Challenges in Eminent Domain Litigation December 16, 2021

dmc small, dispute resolution commissionChallenges in Eminent Domain Litigation

By David M. Cuppage, Esq.

While Ohio has always considered the right of property to be a fundamental right, the state has a right to take private property for public use (i.e., the power of eminent domain). However, the United States and Ohio Constitutions limit the state’s eminent domain power by requiring a taking of private property to be for “public use” and by requiring “just compensation.” Appropriations can be either a full take or a partial take and can also involve compensation for the loss of personal property, relocation expenses and loss of good will. In some instances, the right to take can be challenged in court and in others involving appropriations for purposes of establishing a public roadway, the challenge must be brought by way of a separate injunction action.

When the right to take is not contested, the issues to be determined in court revolve around one topic: just compensation. Experienced and seasoned legal counsel is required to assist a property owner in navigating the complexities of the appropriation process and in obtaining full and complete just compensation.

1.) Determining Compensation for a Full Appropriation of Property

When the state completely appropriates a landowner’s property, the test of “just compensation” is relatively simple—it is the “‘fair market value’ of the property” appropriated. Courts have repeatedly held that just compensation normally is to be measured by the market value of the property at the time of the taking. The fair market value of property is the price which would be agreed upon at a voluntary sale by an owner willing to sell to a purchaser willing to buy.

In determining the amount of compensation, or the market value of the property taken, each case must be considered in the light of its own facts, and every element, every fact, every bit of information, that can fairly enter into the question of value, and which an ordinarily prudent business person would consider before forming judgment in making a purchase, should be considered. The rule of property valuation in a land appropriation proceeding is not what the property is worth for any particular use but what it is worth generally for any and all uses for which it might be suitable, including the most valuable uses to which it can reasonably and practically be adapted.

Care must be taken in retaining the right expert witnesses when determining just compensation and this may include MAI appraisers and real estate agents and brokers.

2.) Determining Compensation for a Partial Appropriation of Property

When the state partially appropriates a landowner’s property and leaves a residue, the test of “just compensation” may become more complicated than that a full take. In a partial appropriation proceeding, the owner is entitled to not only compensation for the fair market value of the land taken, but also for damages, if any, to the residue. When land is partially appropriated, the value of the part taken is not the sole measure of the compensation or damages to be paid to the owner; but the incidental injury or benefit to the part not taken is also to be considered. When the part not taken is left in such shape or condition as to be in itself of less value than before, the owner is entitled to additional damages on that account. For example, in a proceeding brought by a municipality to condemn land for a street, the inquiry necessarily embraces not only an ascertainment of compensation to the landowner for the land taken, but damages to the residue of the abutting land of such owner. Determining compensation in appropriation proceeding “involve[s] an inquiry into the actual value of the land sought to be appropriated, irrespective of any benefits, and the diminished value of the remainder of the tract.

3.) Consideration for Damages to Property Not Appropriated

The general measure of damages to the residue (any “left over,” adjoining, or adjacent property not appropriated) is its diminution in value. In other words, [the difference in the value of the owner’s property with the appropriation and that without it is the rule of compensation. Thus, the formula for calculating residual damages is the difference between the fair market values of the remaining property before, and after, the taking. Damages to the remainder are calculated by deducting the fair market value of the property after the taking from the fair market value of the property prior to the taking.

When ascertaining the post-appropriation fair market value of residual property, reference must be had to the immediate consequences, and the property owner may show any facts calculated to increase the damage to the residue of the tract. In determining both pre-and post-appropriation values, every element should be considered that can fairly enter into the question of value and that an ordinarily prudent businessperson would consider before forming judgment in making the purchase. Any element of damage that makes the residue less valuable in its separate state after its taking than it was as a part of the whole before the taking’ may properly be considered.

4.) Determining the Cost of Residual Damage

Where damage is caused to the residue of property remaining after a taking, the property owner may also be entitled to damages to cure the harm to the property. If, by the expenditure of money in an amount less than the difference between the before-and-after fair market value of the residue, the property owner could make improvements to such residue to restore the fair market value of the residue to that which it was before the improvement, then, evidence of such cost of cure would be admissible and, if proved, would limit the amount of damages to be assessed. The ‘cost of cure’ cannot be utilized to increase damages to the residue, but may be utilized to reduce such damages. As an example, the cost to cure analysis is appropriate where damages to the residue is caused due to a lack of access to and from an ingress/egress point as a result of an appropriation.

In determining cost to cure, it is important to work with civil engineers and construction professionals to design and provide cost estimates to repair the damages caused by a partial appropriation.

5.) Considerations for Relocation Expenses and Personal Property Losses

In addition to the appropriation, a property owner may be entitled to recover relocation and personal property expenses. The owner of the property is entitled to the following relocation expenses: The cost to move the person, family, business, farm, and personal property and the loss of tangible personal property with some limitations. Loss of good will is also compensable if it results from the taking and if the loss cannot be prevented by other reasonable means. Goodwill is the reputation of the business based on where the business is located, the performance of the business and any other characteristics that make a customer want to choose your business brand over that of another company. Loss of good will is limited to up to $10,000 and only if the whole business is taken.

If the state does not approve a payment for which the owner applied for relocation and other benefits, the trier of fact, upon presentation of proof, in an appropriation case shall determine whether to award a payment for the expenses and the amount of any award. The owner shall have the burden of proof with respect to those expenses.

Key Takeaways on Eminent Domain Litigation

In most cases, preserving property ownership is not a very likely outcome, as both the United States Constitution and state laws provide a means by which the State can appropriate land for public consumption or use. Where property owners have the most leverage is compensation for that appropriation. Whether full or partial appropriation, challenging compensation for damage to residue, or recovering relocation expenses and personal property losses, property owners have options to protect their rights and should consult with professional legal counsel well-versed in eminent domain litigation before signing any compensation agreement.

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