|
Condemnation For The General Practitioner
By M. Robert Goldstein
Your client has called you in a panic. He has read in the
newspapers that a new project is to be built and his business
premises are right in its path. He wants you to do something
- anything. That is what this article is all about. It is
the practical advice we would be giving our clients in that
situation.
To begin with, he wants to know whether he can do something
to stop the project or take him out of it and, if not, how
long will he have to stay in business in his premises. Then
he wants to know whether he should get a new location right
away and how much he will get paid for relocating, for the
trade fixtures he installed and for the real estate he owns.
Of course, he also wants to know how long it will take to
get paid and whether he has to get involved in litigation
at all. Then he wants to know about his friend across the
street who will not be condemned, but might as well be during
the time the project is under sonstruction. All he wants is
for you to capsulize Nichols on Eminent Domain in one phone
call.
To begin with, tell him to keep his shirt on, nothing in
condemnation happens very fast or rarely so. Proposals for
condemnation are floated quite often, with nothing happening,
at least not right away. But this project, he tells you, is
serious, it even has its funding spoken for and he hears the
local government is being pushed to approve it. What can he
do to stop it.
While the power to condemn is vested in the State legislature,
it can delegate that authority by appropriate legislation
to governmental and quasi governmental bodies, as well as
to private corporations, such as railroads and utilities.
To find out what their power to condemn is and how far it
reaches, one must look at the particular statute creating
the entity. In the cases of cities, its charter, in the case
of towns and villages, the Town Law and Village law, for utilities,
the Transportation Corporations Law, etc. These statutes merely
define their substantive power. It is the Eminent Domain Procedure
Law ("EDPL") which governs the procedure, both in
approving a condemnation and arriving at "just compensation."
But even in saying the latter, it requires a modification
as far as approving a project is concerned. EDPL provides
for an exception to applying its provisions, if the entity
to exercise the power has a substitute procedure, such as
the Uniform Land Use Review Procedure ("ULURP")
in New York City, which gives the public a aright to be heard
before the project is approved. And in the procedure for fixing
the compensation to those whose property was taken, an exception
to the EDPL procedure is carved out for the City of New York
where Title 5 of the Administrative Code of the City of New
York must be followed in conjunction with EDPL.
As far of the process for approving a project is concerned,
you can safely advise your client that if he is to avoid having
his property condemned, he almost always should forget about
doing it by means of a legal proceeding. While property may
only be condemned for a "public use" or "public
purpose," the terms being synonymous , the definition
of those terms, has become so broad that almost anything a
condemnor wishes to do for the health safety and welfare of
the public fits under tis umbrella. And while th Courts are
the ultimate arbiter, you can count on the fingers of one
hand the number of times a court has set aside a taking on
those gournds in the past fifty years. If he insists on litigating,
the best hope is on environmental grounds, and is usually
only good as a delaying tactic. Unless the client sees a benefit
for litgating for the sake of the litigation itself, that
is not the road to go. The best hope of stopping a condemantion
is by means of the political process. If that does not work,
the next line of defense is to get paid for what had been
taken.
So how long does the process of condemning the property take?
The short anser is that there is no answer. While every statute
has built into it a minimum time table, it is rare for that
minimum to be followed. I think I once computed that after
allowing a reasonable time to prepare the necessary papers
and allowing for the minimum amount of publication and notices,
public hearings and findings that it should take four months
to get through EDPL and take title in the condemnor (ULURP
is a nine month process). But very often EDPL is only at the
end of a protrcted public discussion of whether a project
is to go forward or not. Does anyone still remember the Lower
Manhattan Expressway that was discussed for twenty years,
approved and then killed at the eleventh hour by a newly elected
Mayor Lindsay? How about Westway? Will there be a new domed
stadium for the Mets on the industrial area adjacent to Shea
Stadium? Will Oil City in Syracuse be condemned? Or the airport
be expanded in Buffalo?
So what is required under EDPL. First, a notice, by publication
and posting, of a public hearing with respect to whether condemnation
should take palce. After the proposed condemor makes its decision
and publishes it in local and official newspapers, there is
only a thirty day period in whih to lauch a legal challenge.
If not started during that short time period, it cannot be
taken thereafter. The condemnor may move the Court upon mailed
notice to the owner and by publication, for an order called
a Damage Map, vests title to the property in the condemnor
by operation of law, called a condemnation. That is , unless
it is the State itself which is doing the condemnation, where
the State merely files a taking map in the office where deeds
are recorded, without the necessity for a court order giving
permission to do so, called an appropriation. Thereafter,
the condemnor must give notice of the taking by publication
and mailing and set a deadine for the filing of claims. While
the claim is not juisdictional so as to start the proceeding,
as would a summons be in other litigation, it is a pleading
and like all pleadings it is in the discretion of the Court
as to whether pleadings it is in the discretion of the Court
as to whether to permit a late pleading, if the deadline is
missed. Where it is the State, there is a three year statute
of limitations for filing a claim after personal service.
Further, interest on the award stops six months after title
vesting, where the State is the condemnor, until a claim is
filed.
