An Altus Expert Services TM Presentation: The Expropriation Process

An Altus Expert Services TM Presentation: The Expropriation Process

A Perspective on the Expropriation Process: Compulsory Takings and Compensation

Issues Relating to a Partial Taking Where only a portion of a property is acquired, it is known as a Partial Taking and it concerns: a Larger Parcel what s affected! The Taking itself what s severed! The remaining lands or what s left over! Before and after scenarios what s changed!

The Larger Parcel Concept The term Larger Parcel is that part of a property that has: Ownership Common title Contiguity adjoining or separated, same ownership Unity of Use entire parcel under one use However, all three need not be present in each case

The Larger Parcel Concept

The Principles of Compensation: Heads of Claim

Ontario Expropriations Act, R.S.O. 1990, C. E.26 (2011) Sec 13, (2) Where the land of an owner is expropriated, the compensation payable to the owner shall be based upon, The market value of the land; the damages attributable to disturbance; damages for injurious affection; and any special difficulties in relocation

Definition: Market Value?

Ontario Expropriations Act, R.S.O. 1990 (Sec 14.(1)) The market value of land expropriated is: the amount the land might be expected to realize if sold in the open market by a willing seller to a willing buyer

Primary Valuation Methodology: Before and After Method

Before and After The value resulting from the before and after conditions in a property taking Factors of compensation are accounted in one lump sum authority will receive full, or at least partial, credit for any betterment It may result in no payment for part taken and therefore benefits the expropriating authority (U.S. Federal rule) favours the expropriating authority

Primary Valuation Methodology: Summation Method

Summation involves valuing the land taken adding the decrease in value, if any, to the remaining land by reason of severance damage or injurious affection. less special benefits separates values of the taking, damages and betterment. favours the owner who always receives at least the value of the land taken notwithstanding any beneficial effects or betterment

Heads of Claim: Disturbance Damages

Disturbance Damages inconvenience and cost of finding another residence an allowance for improvements the value of which is not reflected in the market value of the land relocation costs (moving, legal and survey costs, etc.) disturbance compensation to tenant business losses and goodwill disturbance compensation to a security holder

Heads of Claim: Injurious Affection

Ontario Expropriations Act, R.S.O. 1990, C. E.26 (2011) A statutory authority shall compensate the owner of land for loss of damage caused by injurious affection Injurious Affection where there is a taking the reduction in market value to the remaining owner s land caused by the acquisition or by the construction of the works thereon or by the use of the works thereon or any combination of them,

Ontario Expropriations Act (continued) such personal and business damages, resulting from the construction or use, or both, of the works as the statutory authority would be liable for if the construction or use were not under the authority of a statute, Injurious Affection where there is a no taking resulting from the construction and not the use of the lands by the authority Reduction in the market value of the owner s land Personal and business damages

Consequential Damages : Types of Injurious Affection

Severance Damages Where the remaining land is less valuable: Landlocking loss of driveway/field entrances Access to public utilities Change in shape, size and configuration of remainder Significant changes in elevation and street grade Hydrological impairments Economic redundancy of site improvements

Proximity Damages Remaining land is less valuable due to intended or actual use of the project: Light, air, noise issues Site egress and ingress Loss of view and/or visual impairments Safety and traffic hazard concerns Public perceptions (stigma)

No Taking of Land Must be due to the construction and not the use: Antrim Truck Centre Ltd v Ontario (Ministry of Transportation) No land taken Claim for loss in market value and business damages arising out of road construction On March 7, 2013, the Supreme Court of Canada upheld an award by the OMB for injurious affection

Case Study: Ammouri v. Ontario (MTO)

The Highway Project

The Subject Site

The Taking

Any Severance Damages? The site was reduced by approximately 7.2% in size The general shape and configuration remained unchanged The field entrance and site access remained unchanged no immediate or anticipated changes in the availability of municipal services No change occurred to the agricultural use of the lands no change in the potential use of the site

Conclusion the remaining lands of the Subject Property were not affected by severance damages arising from the Taking by the Authority

Pure Injurious Affection Any effect of Highway 10 in terms of light, noise, air and view issues would be expected to be revealed in the pricing of real estate over time Within the completed section of the highway to the south and the Highway Project itself.

