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Irvine Eminent Domain Legal Blog

CPUC: Don't read much into panel's wildfire rate hike ruling

One event does not a trend make. By definition, trends reflect "a general direction or something popular." In the context of the law, precedent is something that may herald a trend because it is "a judicial decision that should be followed by a judge when deciding a later similar case." The law is a complicated thing, however, and one can't always be certain when precedent will apply.

A recent action by the California Public Utilities Commission seems to serve as a case in point. In a 5-0 vote, the panel rejected a bid by San Diego Gas & Electric to raise rates to customers to offset some $380 million in losses it suffered from wildfires in 2007. Two people died and individuals suffered significant property losses from the fires. In making its case for the plan, SPG&E argued that it should be eligible to raise rates because of inverse condemnation.

Compensation for land and loss of goodwill

Eminent domain can be described as the government's power to buy property without consent by the landowner to the transcaction. The authority is not a one-way street, however. The law declares "just compensation" be made to the owner for the loss. The value of that compensation is what makes eminent domain and related issues dense and complex.

In California, just compensation is not limited to the real property taken. It can also be quantified in terms of fixtures, equipment, machinery, furniture, and even intangible assets, such as loss of business goodwill. For example, if you own a business on a parcel taken by eminent domain or inverse condemnation, forcing you to lose the benefits of that location and resulting in increased operating expenses and/or decreased profits, you could be entitled to compensation for loss of business goodwill. The factors to be measured can be as dense and complex as the real property portion of an eminent domain matter.

Remediation in eminent domain

In the real estate world in California, expansion into vacant land is perhaps not as common as redevelopment of properties that have already been improved and used. Available land within city and county boundaries tends to be limited. In the context of land acquisition, governments often seek to exercise eminent domain to acquire property that has a history of use,  and often times those uses can be related to industrial businesses that preexisted current legislation related to preservation of the environment and natural resources.  Sometimes, industrial uses have resulted in environmental contamination, such as lead or arsenic deposits that exceed the natural or acceptable levels; or TCE plumes over portions of the subsurface.  Sometimes, such contamination can occur from neighboring uses or adjacent properties.

Regardless of the state of the property in question, the law still requires the state to provide just compensation to landowners when seeking to take possession of property by eminent domain. When contamination is an issue or could be an issue in an eminent domain matter, who pays for the cleanup, and how? How does this affect the mandate of just compensation to be paid in eminent domain when the government has not caused the contamination?

These issues can be complex and common among sections of cities that are zoned for industrial uses when the government seeks to acquire property in those sections for a public project.

The reach of eminent domain over subsurface resources

Property owners take title to both the surface of the land they own, and in most cases, the subsurface areas underneath the defined property lines.  Unless a covenent or other recorded document legally gives title or rights to another party, the landowner generally enjoys ownership over minerals, water, oil, coal, and other natural resources that may exist subsurface.  Eminent domain proceedings can seek to acquire title to the subsurface rights of a landowner as well as the surface rights.  This can occur when subways or water pipes are built or extended through areas in which they previously did not exist.  To the extent a property owner enjoys the mineral and subsurface rights, they must be compensated for the taking, damaging, acquisition, or interference with those rights by a government entity.

Highest and Best Use of Property in eminent domain

Determining the property's highest and best use is one of the most fundamental aspects of valuation. The highest and best use is the most profitable legally permissible use for which the property is physically, geographically, and economically adaptable.  As applied in eminent domain, the four criteria that real estate appraisers generally consider are:

1. Legal permissibility.

2. Physical possibility.

3. Financial feasibility.

4. Maximum productivity. 

Zoning is one of the most important and analyzed factors in a highest and best use analysis.  A determination of the property's highest and best use is not necessarily limited by current zoning or land use restrictions. If a jury decides that there was a reasonable probability of a change in zoning or other use restrictions in the near future, then the jury must determine the highest and best use of the property based on that change.

