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Consider Precondemnation Damages Early to Avoid a Claim Later
Real Estate Newsletter
Although the award in a condemnation action is generally the fair market value of the property taken and severance damages, if any, if the property taken is part of a larger parcel, there are instances in which a property owner may be entitled to "precondemnation damages." Precondemnation damages may be awarded if a property owner proves both that "(1) the public authority acted improperly either by unreasonably delaying eminent domain action following an announcement of intent to condemn or by other unreasonable conduct prior to condemnation; and (2) as a result of such action, the property in question suffered a diminution in market value." (Klopping v. City of Whittier, 8 Cal.3d 39, 52 (1972).) Neither property owners nor agencies benefit in circumstances where precondemnation damages are in issue. Agencies, in particular, should try to avoid precondemnation damages, if possible, and can employ a number of strategies to that end.
A court's inquiry when confronting a claim for precondemnation damages focuses on the agency's justifications for its actions before condemnation. (Contra Costa Water District v. Vaquero Farms, Inc., 58 Cal.App.4th 883, 901 (1997).) In Vaquero Farms, the agency was able to justify its actions and avoid precondemnation damages. There, the Water District sought to condemn property for a large reservoir project. The owner sought precondemnation damages, alleging it was "unable to develop a portion of its property for residential use and [that] it suffered a loss of the anticipated profits and higher land values which would inevitably follow." The owner argued that for a period of seven years, the Water District "placed a cloud over [the owner's] property, while publicly announcing its intention to destroy access and flood the subject property. During this delay, [the Water District] acquired all of [the owner's] major neighbors, rendering it an island of private ownership, threatened to stop any proposed development in the project area, and let [the owner] hang in limbo without ever once proceeding with expeditious negotiation."
The Water District's evidence established that its reservoir project was a large and involved one "requiring acquisition of property from many separate ownerships and obtaining numerous permits and approvals legally required to implement such a project." For a few years, the Water District was uncertain as to the size and configuration of the property it required from the owner. Once the Water District obtained the necessary environmental approvals and determined the location of the take, it insisted it "expeditiously sought to negotiate" with the owner. The court found the Water District's justification to be compelling.
By contrast, in Tilem v. City of Los Angeles, 142 Cal.App.3d 694 (1983), landowner Joseph Tilem bought two contiguous vacant parcels in 1970 that he planned to develop. Tilem constructed an apartment building on Parcel 1 in 1970. In 1972, Tilem learned that the city planned to take a 6-foot strip along the frontage of both parcels to widen a road. In November 1976, the city decided to seek a 16-foot strip instead. Then, in 1977, the city decided to condemn a 10-foot strip. The city made what was determined to be an unreasonable offer to purchase the property in 1977 and it filed the condemnation action in February 1978, but did not serve Tilem until June 1978.
From 1972 until 1976, Tilem believed that the city's project would not go forward. In mid-1976, Tilem found a building that he planned to move to Parcel 2. When Tilem went to the city to initiate the permitting process to do so, he discovered that once the city took his land, he would be unable to comply with setback requirements for any development. Consequently, he made no further attempt to develop Parcel 2. In December 1977, Tilem entered into a lease-option agreement for the sale of Parcel 1.
The city abandoned its action just before trial in 1979, and the only issue tried was Tilem's claim for precondemnation damages. The court ruled that the city unreasonably placed a cloud on the salability of Parcel 1. The court ruled further that the city prevented Tilem from developing Parcel 2 from 1976 until 1979, rendering the property virtually useless during that time. Tilem was entitled to the value of the lost lease-option agreement for Parcel 1 and lost rental value of Parcel 2 during the precondemnation period. (Tilem; see also City of Fresno v. Shewmake, 129 Cal.App.3d 907, 911-12 (1982) (loss of use can also be measured by termination or reduction of rental income due to unreasonable precondemnation activity).)
Any agency contemplating or undertaking a public project would be well served by consulting with condemnation counsel and keeping precondemnation damages in mind throughout the planning process. An agency should take steps to ensure that its actions are justifiable and related to prudent project planning. Such steps may include the following:
- Communicate with property owners. By keeping potentially affected property owners informed of the process each step of the way, an agency can avoid claims that an owner was prejudiced by changes in the project.
- Document all requests from property owners related to the project. Property owners make various requests at all stages of project planning, some of which an agency may grant and some of which an agency may not grant. An agency can be sure that such decisions will be scrutinized if precondemnation damages are claimed, so thorough record keeping is essential.
- Document the project timeline. Often a project spans several years from conception to construction. Factors such as budgeting and environmental review may greatly impact project schedules and completion dates, and those individuals responsible for initial project planning may not be the same as those in charge in the end. An agency should document all decisions related to project location and timing so the timeline may be easily reconstructed.
- Carefully evaluate all public announcements related to the project. An "announcement of intent to condemn" for precondemnation damages purposes may precede the actual, formal announcement from the agency's perspective. All public announcements should relate to a desire to ensure public input in the planning process and the like.
Prudent planning and good communication aid in avoiding successful claims for precondemnation damages, and may also assist in preserving an agency's goodwill with property owners throughout the project. Although the filing of condemnation actions is often required in public projects, a good relationship with property owners can reduce the number of actions that ultimately need to be filed. If property owners believe they are being treated fairly by the agency, they may be more likely to sell their property for a fair price without the need for litigation. Everyone benefits from such an outcome.
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