Pure Injurious Affection No conclusive market evidence, direct or indirect, that would attribute the slower appreciation in market value specifically to the Highway Project. concluded that the subsequent widening and other improvements to the highway would not have any affect to the market value of the remaining lands The Remainder would not suffer any degree of injurious affection arising from the actual or intended use of the portion taken by the Authority.

What Injurious Affection? Claimants appraiser estimated injurious affection loss of 25% of the remainder s market value The Board commented that the appraiser s approach was to assume de facto injurious affection, to which the finding of an ongoing unrelated study was used for quantification Injurious affection is not axiomatic as a consequence of a taking. Board s Decision: award for the fee value of the taking; no compensation for consequential damages

Benefits: General Benefits

General Benefits Accrues to an entire neighbourhood or community Beneficial effect on all property value subject to the Authority s expropriation and works Example, the DRIC project that will provide an improved border access between Canada and the U.S.

Detroit River International Crossing (DRIC) Project: Benefits to the Community at Large

Benefits: Special Benefits

Special Benefits (Betterment) Accrues directly and solely to the advantage of the property remaining after a partial taking: Near interchange Increase road frontage Increased visibility Improved drainage Better access

Set-Off Against Damages Ontario Expropriations Act, R.S.O. Sec 23: The value of any advantage to the land or remaining land of an owner derived from any work for which land was expropriated or by which land was injuriously affected shall be set off only against the amount of the damages for injurious affection to the owner s land or remaining lands.

The Formula Value of the Remainder, After (Separate Parcel) Less: Value of Remainder, Before (Part of Whole) = Special Benefits: Or, alternatively: The Value of the Remainder, Before Taking (HBU) Less: the Value of the Remainder, After Taking (HBU) = Special Benefits or Betterment

Case Study: Mayfield v. Crown

Path of the Highway Project

Subject Property, Before

Subject Site, After

Valuation of the Lands Taken Market Value of the Subject Property (Before) Land Use Acres Rate/Acre Market Value Total Workable Lands 65.9 $80,000 $5,272,000 Conservation Lands 13.8 $7,500 $103,500 $5,375,500 Market Value of the Lands Taken Land Use Acres Rate/Acre Market Value Compensation Workable Lands 21.3 $80,000 $1,704,000 $1,704,000

Valuation of the Remainder Market Value of the Remaining Land (Based on the Before HBU) Land Use Acres Rate/Acre Market Value Total Workable Lands 44.6 $80,000 $3,568,000 Conservation Lands 13.8 $7,500 $103,500 $3,671,500 Summary: Acres Market Value Subject Site, Before 79.7 Estimated Market Value $5,375,500 Subject Site, After 58.4 Estimated Market Value $3,671,500 Fee Taking 21.3 Compensation for Taking $1,704,000

Valuation of Special Benefits Market Value of the North Parcel (After HBU) Land Use Acres Rate/Acre Market Value Total Developable Lands 28.8 $160,000 $4,608,000 Conservation Lands 13.8 $7,500 $103,500 $4,711,500 Market Value of the South Parcel (After HBU) Land Use Acres Rate/Acre Market Value Total Developable Lands 15.8 $250,000 $3,950,000 $3,950,000 Market Value of the Remainder (With Betterment) Remainder Lands, Including Both Parcels Total Value: $8,661,500

Determination of Betterment Estimating Betterment from Severance Acres Market Value HBU, Before Taking 58.4 Estimated Market Value $3,671,500 HBU, After Taking 58.4 Estimated Market Value $8,661,500 Totals: ($4,990,000) Estimating Injurious Affection to North Parcel (Severance Damages) Land Use Acres Value Loss Total Developable Lands 28.8 $4,608,000 50% $2,304,000 Conservation Lands 13.8 $103,500 0% $0 Totals: $2,304,000

