PRE-LAWSUIT CONDEMNATION ISSUES
Before filing an eminent domain lawsuit, an agency must submit a good faith offer identifying both the rights they seek to acquire and the just compensation being offered. Since agencies are entitled to gather information to support a good faith offer, it is best to retain counsel as soon as possible.
The Uniform Condemnation Procedures Act (“UCPA”), MCL 213.51 et. seq. provides procedures that condemning authorities must follow both before filing and during an eminent domain lawsuit. This post touches on some of the procedural issues that arise before an eminent domain case is actually filed.
An “agency” can include both government and private entities such as utility companies. MCL 213.55 requires the agency to submit a good faith written offer. A good faith offer identifies the amount of just compensation that the agency is willing to pay. “Before initiating negotiations for the purchase of property, the agency shall establish an amount that it believes to be just compensation for the property and promptly shall submit to the owner a good faith written offer to acquire the property for the full amount so established.” Usually the good faith offer is based upon an appraisal. In some instances, municipalities will based good faith offers upon information prepared by an assessor or utility companies may apply a per lineal foot value.
When using their condemnation rights, agencies are obligated to pay just compensation that takes into account a number of factors. First, they must pay for the real estate that they are actually acquiring. Second, if they are not taking all the property owned by a particular owner, it is a partial taking and they must pay damages to the remainder if they exist. Agencies frequently retain appraisers who undertake “part taken” appraisals that conclude that no damages to the remainder exist with no supporting analysis. Agencies must pay for any fixtures that they are taking. Finally, agencies must pay for certain types of damages (depending on the situation) that occur to a business.
Obviously, in order to properly evaluate these issues, agencies should first understand the issues that are created by the taking. In order to prepare a good faith offer, the UCPA authorizes the agency to enter the property but only after notifying the owner and providing the opportunity to accompany. The agency may also obtain certain financial records. It is best to retain an attorney who understands this process at the outset.
An anecdote illustrate the importance of a property owner retaining an attorney early in the condemnation process. Early in my career, I was involved in a case that required the relocation of a machine shop. The agency did not include just compensation owing for fixtures as part of its good faith offer and sought to avoid reimbursing attorney fees paid by the owner when fixtures were included in the final award. The agency claimed that the owner had stated that he planned on relocating all of the fixtures and that it did not make a good faith offer due to that statement. The owner denied making the statement. If I had been representing the owner at that time, I would have never allowed him to meet with the agency to create the opportunity for this dispute to arise. Further, I would have insisted that the agency submit any questions to the owner in writing so that a record would exist of the information exchanged. However, that owner had not retained an attorney. As a result, the Judge denied reimbursing a portion of the attorney fees incurred by the owner, all because the owner did not understand the pre-lawsuit condemnation procedures.
On the other hand, I once tried a case in which the agency’s appraiser concluded that no damages to the remainder existed – without ever leaving the street to view the property over which an easement was being imposed. I established this fact before the jury because the appraiser could not confirm that he followed the pre-lawsuit procedures by obtaining formal permission to inspect the property. The jury did not find that appraiser credible and awarded about 90% of what we requested or about fifteen times what the agency had offered.
Understanding these procedures can shape how a condemnation lawsuit will later proceed. Therefore, they are very important and owners can avoid pitfalls be retaining experienced counsel early in the process. If you have any questions about any eminent domain issues, please do not hesitate to ask me.