain - Hiring Someone to Work for You

From a landowner's perspective, the Washington State eminent domain process can be very scary. One moment you probably were enjoying life, enjoying home or business ownership, and taking care of day to day activities. The next, some governmental entity is telling you that your property is required for use for the greater public good, that they are going to pay you fair market value for it, but that you do not have a choice about losing your property. That is quite a lot to handle.

If Your Washington State Property is Being Condemned Get Help

As a Washington State landowner, you need help for several reasons. First, landowners deserve just compensation. This is hard to achieve without an attorney or representative on your side. The issues are simply too complicated. We know what to expect, how to voice your opinions and beliefs regarding just compensation, and are familiar with the process overall. And second, I generally think this is important information.

An experienced Washington Eminent Domain Lawyer can spot damages and issues that landowners may not even know exist.

At some point I'll discuss access, severance, circuity of travel, and damages to the remainder, but until then, you probably have no idea what I'm talking about. An experienced eminent domain attorney will. They will know not only what these terms mean, but will be able to spot these issues when they exist with your property. Seeing these issues, particularly if not picked up by the governmental entity, could make the difference in thousands and thousands of dollars in just compensation

An experienced Washington State eminent domain attorney can evaluate the condemning authorities offer and determine if it is fair.

Unless you are in the real estate industry you may have never come across a real estate appraisal in your life. There is nothing wrong with that, but understanding the government's appraisal is vital to receiving the compensation owed. Believing your property is worth more than the government's offer and showing it to be true are two different things. One is highly effective, the other is not

Your attorney, or a consultant, if experienced in Washington State eminent domain, will have a firm grasp not only on the appraisal method used, but the alternative methods that might help to increase your award of just compensation or settlement amount. Armed with this information, the just compensation award can often dramatically increase

Finally, your representative will also know when to accept the government's offer and stick it in the bank. There is nothing worse as an eminent domain attorney than giving a more than fair settlement to a landowner, have them refuse it because they think they are being treated unfairly, and then have the appraiser's at the condemnation hearing come back with a significantly smaller amount for just compensation. The landowner is devastated because he feels that he's been cheated, but the way the laws are set up, sometimes things that really matter to landowners are not compensable items.

The Fee Paid for Help is Worth the Additional Just Compensation in Eminent Domain.

Traditionally the fee for someone helping landowners with eminent domain matters is a contingent fee basis. This means they will not collect unless they secure an award or settlement over the initial offer. If you hire an attorney from the outset, the attorney's fee is usually 30% of whatever is received over the offer. A consultant will usually charge something closer to 20 percent (they usually cannot take the case all the way through trial, which is much more a crapshooot than simply negotiating).

This may seem like a lot of money to give up for receiving help with your Washington State eminent domain problems. But my preceding paragraphs should show you what you are getting in return. Without help getting anything extra is significantly harder - as a landowner you just don't have the background to effectively negotiate. It would be like me trying to take over a farming operation or negotiate grain prices - I have no idea what I'm doing.

The other aspect I'd ask you to remember is that the attorney is also taking some risk by not getting paid unless you do. It is possible that they could invest significant time and money in your case and have nothing materialize. Understanding this risk is part of the profession, but it does result in a slightly higher fee in the end.

Do not use your family attorney to negotiate!

If you were in Melbourne, Australia and got into trouble would you hire a United States attorney? No, you'd hire a Melbourne Lawyer. Eminent domain is highly specialized work and works the same way. If your family attorney is not familiar with it, ask him to refer you to someone who is. It can make the difference in winning and losing a lot of money. Just because someone is an attorney doesn't mean they know everything about the law. I have no clue when it comes to family law, criminal law, and securities, and I wouldn't try to help someone with those problems. Find an attorney experienced in condemnation law

Once you find someone, expect the best, but listen to what they have to say. Losing your property to condemnation can be a very trying experience, and sometimes the pain of losing the property can overshadow your better interests. Let your condemnation attorney guide you through the process, and hopefully at least you'll be able to take some more money away in the end.

Eminent Domain | Exclusions From Fair Market Value

Eminent Domain Law - Exclusions From Fair Market Value and Just Compensation.

Before I begin this post on some of the factors that are excluded in assessing fair market value, let me point out that the law in each state is different regarding these factors, this is a very general overview, and you should consult your eminent domain lawyer before implementing or excluding any of these factors from your fair market value/just compensation argument. Call me if you are in Washington State.

The whole idea behind eminent domain is that the government is afforded the power to acquire anyone's property at any time, if the right circumstances exist. Usually this means the property is required for a public use. Although the Kelo vs. City of New London case has expanded how a public use is defined, the general rule still holds true.

In acquiring property for a public use, the state of Washington may not simply seize your property. You have some power. You are afforded the right to just compensation for what is being taken from you. Just compensation is loosely based on the fair market value of the property, or what a willing buyer would pay for the property and a willing seller would sell the property for in an open market. Just compensation also includes damages to the remaining property, if they exist.

Despite this broad language regarding payment for your property, not everything that you may think contributes value to your property is a compensable item.

Length of Ownership is Not a Compensable Item in Eminent Domain.

