|
Partial Takings
By M. Robert Goldstein & Michael J. Goldstein
The condemnation practitioner, as opposed
to the tax certiorari practitioner, when dealing with real
estate valuation, has to face two separate classes of appropriation
- total and partial. While no case in eminent domain is simple,
in the total taking scenario, all we have to deal with is
the proper compensation to be paid for the taking which usually
means, what is the market value of the property taken, i.e.,
direct damages.
Partial takings, however, are more complicated.
Not only are we concerned with the value of the part taken,
we must also look into whether or not the part not taken has
had its value affected negatively and if so, is it offset
by the positive effects of the planned improvement or by a
cost-to-cure.
This, of course, leads us to two more inquiries
when there is a partial taking. Is there a consequential damage
or not? If there is not, the inquiry, as to that, stops there
and we are back where we were in the total taking case, i.e.,
asking what is the value of the property taken. Believe it
or not, however, some people, and courts, have made even that
question more complicated but we will address that in another
column. First, let us address the question of consequential
damages.
For the purpose of this discussion, consequential
damages are those damages to the property not taken that have
been caused by the partial taking. This can be broken down
further into two more classes; (1) severance damages and (2)
consequential damages that occur by virtue of the planned
improvement for which the property was taken. The courts and
some practitioners have sometimes used the terms, "consequential
damages" and "severance damages" interchangeably
but we believe that only creates confusion and the distinction
is a useful tool. For the rest of this column, where we discuss
it, we shall distinguish between severance damages and consequential
damages.
Severance damages are damages that occur
simply because the property acquired is no longer a part of
what was once the whole property, i.e., it has been severed.
It does not matter why the property was acquired. An example
would be improved property in which the improvement has been
partially acquired and demolished. Left as is, following the
demolition, we usually have a smaller building with one side
exposed, clearly an untenable situation for the property owner.
Assuming, as we must, that most buildings in this condition
are unusable, the result of this severance, with nothing intervening,
is a total loss of the building and a total loss of value.
It does not matter what the property was taken for. The damage
is done by the simple act of the partial acquisition.
Of course, in the situation we describe above,
because what we are dealing with in the severance or consequential
damage claim is not a taking but a damage as opposed to what
we deal with in the direct taking, there is the duty to mitigate
the damage. That usually takes the form of a cost-to-cure
if, in fact, the damage can be cured. Assuming that the building
that is left can be used once the side facing the taken portion
is sealed up, the cost of sealing up that side is the cost-to-cure
that mitigates the damage that would have been the loss of
the entire building. It is axiomatic that the cost-to-cure
must be less than the consequential damage it is curing. If
it were the same or more, as a matter of common sense, it
mitigates nothing and who would bother? If the smaller building,
for any reason, is less valuable per square foot, FAR or any
other unit, we have a combination of a consequential damage,
albeit less than if the problem were not cured, plus a cost-to-cure.
Consequential damages, as we are using the
term here, are another thing. In this situation, it is not
so much the property that is taken that causes the damage
but the use to which the taken area is put. One must be careful,
however, to understand that it is not the use alone, regardless
of the real damage it may cause, that causes the compensable
damage, but the use in combination with and for which there
was a partial taking of property, causing a damage to the
remainder property which must be compensated. (South
Buffalo Rwy Co. v. Kirkover, 176 N.Y. 301, 68 N.E.
366; Hill & Aldrich v. Mohawk & Hudson River
Rwy Co., 7 N.Y. 152; County of Erie v. Friedenburg,
221 N.Y. 389, 117 N.E. 611; Bohn v. Railway
Co., 129 N.Y. 576, 29 N.E. 802). In this category,
as the elevated railroad cases tell us, there need be no direct
physical taking of corporeal real estate for there to be a
consequential damage. The taking of the easements of light,
air and/or access are sufficient. (Story v. New York
Elevated R.R. Co., 90 N.Y. 122 (1882)).
Be careful, when considering what we have
discussed above, to note that not all consequential damages,
no matter how real, are compensable. Examples are damages
caused by the diversion of traffic or damages to a business
(in New York) unless that damage to business can be translated
into a loss of rental value.
