Eminent Domain Law and Practice in Minnesota

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1 Eminent Domain Law and Practice in Minnesota Gary A. Van Cleve Larkin Hoffman Law Firm Igor Lenzner Rinke Noonan Law Firm

2 What is Eminent Domain? Right of the state to take private property for public use or purposes Inherent right of the sovereignty U.S. and Minnesota Constitutions require just compensation be paid for the taking Minnesota Constitution broader than Federal Minn. Stat. Ch. 117: Eminent domain law

3 Who Has Authority to Condemn? State and certain delegated agencies and political subdivisions: MnDOT Cities and Counties Housing and Redevelopment Authorities Port Authorities Metropolitan Council Watershed Districts

4 Who Has Authority to Condemn? Certain Non-Governmental Entities Utility companies Railroads

5 What is Public Use or Public Purpose? Eminent domain may only be used for a public use or public purpose. Minn. Stat , subd. 2. Public use or public purpose means exclusively: Possession, occupation, ownership, and enjoyment of the land by general public/agencies Creation or functioning of public service corp.

6 What is Public Use or Public Purpose? Mitigation of blighted area, remediation of environmentally-contaminated area, reduction of abandoned property, or removal of a public nuisance EXPRESS EXCLUSION: The public benefits of economic development, including an increase in tax base, tax revenues, employment, or general economic health, do not by themselves constitute a public use or public purpose. (Anti-Kelo exception)

7 Pre-Condemnation Procedures Identify Project and Property Needed Ensure Project Meets New Test for Public Improvement Studies, meetings, designs Identification of land needed and determination of value

8 Pre-Condemnation Appraisal and Negotiation Requirements (Minn. Stat ) Duties of Acquiring Authority: Must obtain: at least one appraisal Must confer: with property owner if reasonably possible Must provide: owner with copy of appraisal Must inform: owner of right to obtain appraisal Minn. Stat , subd. 2(a).

9 Pre-Condemnation Appraisal and Negotiation Requirements (Minn. Stat ) Property owner s right to reimbursement for appraisal Entitled to reasonable costs of appraisal Maximum of $1,500 for (i) one- or two-family homes and (ii) minimum damage acquisitions Maximum of $5,000 for other property types Reimbursement within 30 days of receiving owner s appraisal and reimbursement info Minn. Stat , subds. 2(b) and 2(c).

10 Pre-Condemnation Appraisal and Negotiation Requirements (Minn. Stat ) Negotiation requirement Authority must make a good faith attempt to acquire property by direct purchase Authority must consider appraisals, including any from the property owner if available If both full and partial taking being considered, authority must make good faith attempt to negotiate over both types of takings. Minn. Stat , subd. 3.

11 The Condemnation Action The Petition. Must describe the land and its owners Filed in district court of county where land situated Must state public purpose for taking Pray for appointment of commissioners to appraise damages for taking. Minn. Stat , subd. 1.

12 The Condemnation Action Notice of the petition Served in same manner as summons in civil action Must be served at least 20 days before hearing Must state any challenge to public use or purpose must be made at hearing Court order approving public purpose is final unless appealed within 60 days of order s service Minn. Stat , subd. 2.

13 The Quick Take Statute Traditional condemnation No transfer of title to condemning authority until completion of the action and final payment of award Minn. Stat Minnesota allows a quick take procedure under which title may be taken at the beginning of the process. Minn. Stat

14 The Quick Take Statute (cont.) Quick take condemnation Entitles condemning authority to take title to and possession of the land before value determined Authority must give minimum 90 days notice by certified mail to property owners of quick take Authority must pay owner or deposit money into court representing the approved appraised value Authority at the petition hearing must move the court to order transfer of title and possession

15 The Quick Take Statute (cont.) Condemning authority s approved appraisal value is not final Owner still has right to seek additional damages through the condemnation proceedings Tip: Attorney for fee owner should try to obtain consent of mortgage companies, tenants and other owners to obtain direct payment in lieu of the court deposit for the quick take Owner has right to move court for release of deposit.

16 The Eminent Domain Proceedings Two-stage (potentially) eminent domain proceedings in Minnesota Commissioners hearing Minn. Stat , , , District court jury trial de novo Minn. Stat , , , ,

17 The Commissioners Hearing District court appoints three disinterested commissioners and at least two alternates To ascertain and report the amount of damages Conflict of interest inquiry required Attorneys for property owners allowed input Real estate-related qualifications required Oath administered by court

18 The Commissioners Hearing How commissioners hearings differ from court proceedings No discovery except appraisal exchanges Parties must produce appraisals to each other at least five days before hearing. Minn. Stat , subd. 4. Rules of evidence? Not enforced Commissioners do not make rulings of law

19 The Commissioners Hearing Duty of the Commissioners: Commissioners must view the property Owner typically testifies along with appraisers; other witnesses may include engineers, brokers, planning consultants make a separate assessment and award of the damages which in their judgment will result to each of the owners of the land by reason of such taking and report the same to the court Minn. Stat

20 The Commissioners Hearing File their damages report with district court by court-established deadline (routinely extended) Minn. Stat Condemning authority must give notice of report filing to all interested parties Minn. Stat

21 District Court Proceedings Any party may appeal commissioners award to district court within 40 days of filing of commissioners report Any other party may cross-appeal within 50 days of filing of commissioners report Minn. Stat

22 District Court Proceedings Proper service of notice of appeal critical to perfecting the appeal. File notice of appeal with court administrator Serve notice by U.S. mail on all parties shown on condemning authority s affidavit of mailing Minn. Stat