If your family has owned a property going back generations and generations, maybe even hundreds of years, in many states this factor is not considered a compensable item, even though to you it makes the property particularly valuable.

Why is this? It goes back to the theory behind just compensation. The goal is to make the landowner whole, to give them what they had before. The fairest way to do this is to determine what the marketplace supports. The marketplace would not consider the length of familial ownership of a property, so an appraiser cannot as well.

For example, if you were to put your property up on the market today, you could command a premium for location, for zoning capabilities, for present use, for the minerals located on it, and for many other things. But the fact that the property had been in your family for years would not be a factor a buyer would consider when making an offer. As much as it stings, that factor does not contribute to the value of the property (although some states require an automatic bump in the purchase price if the land has been in the same family for 50 years or more.

The Fact that Washtington State Took your Property is Not Compensable.

As much as an appraiser would like to be able to take into account that your property is being taken against your will by the big bad government, it is not a compensable item. This should make sense going back to the theory just discussed.

And if you think about it, this makes sense. In most circumstances, whether you admit it or not, the property that is being acquired is going to be used for something that benefits the general public (99% of the time). So the greater good in this case prevails over the tribulations of the few. It may not be fair, but it makes sense, and the legislatures, acting on the fifth and fourteenth amendments to the Constitution, have not made this a compensable item.

Uses that are Remote, Speculative, or Conjectural are Not Compensable.

If your property could potentially be a new commercial or residential development site, this can be factored into the valuation of your property for just compensation purposes. This potential, in eminent domain, though, must be realistic, meaning there must be concrete facts that demonstrate the properties conduciveness to development.

For example, in some areas that are growing quickly, everyone thinks their 40 acre parcel is prime commercial development, on the cusp of being sold for $3 per square foot. It might even be two blocks from new commercial development. If your property doesn't have utilities, isn't zoned for commercial use, and could not qualify to be rezoned and get access to utilities, it would be speculative at best to value it as a commercial site. This valuation of condemnation property to determine just compensation is not allowed.

Evaluation and Negotiation of Just Compensation Offers in Washington State Eminent Domain Cases are Most Successful if these Rules are Followed.

It is possible to bring these things up in a condemnation hearing, but the likelihood is that these pleas will fall on deaf ears. To get the most value out of your property in condemnation, your best bet is to hire an experienced, realistic attorney or eminent domain consultant and do your best to present the highest value of your property and get the most money for your property taking. Doing that will ensure you get the most money for your condemned property.

Eminent Domain | Two Types of Taking | Just Compensation

Eminent Domain Law - Two Types of Takings Just Compensation

There are two basic types of takings in the Washington eminent domain law. The first is referred to as a total take. As it sounds, this situation occurs when an entire parcel or tract of land is acquired for a project. The second type of taking is a partial take, and as it sounds, refers to the acquisition of only a partial portion of a tract or parcel. Although it may seem like a small distinction, when analyzing the value of property it becomes very important as valuation of the different property types is done in very different ways.

Condemnation Just Compensation Valuation of total take

The analysis for valuing a total take is straightforward. Using one of three appraisal methods (comparable sales, replacement cost, or income), or a combination thereof, one just determines the actual current fair market value of the property and that is the amount of just compensation owed to the landowner. No further analysis is necessary.

This should make perfect sense from both the landowner's and government agency's point of view. To determine just compensation for an entire tract of land, intuitively the analysis would be to find out what the property as a whole is worth. Whether or not the number arrived at in the analysis is correct is another story, but the theory behind it is sound.

Washington State Just Compensation Valuation of Partial Take

As easy as total takings analysis can be, partial takings can be difficult. Just taking a quick glance at the situation it may seem that the best way to find out what the fair market value of a partial taking is to determine what that size of property is worth and pay for it. Although this seems correct, in practice it just doesn't work out. Using an example of a partial taking for a highway project will demonstrate the error in that determination.

Let's assume there is a highway project in the works that requires 8 acres off a 60 acre parcel in rural Kansas. Using the above proposed methodology, the appraiser would use the sales comparison approach and look for properties in the area recently sold that were between 6 and 10 acres to gauge the fair market value of similar sized tracts. In doing so, the appraiser would probably determine most of the tracts were being sold as rural-residential properties. Let's say that number was $5,000 and acre.

Under the above proposed theory, the analysis would be complete. The 8 acres would be worth $40,000, and that would be it. However, what if I told you that the 8 acres being taken was cutting right through the 60 acres, leaving 10 acres on one side and 42 acres on another, and that the 10 acres would be useless because there would be no way to get to it once the road is built? Under the above theory, there is no way to compensate for that, unless you want to argue that the 10 acres is a take under inverse condemnation principles and therefore just compensation is due. Well, what if it wasn't useless but the owner would have to drive 5 miles around the road to get to it? Then there would be no argument for inverse condemnation, and he would be stuck.

Another problem that might happen is what if 1 acre is being taken off of 60 and 60 acre parcels are going for $1,000/acre and 1 acre parcels are going for $20,000/acre. Does it seem fair to pay the owner of land that is really worth $1,000/acre $20,000/acre just because a small sliver is required? No should be your answer.