Eminent domain used in establishing trolley stop and parking area

Traffic congestion is a serious problem in some areas of California. As areas continue to grow and expand, the need to relieve some of this congestion also grows. Most of the time, the property needed to facilitate this must be acquired from private individuals and various businesses. The process of acquiring this private property for public use is referred to as eminent domain.

The San Diego Association of Governments has recognized the need to extend the Mid-Coast Trolley line in an effort to relieve congestion within its area of concern. The association claims that this trolley line extension will assist in removing some of the traffic from San Diego's roadways throughout the day and especially during times of peak travel. However, in order to make the extension happen, the association will need to acquire the necessary property. La Jolla Village Square is the current owner of the property in question.

Peterson Law Group settles 5-acre Eminent Domain case

San Bernardino County seeks to implement the Bandicoot Basin Flood Control Facility near a portion of the California Acqueduct in San Bernadino County.  Peterson Law Group represented the owner of a 5-acre development property that the County's Flood Control District acquired as a necessary parcel to that project.  The property was vacant at the time the County filed the case in San Bernardino Superior Court, but its highest and best use was for residential subdivision development as allowed by the property's zoning.  Peterson Law Group was able to negotiate a settlement for nearly double the County's initial offer to the property owner.

Eminent domain basics

Americans in California and across the country are entitled to certain protections guaranteed by the U.S. Constitution, among other laws. Under the "Takings Clause" of the Fifth Amendment of the U.S. Constitution, and its California counterpart under Article I section 19(a) of the California Constitution, the government may "take," or initiate a forced sale of private property to the government for a public purpose or use, as long as the government pays the landowner "just compensation." The process in which this occurs is referred to as eminent domain, which is complex, multi-layered, and often intimidating to landowners and business owners facing this powerful aspect of government rights.

Situations in which eminent domain is initiated includes projects related to transportation, such as a freeway expansion or interchange realignment, water supply or retention structures, large scale flood control projects, such as dams and levees, or public building projects, such as city halls. Eminent domain can be initiated by various municipal and local entities, such as cities and county's, and also by the state of California and its various branches, such as the Department of Transportation or Public Works Board.

High Speed Rail in California update

The High Speed Rail Authority conitnues to move forward with its plans to construct and implement California's first bullet train, with service from Los Angeles to the Bay Area, and ultimately to Orange County and San Diego County.  Acquisitions have been underway for years in the Central Valley.  Peterson Law Group currently represents the owner of a 79 acre almond farm, whose property is being severed in half for the high speed train.

Several segments are under construction, and aquisitions of private property by eminent domain continue to take place along the Central Valley.  The aquisitions have typically been carried out by the State's Public Works Board.  However, sometime the Board works through local and municipal governments, such as Cities, to engage in studies and aquisitions for projects that appear to be local in nature, but will ultimately comprise the final alignment for the High Speed Rail.  These include grade separations (diving the road underneath the current rail alignment, which often requires realignment of the entire street), and local traffic "hot spot" configurations.

California eminent domain: Question property valuation

Eminent domain laws give the State and its subentities, Cities, Counties, Water Districts, Flood Control Districts, Public Works Departments, and other local municipalities the right to force a property owner to sell the government their property for a public use or project.  Prior to intitiating this power, the government entity must approach the property owner and appraise the property it intends to acquire. The law requires the government to make a "prelitigation offer" prior to intiating the condemnation proceeding in Superior Court.  

You do not have to accept this offer.  In fact, most property owners are unhappy with, and skeptical of these prelitigation offers.  The reasons is that Eminent domain laws are unique; complicated; and only apply in Eminent domain matters.  Valuation questions and issues are much different than a those that occur in a regular market transaction, primarily because a sale in Eminent domain is compulsory (involuntary).

The government is required to pay the fair market value for its acquisition.  "Fair Market Value" is a term unique to Eminent domain.  What does it mean? When the appraiser works for the government, how do you know that is what you are being offered?

Please contact Peterson Law Group if your property or business may be affected by a public project, public use, or other government activity.

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