23 District Court Proceedings Appealing parties have right to a jury trial Minn. Stat Trial is de novo Commissioners may be called as witnesses Owner has burden to establish damages Minn. Stat , subd. 1

24 District Court Proceedings Trial proceeds as any other civil trial. Appeal may be taken from the final judgment to Minnesota Court of Appeals as in any other civil case

25 Special Issues--Attorneys Fees New attorneys fees provisions in 2006 amendments Award of attorneys fees is based on percentage that final damages award exceeds condemning authority s last written offer Final award more than 40% greater than last written offer: court shall award owner reasonable fees and costs

26 Special Issues--Attorneys Fees Final award at least 20% greater than last written offer, but less than 40% greater: court may award reasonable attorneys fees and costs No attorneys fees if final judgment or award is less than $25,000 Attorneys fees also awardable for unlawful takings or takings not for a public use: court shall award reasonable attorneys fees and costs Minn. Stat (a) and (b)

27 Special Issues--Going Concern Going concern refers to the going value or business value attributable to the location of an established business Before 2006 amendments, very difficult to recover going concern value in condemnation In 2006, legislature defined going concern and circumstances where recoverable

28 Special Issues--Going Concern [B]enefits that accrue to a business or trade as a result of its location, reputation for dependability, skill or quality, customer base, good will, or any other circumstances resulting in the probable retention of old or acquisition of new patronage. Minn. Stat , subd. 1

29 Special Issues--Going Concern General rule under new statute: If a business or trade is destroyed by a taking, the owner shall be compensated for loss of going concern. Minn. Stat , subd. 2

30 Special Issues--Going Concern Avoiding liability for loss of going concern: If authority can show that loss not caused by the taking If authority can show loss can reasonably be prevented by (a) relocating the business in same/similar and reasonably suitable location, or (b) by taking steps, adopting procedures that reasonably prudent person would to preserve, or To award would be duplicative compensation

31 Special Issues--Inverse Condemnation Cause of action against the government to recover value property that has been taken in fact without exercise of eminent domain. If property owner successful, entitled to reasonable attorneys, appraiser, engineering fees and costs. Minn. Stat

32 Special Issues--Relocation Federal Uniform Relocation Assistance and Real Property Acquisition Act of U.S.C Incorporated by reference into Minnesota law by Minn. Stat , subd. 1. Moving expenses, referred to as relocation claims

33 Special Issues--Relocation Generally must submit relocation claims to condemning authority within 180 days after displaced person required to vacate or the final date of compensation for the taking. Claim must be supported by documentation for expenses incurred. Condemning authority must provide reasonable assistance in filing claims

34 Special Issues--Relocation Types of payments allowed: Moving expenses (49 CFR 24.31) Non-residential moves (49 CFR ) Reestablishment expenses (49 CFR ) Replacement housing (49 CFR )

35 What is Just Compensation? Measured by the fair market value of the property taken FMV: the amount a purchaser who is willing to buy the property would pay to an owner who is willing to sell it, taking into consideration the highest and best use of the property

36 What is Just Compensation? Determining just compensation--three valuation methods Market approach: compare to similar properties and adjust for differences Income approach: value of an income-producing property by converting cash flows and reversions into property value (capitalization of income) Cost approach: cost to construct less depreciation

37 Evidence of Market Value The Project Rule: enhancement or diminution in value caused by the governmental improvement not admissible State v. Anderson, 197 N.W.2d 237 (Minn. 1972) (enhancements) Regents v. Hibbing, 225 N.W.2d 810 (1975)

38 Evidence of Market Value Highest and Best Use: law requires that property be valued at its highest and best use. Four criteria are: legally permissible, physically possible, financially feasible and maximally productive Dictionary of Real Estate Appraisal, 3rd ed. (Appraisal Institute) at 171.

39 Evidence of Market Value Principles applied by Minnesota courts in determining highest and best use: Assemblage: if H&BU achieved through assembling parcel with others, evidence of likelihood of assembly will be heard. Regents. Zoning Change: if H&BU achieved through zoning change, probability of such change will be heard. State v. Briggs, 488 N.W.2d 811 (Minn. App. 1992).

40 Evidence of Market Value--Partial Takings Severance Damages. Where the entire parcel is not taken, the owner is entitled to compensation for the diminution in value of the remainder of the property after the taking, i.e., severance damages, a form of consequential damages. City of Minneapolis v. Yale, 268 N.W.2d 170 (Minn. 1971).

41 Evidence of Market Value--Partial Takings, Severance Principles Larger parcel rule: parcels of land may be considered together for purposes of measuring damages to remaining property after taking if the parcels are sufficiently connected. Yale. Mitigation/cost to cure: Owner has duty to mitigate damages. State v. Pahl, 95 N.W.2d 85 (Minn. 1959). Severance damages may, as a result, be limited to owner s cost to cure rather than diminution in value.

42 Evidence of Market Value--Partial Takings, Severance Principles Loss of access: Arises to level of a taking only when owner is left without reasonably convenient and suitable access in at least one direction. Hendrickson v. State, 127 N.W.2d 165 (Minn. 1964). New driveway access rule: 2006 amendments added provision allowing business owner compensation if loss of 51% or greater of driveway access and 51% decrease in revenue. Minn. Stat , subd. 4.

43 Evidence of Market Value--Partial Takings, Severance Principles Loss of visibility/construction interference: Both are factors in measuring diminution in value of remainder after taking. Going concern damages. See 2006 amendments, Minn. Stat and

44 Questions? END