California Eminent Domain Report

Most private development projects in California trigger some sort of discretionary public approval, whether it be environmental review, zone changes, permits, or other forms of entitlement approvals.  As part of that approval process, public agencies are more frequently demanding certain off-site public improvements to accommodate the proposed private development.  Such improvements could include, for example, street widenings to accommodate additional traffic, pump stations for additional water capacity, or flood improvements to address drainage or run-off concerns.  When constructing these off-site improvements necessitates acquiring private property, can eminent domain be utilized, and if so, how does the process work?

This may sound like the use of eminent domain for a private development, which is generally not permitted under California law after the dissolution of redevelopment agencies.  However, the off-site improvements -- while triggered by a private development -- are for the benefit of the public, and therefore eminent domain is permissible if all other requirements are satisfied.  Specifically, California Government Code Section 66462.5 provides that when a condition of a subdivision map approval or a development agreement requires the installation or construction of improvements on off-site property not owned or controlled by a developer, and title cannot be obtained by negotiated purchase, a city is required to commence proceedings to acquire off-site property by eminent domain or such off-site improvement conditions will be waived. 

In other words, if a local government agency conditions a development approval on the developer constructing off-site improvements, the developer is to attempt to acquire such private property via negotiation, and if unsuccessful, the city or county must use eminent domain to acquire the property or otherwise waive the condition. 

These situations sometimes become complicated; is the private developer supposed to follow the same acquisition process as a public agency, by sending out notices of intent to appraise, securing appraisals, approving just compensation, making offers, negotiating in good faith, etc.?  Or can the developer simply reach out to private owners as it would typically do in a private market transaction?  Would it be better if the local government agency takes responsibility on the front end for any off-site property acquisitions to avoid duplicating work or a messy hand-off if the developer’s negotiations are not successful?  Who gets to decide what appraisers to use, and what settlements to accept?  And importantly, who is ultimately responsible for the costs of title reports and/or litigation guarantees, appraisal costs, litigation expenses, costs for experts and consultants, court costs, attorneys’ fees, and deposits or just compensation payments?

Many of these questions remain the subject of negotiation between the private developer and the local agency.  Pursuant to said Section 66462.5, a city and a developer may enter into an agreement to allocate the costs and responsibilities for acquisition of such off-site property.  Both public agencies and private developers would be well-suited to ensure they are advised by experienced eminent domain attorneys in developing an efficient and cost-effective path forward.