There is a practical problem in determining
consequential damages, using the definition we employ here.
Government being what it is and contractors being what they
are, more often than not, the valuation trial and certainly,
the preparation for it takes place before the construction
of the improvement. Of course, some things are self evident.
The construction of a sewerage disposal plant, a landfill
or a railroad outside your door, for valuation purposes, do
not present much of a problem. It does not take much imagination
to understand the deleterious effects on property that those
projects will cause.
As to those that are not so obvious, resort
can be had to what is actually planned. The construction plans
for what is proposed are usually available and one can look
to them to see whether a road will be built at, below or above
the grade of the remaining property when the taking maps do
not tell you. They will also tell you if the property, in
spite of the taking maps, are left with practical access.
In determining consequential damages caused
by the use to which the appropriated property is put, we are
guided by two immutable principles of condemnation law. The
first is that property must be valued and the right to damages
must be set as of the date title vests in the condemnor. (Wolfe
v. State of New York, 22 N.Y.2d 292, 292 N.Y.S.2d
635; Kahlen v. State of New York, 223 N.Y. 383,
119 N.E. 883; Buffalo Valley Realty Co. v. State of
New York, 273 N.Y. 319, 7 N.E.2d 297; Chester
Litho, Inc. v. Palisades Interstate Park Commission, 33
A.D.2d 572, 305 N.Y.S.2d 681).
The second is that damages must be determined,
not necessarily on what the condemnor plans to do but on what
it has the right to do. (Wolfe v. State of New York,
supra; Spinner v. State of New York,
4 A.D.2d 987; Morton v. State of New York, 8
A.D.2d 49; Weber v. State of New York, 25 A.D.2d
584, 267 N.Y.S.2d 152).
The first principle tells us that when we
look at the construction plans to determine the condemnor's
intentions, they must be the plans that existed on title vesting
date. If not, we resort to the second principle. That construction
plans are relevant has been considered by the courts. In Hill
& Aldrich v. Hudson River Rwy. Co., 7 N.Y. 152,
supra, the Court of Appeals said, ". .
. the plan of the road and the mode of its construction must
always be
before the appraisers and enter into and
modify the assessment of damages." And in In re
Grade Crossing Commissioner of the City of Buffalo, 6
A.D. 327, the Appellate Division said,
"The true rule — the only
rule which will do equal justice to all parties —
is to determine what will be the effect of the proposed
change upon the market value of the property....the
proposed plan of improvement must be considered as
a whole and the erection of the structure in the street
as a part or incident of it; and if such improvement,
or any part of it, will diminish the value of appellant's
remaining property, then that fact should be taken
into consideration by the commissioners."
But construction plans change and sometimes
they do not yet exist on title vesting date. That is why the
second principle must be considered, i.e., we must consider
that the condemnor has done everything detrimental that it
had the right to do. Remember, there is usually just one valuation
trial and we only get one bite at the apple. In the Spinner,
Morton and Weber cases, because the
State had reserved, in effect, the right to keep the condemnee
from the property appropriated, although it was not its current
intention, the Courts ruled that for the purposes of valuation,
it had, in fact, done so, and found a loss of access to the
remainder property. Had it not so ruled, and the State decided,
at some later date, after the valuation trial had finished
and damages without a loss of access been awarded, for some
reason, to deny access to the remainder property, it would
have been too late. The value of the remainder would have
been totally destroyed by the consequential damage and the
owner would have no recourse. He or she would not get a second
chance.
One more word of caution. Much has been said
and written in regard to partial takings, that the property
should (or must) be valued as it was before the appropriation
and then as it is after the appropriation, the difference
being the value of the property taken plus the consequential
damages. Care must be taken to use that concept judiciously
because, first, it is not universally true and second, if
it were, depending on the circumstances, it could result in
the condemnor paying less than the value of what it took.
That, however, is a subject that time and room will not allow
us to cover here. It will very likely be the subject of a
future column.
|
