Over the years, the approval process for development projects in California has become more burdensome, more difficult, and more time consuming. The project proponent -- whether a private developer or a public agency -- spends months, and usually years, addressing environmental issues, processing entitlements and, for bigger projects, often facing court challenges. But what does this have to do with eminent domain?
Well, property owners and business owners typically become aware of potential government projects very early in the planning process. And while the government is still waiting for project approvals (approval of an Environmental Impact Report, for example), the owners whose property may be acquired for the project are left facing extreme uncertainty which creates a "cloud of condemnation" over their property -- and which makes it nearly impossible to sell, process entitlements, find tenants, etc. Unfortunately, the longer the government's approval process takes, the longer the owners face this uncertainty.
A good example of this is taking place right now in the City of Exeter. According to a Visalia-Times Delta article, "City of Exeter bows out in dispute between residents, school district," the Exeter public school district is looking to expand one of its elementary school campuses, and the proposed expansion site requires the acquisition of eleven properties. Owners obviously fear their property may be acquired by eminent domain, but the school district feels it cannot begin the negotiation/eminent domain process yet because the site has not gone through the full approval process (meaning there is no guarantee the project will ultimately be built on this particular site).
(This particular example also has an interesting twist in that the City got involved and attempted to negotiate a memorandum of understanding by which the school district would not use eminent domain for the properties. The school district declined to enter into the agreement, further fueling the belief that eminent domain may be used in the future.)
Proposed public school sites, for example, require soil samples, land surveys, and many other inspections and approvals before the proposed site is ultimately approved. On the one hand, this drawn out approval process for a proposed school site makes sense. We do not want our children to go to school on a daily basis on a site that could be potentially contaminated with hazardous materials, or that has other issues (such as traffic concerns, inadequate recreational space, etc.). On the other hand, however, during the long approval process, the potentially impacted property and business owners may face uncertainty, decreased property values, lost tenants, and the inability to sell. Are these losses compensable as a type of precondemnation damages?
Generally, such impacts suffered by the property and business owners are non-compensable where the project has not been formally approved and the government has not engaged in other types of unreasonable conduct. While this may seem unfair to the impacted property and business owners, if this were not the case, government agencies could face liability on each and every proposed site even if that site is not ultimately selected. I unfortunately do not have a good answer for how to deal with this dilema other than to urge public agencies to be forthright and keep the public informed during the process. From a property owner perspective, there may be recourse available if the agency makes announcements of intent to condemn or engages in other unreasonable conduct. It probably makes sense for a property or business owner to consult with an eminent domain attorney early in the process to understand the owner's rights, even if the condemnation seems far in the future and may not ultimately take place.
Brad Kuhn, Chair of Nossaman's Eminent Domain & Valuation Group, guides private and public sector clients through complex real estate development and infrastructure projects – particularly with eminent domain/inverse ...
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