Eminent Domain-How It Affects the Downtown Arena and Similar Projects
by Brad Stout
The proposed Northwest By-pass, the Water Walk featuring Gander Mountain and the much anticipated downtown arena serve as very visible reminders of the constant public demand for private property. In addition to these high profile examples, public entities often find themselves in need of property to widen roads, construct new power lines, install water lines and provide a host of other improvements made necessary by development’s slow steady march. Although most of the necessary property is acquired by purchase, public entities often rely on the power of eminent domain to take the necessary property.
Eminent Domain Requires Compensation
Although often characterized as the inherent authority to take property, the power of eminent domain includes the corresponding obligation to pay “just compensation” for the property taken. Kansas law expands this notion to require a condemning agency to pay just compensation for property taken and to pay for damages to the property remaining.
Just compensation and damages are determined by arriving at fair market value of the property using the same tools employed by the appraisal profession: comparable sales, cost or capitalization of income appraisal methods or any combination of such appraisal methods. One should note that the U.S. Constitution demands a landowner receive just compensation for his property taken. Where property is unique or specialized such that the standard appraisal tools do not result in a value, some other method must be used to arrive at a value for the property. In the end, the landowner must be placed in the same position pecuniarily as he would have occupied if his property had not been taken.
The Property to be Valued: Total Takes
If a public entity takes an entire parcel of property, the compensation it must pay is the fair market value of the property immediately before the taking. Cases where the entire property is taken typically involve only disputes concerning the property’s fair market value. The determination of the value in a condemnation action should consider all circumstances shown to reasonably bear on fair market value. Thus, although the inquiry is narrowly focused on fair market value, there are invariably a number of issues to consider.
In addition to disputes that may arise concerning the property’s characteristics of value, a condemnation value must assume the property is being used for its best and most advantageous use. While that is normally its current use, there are many instances where a different use would result in a greater value. For example, agricultural land is often valued at development prices in recognition of the development trend in the area. A landowner should be aware of other reasonable uses of his property that may increase its value.
The Property to be Valued: Partial Takes
Most often, the taking is of only part of the entire property. Utility easements and easements to widen roads, for example, are in the vast majority of cases only partial takings. Just compensation and damages in such cases is measured by the fair market value of the entire parcel immediately before the taking, less the fair market value of the property or interests remaining immediately after the taking. The landowner is entitled to the difference. In theory, this equation should incorporate both just compensation for the property taken and damages to the remainder. The equation should also leave the landowner with assets equal to what he or she had before the condemnation action took place. Before the taking the asset was property, and after the taking, the assets are the remaining property and cash. The value of the remaining assets and cash should equal the before-value of the property.
Relocation benefits are intended to assist in defraying the costs to relocate persons displaced from their home, business or farm by a condemning agency. Relocation benefits may be substantial and deserve attention. For example, persons displaced from their residence may be entitled to payment for moving and related expenses and payment for the difference in price, if any, of a comparable replacement dwelling. A displaced business would be entitled to the cost to move and reinstall personal property. Relocation expenses may provide much needed assistance and, therefore, should not be overlooked.
Should you be faced with the loss of your property through eminent domain, remember you are entitled to be paid just compensation or, in the case of partial takings, just compensation and damages. The total compensation should reflect all characteristics of value and should consider your property at its best and most advantageous use. Finally, should you be required to move your home, business or farm, you may receive relocation assistance to offset the cost of the move.
Brad Stout’s practice includes representation of property owners and condemning authorities in eminent domain actions.
(Article appeared in Adams Jones March 2005 Newsletter)