Thereafter, the rules of the particular court apply for the
fixation of the value of the property. Essentially they provide
that the appraisal reports which constitute the proof of the
value of the taken property and the damage to the untaken
property, where only a part of a property is taken, must be
filed with the Court and/or exchanged with the opposing side
within nine months in the Supreme Court, and six months in
the Court of Claims, unless the time is extended by leave
of the Court.
So now your client wants to know about how much he will be
paid. Believing in giving the bad news first, you explain
to him about good will, business interruption and relocation.
In New York yuou cannot be paid for either the loss of good
will or business damage on the theory it has not been taken
from you as you are free to reestablish your business at any
other location the zoning laws permit. And as to his neighbor,
none of whose property has been taken, but whose business
will suffer both from the street being torn up in front of
his premises during consitution and his customers leaving
th eneighborhood, he has no right of claim in the proceeding
to fix compensation for the taking. It is"damnum absque
injuria." The ticket for admission to the proceeding
is a physical taking of property unless a special statute
expands that right as is the case where the City of New York
acquires property for its watershed. As for costs of relocation,
while he can include in his claim in the condemnation proceeding,
the costs of relocation of his "trade fixtures",
he cannot do so for his inventory, furniture and other personal
property. Those he can recover for as part of his administratively
paid relocation payment, which cannot by statute exceed $25,000,
pursuant to General Municpal Law, Sec. 74(b), unless the project
is federally funded, in whole or in part, in which case there
is no cap on the payment, except what is reasonable and necessary.
As for his real estate, while the constitutional requirement
is "just compensation", in practical terms this
is equated to "fair market value." But as beauty
is in the eye of the beholder, so is value. It is the rare
buyer and seller who intially agree on what is a fair price
and the fixing of value is more an art than a science. But
since value in condemnation is fixed in court proceedings,
unless the parties can agree as to what is a fair value, without
resort to the Courts, the fixation of value is hemmed in by
all manners of Court rules and strictures relating to procedures
as to how you fix value, what evidence can or cannot be used
in the process and even what it is.
The procedure starts with the process of the condemnor making
an offer to buy the property at what it deems to be its fair
value. Since fixing value is an art and value is a matter
of opinion, the evidence of value is opinion evidence from
an expert witness, an appraiser, whether of the real estate
or the trade fixtures, The amount of the offer must be the
condemnor's "highest approved appraisal," if more
than one appraiser was retained to appraise the property.
But even there, if the condemnor fails to make an offer prior
to the condemnation, it is not jurisdictional so as to preclude
the institution of the proceeding. The owner has the option
of accepting the offer and calling it a day or merely accepting
it as an interim payment, and advance payment, and seeking
to recover what he deems to be its fair value. Of course,
the condemnor is well advised to make an offer since at the
end of the litigation, when the Court may be asked to determine
whether the owner is to be reimbursed for his litigation costs,
as EDPL provides, the determinant will be whether the owner
was made an offer giving him the option to avoid having to
litigate the value.
Valuation of the property is as simple and as difficult as
determining what is in the minds of buyers and sellers of
real estate in deciding what price should be paid for a particular
property, with some noteworthy differences. In the market
place, the seller sells only what he owns. Thus, if the property
is leased at a particular rent, the property is sold subject
to the tenant paying that rent, for the term of the lease,
and with market rent thereafter. If the rent paid is more
than market, it requires a judgment of how good the tenant
is for a judgment, if he defaults, while, if at less than
market, a judgment of what the rent will be a the end of the
lease and a discount for the below market rent until then.
Condemnation ignores the lease, if it is not reflective of
a fair rent at the time of the taking, as a condemnation taking
includes within it all of the interests in the property, including
the lease, and leaves ti to the parties to determine, by means
of the terms of the lease (condemnation clause), how the award
shall be divided, if at all, between the landlord and the
tenant. While most condemnation clauses preclude a tenant
recovering tor the value of his lease, it is for the landlord's
benefit, not the condemnor's. Thus, the property is valued
as free and clear of the lease.
Not all properties are sold for income, such as private homes.
There the value is fixed by comparison to the sales of other
similar properties, with the real estate expert making subjective
adjustments in what the price differential would be for the
different attributes of the comparison properties to the condemned
property. Then, there are the properties which are rarely
sold and are not built to produce rental income, the so called
specialty buildings, such as churches, schools and clubhouses.
Since the other two methods of valuation cannot be used an
artificial measurement of value is the result, i.e., the cost
of reproducing the building less its depreciation, both physical
and functional, but not its bookkeeping depreciation.
You explain to him that in the final analysis, it is the
Courts duty to be fair both to the property owner but also
to the public. And the Court will try to do just that with
the help of the attorneys who help to provide the facts and
law on which they base their judgment.
A member of the Association's House of Delegates, M. Robert
Goldstein is a partner in the New York City law firm of Goldstein,
Goldstein, Rikon & Gottlieb, P.C. An expert in the field
of condemnation law, Mr. Goldstein, for the past 24 years,
has authored a monthly column on Condemnation and Tax Certiorari
for the New York Law Journal. He is Secretary of the New York
County Lawyers Association and a member of its Board of Directors
and Executive Committee.
Back to first page of publications
|
