California Eminent Domain Report

The City of Fremont announced that it plans to condemn a small, 1,249 square foot property located at the corner of Warren Avenue and Kato Road in order to facilitate its Warren Avenue Grade Separation Project.

There's nothing particularly notable about the announcement, except for a potential regulatory overlay.  The parcel is apparently owned by AT&T Communications, and even though the property currently lies vacant, AT&T is apparently taking the position that it cannot agree to any deal with the City without first obtaining approval from the California Public Utilities Commission.  That is, unless the deal comes under the ambit of an ongoing eminent domain action.

As a result, though the December 30 article in the Mercury News, City of Fremont to enact eminent domain on another Kato Road property makes it sound like the parties are working amicably towards an agreement, AT&T actually suggested that the City proceed with the eminent domain action. 

This is not as unusual as it sounds.  Property owners and government agencies routinely engage in "friendly condemnations" where the amount of just compensation isn't seriously in dispute.  This can happen for any number of reasons.  For example, friendly condemnations happen:

• Because the owner wants to secure the favorable tax treatment that Internal Revenue Code section 1033 provides (though acquisitions made under threat of eminent domain should be sufficient to trigger these provisions);

• Where a property owner approaches the government with a plan to have the government purchase the property, and the parties agree to a "friendly condemnation" to secure section 1033 tax treatment for what would otherwise be an ordinary, arms-length sale;

• Where the involvement of third-party interest holders require condemnation to secure clean title in a transaction - or timely possession - where the fee owner has already agreed to a purchase price; or

• Where, as here, the owner is somehow precluded from making a decision to sell voluntarily.