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Recent Developments in Eminent Domain Law
Real Estate Newsletter
In the wake of the 2005 ruling in Kelo v. City of New London, 125 S. Ct. 2655 (2005), public awareness of eminent domain actions and a public entity's right to take increased dramatically. Some sought to use eminent domain as an example of government power gone awry. In California, legislators and lobbyists introduced a number of ballot initiatives and other legislation to restrict agency power to exercise the government's eminent domain power. However, although the backlash from Kelo appears to have been modest, there have been a number of significant recent changes in the legal landscape.
Perhaps the most important change in California's eminent domain law is Senate Bill 1210 which, contrary to previous practice, requires that an agency follow a formal motion procedure prior to taking possession of property with at least 90 days' notice before the possession hearing. Previously, an agency could seek possession ex parte when it filed the complaint and there were essentially no viable defenses. A defendant may now assert "hardship" as a defense and a property owner may be able to remain in possession of the land if able to show that the hardship is "substantial." Additionally, Senate Bill 1210 requires the agency to provide an informational packet to the property owner and offer $5,000 to the property owner for an independent appraisal under section 1263.025.
A sobering example of what happens when each step in the taking process is not followed properly is City of Stockton v. Marina Towers LLC, et al. (February 13, 2009, C054495) __ Cal.App.4th __, in which the city had used its eminent domain power and spent millions improving property – only to have the court rule that the city did not have a right to take. The court concluded that if a resolution of necessity does not contain an adequate project description, the agency cannot meet the findings required by section 1240.030 in order to permit a right to take. The required findings under the statute are: (a) public interest and necessity require the project; (b) the project is most compatible with the greatest public good and least private injury; and (c) the property is necessary for the project. Without establishing facts sufficient to satisfy these requirements, an agency has no right to condemn.
The court in City of Stockton held that the project description in the resolution of necessity was so vague, uncertain and sweeping in scope that it failed to specify the "public use" for which it sought acquisition of the property. This outcome was not entirely surprising, as the city had no plan for the property until after condemning it.
To be sure, all was not lost for the city, and the court did not dismiss the case unconditionally. Instead, the court allowed the city to pass a new resolution while maintaining ownership. It also ordered the city to pay the property owners' legal expenses, which defendant's counsel approximated at $1 million. While the ruling superficially appears to be a victory for the property owner, the city was given the opportunity to pass a new resolution of necessity. In addition to Senate Bill 1210, Prop. 99 was passed, the effect of which has yet to be seen. Prop. 99 competed directly with Prop. 98, an initiative whose main purpose appeared to be to define rent control as a taking; if both measures passed, the one with the highest percentage of votes would become law. Prop. 98 lost by a large margin, but Prop. 99 emerged victorious. The new language of Prop. 99 amends Section 19 of Article I of the California Constitution to read: "(b) The [s]tate and local governments are prohibited from acquiring by eminent domain an owner-occupied residence for the purpose of conveying it to a private person."
Prop. 99 spoke directly to the concerns prompted by the ruling in Kelo. However, Prop. 99 is not without its limitations and exceptions. To be protected, a property must have been the owner's principal place of residence for at least one year. Many classes of landowners remain entirely unaffected, as the proposition's protections are not extended to business owners, farmers or commercial property and apartment owners. There are also exceptions for government takings that would protect public health and safety, prevent crime, assist in an emergency or remedy contamination.
The most noteworthy exception is for government takings of property that is acquired for a public work or improvement. As long as an agency ensures that a portion of a redevelopment project is owned and managed by a public entity instead of a private party, the agency can acquire all necessary property, including land used as an owner's principal place of residence. While Prop. 99 offers some protection to homeowners, the carveouts for certain government takings limit any real stifling effects on the government's eminent domain power.
In addition to the changes made by Senate Bill 1210 and Prop. 99, the California Supreme Court has clarified the longstanding, bright-line rule that when an agency makes a deposit of probable compensation that equals or exceeds the probable amount of the owner's compensation, the date of deposit qualifies as the date of value. Mt. San Jacinto Community College District v. Superior Court, 40 Cal.4th 648, 666 (2007). Additionally, so long as the probable compensation deposit remains available to a landowner for prompt release, the landowner waives its right to challenge the taking if it withdraws the deposit. However, when no deposit is made in a condemnation proceeding, landowners remain free to seek to assign the trial date as the date of value. This decision sheds light on previous decisions that have had contrasting rulings on when a date of deposit is set.
Overall, California law has remained largely unchanged by the ruling in Kelo and the public and legislative backlash. Eminent domain law generally continues to evolve. Knowing how to navigate the changes in the taking process that have resulted and keeping an eye on future litigation and legislation will be key for public agencies and landowners in the years to come.
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