To counter these problems, and a couple of others, a theory of just compensation was derived which examines the full value of the property before the taking, and then the full value of the property remaining after the taking, and taking the difference in those two to arrive at a just compensation amount. Under that analysis, a true measure of just compensation is reached, and any damages that might be associated with the taking are accounted for.

Next time - comparable the comparison sales approach is explained.

Washington State Eminent Domain Landowner Consultation

Eminent Domain | Condemnation Law | Overview

Eminent Domain and Condemnation - An Overview

Eminent domain, also known as condemnation law, is the power of the state to take your property for government purposes or public use. This power is derived from the 5th and 14th amendments to the United States Constitution. The 5th amendment provides, in part, "Nor shall private property be taken for public use, without just compensation." The 14th amendment, also referred to as the enabling clause, provides that each of the constitutional amendments shall apply to the states.

A review of the 5th amendment finds there are two requirements for a proper taking. First, private property can only be taken for a public use. In the past, this has come to be defined very broadly by the Supreme Court (remember the national news story about the Kelo's and their home being taken for a commercial development? That was an eminent domain case), resulting in state legislatures specifically defining what a proper public use is. The second requirement calls for just compensation. This has been decided to mean, in relative terms, the fair market value of the property. Said another way, what a willing buyer would pay and a willing seller would accept, in an open and competitive market, without undue compulsion.

Property Appraisal

Typically, though, the eminent domain process doesn't begin with a petition being filed at your local state or federal courthouse. The process actually begins much earlier than that. It all really starts when a governmental agency or economic development group decides to locate a project in a certain area with a certain real property "footprint." At that time it is determined which properties are affected and who the owners of those properties are. Usually this is done through a title search, conducted by the agency itself or a title company.

Once the title search is complete, appraisals are completed on all the properties to determine their fair market value. Believe it or not, most Washington eminent domain authorities are not out to lowball landowners. They want to make sure fair market value is paid, not a penny more, not a penny less. The reality of this, though, is that often property owners are faced with fair market value determinations that are far below their expectations. Sometimes their expectations are well grounded, sometimes they are not.

The Offer

Once the appraisal process is complete, people called acquisition agents are sent out into the field to make contact with landowners and present them with offers for their property. This, as you can expect, is usually a very sensitive matter, and usually it is handled delicately. People are rarely excited to hear that their property is being acquired, and it takes a special type of person to do this job.

After the offer has been presented, the landowner is given a certain amount of time to evaluate the offer of just compensation. At that time they have three choices: they can accept the offer; they can reject the offer; or they can negotiate with the acquiring body to receive more compensation (my recommendation). In the state of Washington, each landowner gets $750 to have someone evaluate the offer of just compensation (and as a landowner you really should take advantage of this).

As you can expect, no one really knows a property better than its owner. Because of that, often appraisers will miss some aspect of the property that makes it more valuable, or fails to account for an element that will have to be moved on account of the project (in rural areas this is often a well or septic tank, in urban areas this could be a satellite dish). This negotiation process will be discussed in more detail in the future, but it is important to have someone that is experienced with eminent domain and is familiar with the appraisal process. It can mean the difference in thousands of dollars of just compensation.

Eminent Domain

Assuming no agreement can be reached, eminent domain is the last result. Condemnation proceedings themselves are very informal matters. A judge will appoint a specific number of appraisers (in my Kansas it's three) whose sole job is to determine the fair market value of the property (if you think the government is taking your property without having a government purpose, there is another route to take, discussed later). At the hearing both sides are allowed to present their theory and evidence relating to fair market value (although the rules of evidence don't apply here). At the close of the presentations, the appraisers have a chance to look at the property (a "viewing"). Once that is complete, the appraisers will have about two weeks to issue their opinion as to value.

Eminent Domain Jury Trial

If either party is unsatisfied with the appraiser's award, they can appeal the decision to District Court (in Kansas). At this time the case becomes like any other civil action (in state court). Discovery occurs, each side selects an expert, and a jury trial is held. At the trial, though, the only issue the jury is deciding is what the property owner should be paid for the property that is being acquired. The parties are not free to challenge the validity of the taking itself.

Once the evidence is heard, the jury returns a verdict of just compensation. Unless there was a legal or factual issue that should not have been heard or was decided incorrectly, this is the final stop for determining just compensation. At that time the eminent domain or condemnation process is over and the state must pay into the Court the amount of the award.

Although this seems very straightforward and easy, like any legal topic there are all sorts of nuances and exceptions in play that can result for big returns for landowners if they are aware of them and bring them up. As I said before, most government agencies are not in this to save money. They want to pay just compensation (these people will, after all, be voting in the next election), but no more than required. In the coming posts, I'll describe some of the situations I've run into and try to provide some guidance on how to deal with it.

Welcome to Eminent Domain | Condemnation | Property Law | Relocation Assistance

Welcome to my site. If you have found yourself here you are probably either acquiring someone else's land via condemnation or eminent domain or having your property acquired (and possible being moved out of your house). If you are in the latter boat, you are probably very unfamiliar with condemnation law and probably have heard only bad things. Hopefully this site will ease some of those fears, or at least answer your questions.