The Payment of Damages as Part of Just Compensation
This Article is written by Owners’ Counsel of America for general informational purposes only. It is intended to assist landowners by providing them with some basic information about the concept of making a “Damage Claim” in an eminent domain. This Article is not to be viewed as providing legal advice or to be considered as a substitute for consulting with an experienced eminent domain, takings or property rights lawyer on the matters covered herein. The definition of all hyper-linked terms can be found in the Dictionary of Key Terms on the OCA Website.
While state laws may vary regarding how damages to an owner’s remaining property (also called the remainder or residue) are determined in an eminent domain case, most laws require that damages be made part of an owner’s just compensation if they have been proven to exist and are thereafter awarded.
In some cases, an owner’s damage claim can surpass (even to a substantial degree) the claim of just compensation for the value of the property being taken from the owner. Indeed, there are situations where the parties may decide to only litigate the issue of damages, having resolved the valuation issue for the property being taken. The point being made here is that damages are an important part of the just compensation issue and sometimes can be the primary source of disagreement between the parties.
The purpose of damages (sometimes called severance damages or consequential damages) is to provide compensation to the property owner for the adverse impacts of the condemning authority’s project on the owner’s remaining property. The elements which can form a basis for a damage claim vary substantially, with some jurisdictions adopting a broad standard for damage recovery (sometimes called a market-based approach) while others embrace a more restrictive standard. As a result, what elements are or are not recoverable as part of a damage claim may differ from state to state, meaning that a property owner is well advised to consult with an experienced eminent domain lawyer before making a damage claim, particularly a substantial damage claim. If a damage element is deemed legally impermissible in a certain jurisdicton the property owner will not be able to recover compensatino for that element.
Below is a list of some (but certainly not all) of the more common damage claims that have been made in eminent domain cases:
- Proximity damages
- Noise impact damages
- Traffic impact damages
- Loss of parking damages
- Loss or impairment of access damages
- Loss of landscaping or buffer damages
- Lot or building density impacts and damages
- Division or bifurcation of property damages
- Non-economic remnant damages
- Increase in development costs damages
- Reduction of wetlands damages
- Change of zoning or change of highest and best use damages
- Stigma damages (sometimes claimed in pipeline or overhead transmission line cases)
One area where state laws can differ markedly has to do with the issue of whether business losses are recoverable as damages in an eminent domain case. Some states do allow such damage claims to be made while others take the position that they are not compensable. Once again, consultation with an experienced eminent domain lawyer regarding the issue of recoverability is highly advised.
Diminution in Market Value
Many jurisdictions restrict damage claims to only those elements that can be proven to diminish the fair market value of the subject property. How diminution in value is proven may differ from state to state, but generally requires some objective evidence of the before and after value of the property at issue, with the difference in value attributable to the damages being claimed.
Cost to Cure
Another or related method of ascertaining damages to remaining properly in a condemnation action is sometimes called the “cost to cure.” Under a cost to cure analysis damages are based on objective evidence of the costs associated with curing, restoring, replacing or repairing the damages that result from the partial taking, depending upon the circumstances in the case. Evidence of cost to cure can come from appraisers, contractors, engineers, costs indexes or other knowledgeable expert witnesses or relevant resources.
Speculative Damages and Burden of Proof
Most state laws preclude recovery of a damage claim that is deemed speculative, meaning it is based on theory or conjecture without firm or convincing evidence. Many condemning authorities will take advantage of this rule by arguing that a property owner’s damage claim is speculative and therefore inadmissible to establish compensation. Because many state laws place the Burden of Proof on the property owner to demonstrate that damages exist, an owner should be prepared to meet this burden and also to counter a condemnor’s speculative argument by ensuring that all damage claims are based on reasonable and sound evidence.