Compensation Summary Market Value of the Lands Taken Land Use Acres Rate/Acre Market Value Compensation Workable Lands 21.3 $80,000 $1,704,000 $1,704,000 Consequential Damages/Betterment Plus: Injurious Affection (Severance Damage & Loss of Access): $2,304,000 Less: Betterment as a Set-Off to Estimated Injurious Affection ($4,990,000) Balance: $0 Estimated Compensation to the Owner (Net of Betterment and any Injurious Affection to the Remaining Lands): $1,704,000

Case Study: Gillespie v. Ontario (MTO)

The Highway Project

The Subject Site (Before)

The Subject Site (After)

Case Summary Lands required to improve highway interchange Municipal plans generally encouraging local development Claim arising out of service road reconfiguration and yard Configuration necessity of planning regime not scheme. Claimant benefited greatly by the road construction No injurious affection

Valuation, Before & After Market Value of the Subject Property (Before) Land Use Acres Rate/Acre Market Value Total Potential Commercial 7.4 $150,000 $1,109,655 Potential Industrial 31.6 $45,000 $1,422,000 $2,500,000 Less: Cost of Services and Service Road ($631,744) Estimated Net Value of Raw Land $1,899,911 Rounded $1,900,000 Betterment from Severance Acres Market Value HBU, Before Taking 31.6 Estimated Market Value $1,422,000 HBU, After Taking 31.6 Estimated Market Value $1,828,873 Totals: ($406,873)

Board Decision OMB Decision /Divisional Court Appeal HBU, After Taking 31.6 acres Estimated Market Value $1,828,873 Less: Cost of Services and Service Road ($631,744) Less: Betterment to the Remaining Lands ($406,873) Net After Value $789,656 Compensation Award Before the Taking: $1,900,000 After the Taking: $789,656 Compensation to the Property Owner $1,110,344

Appeal and Compensation Ontario Court of Appeal HBU, After Taking 31.6 acres Estimated Market Value $1,828,873 Less: Cost of Services and Service Road ($145,121) Less: Betterment to the Remaining Lands ($406,873) Net After Value $1,276,879 Compensation Award Before the Taking: $1,900,000 After the Taking: $1,276,879 Compensation to the Property Owner $623,121

Conclusions Board decision: Advantage to remaining land derived from scheme cannot be factored into market value Statute clearly removes advantage from the calculation of market value

Case Study: Green-Life Proteins v. Ontario (MTO)

Case Summary Lands required for highway improvements Lands were used for growing alfalfa crops Claim for the fee taking had been settled earlier Claim for Business Damages (loss of income for inability to process alfalfa crop Increase in value to remaining parcels setting-off claim for injurious affection in full

Background MTO expropriated a 10-acre parcel bisecting a 38-acre parcel of agricultural land located in Brantford Township The taking was for the construction of a ramp leading to Highway 403 Compensation was settled by agreement without prejudice to a claim for substantiated business loss The claim was for lost profits - deprived of the opportunity to use the lands in 1990 for the growing of alfalfa

Issue of Betterment The business damages were agreed at $36,907 The Authority s appraiser estimated that the remnant parcels, after the taking, a market value greater than the value, before taking Change in highest and best use! MTO submitted that this was betterment which must be used to set off Green-Life s claim for injurious affection

The Findings and Award The findings of the Board: a valid claim for business damages of $36,907 betterment of $60,000 that exceeded the claim for business damages business damage claim was completely offset by betterment No reward of compensation

Recovery of Costs MTO subsequently brought a claim seeking it s a portion of its costs (about $43,120) from the owner Prior offer of $60,000 to settle the owner s claim, which was refused Cost consequences to a failure to accept a bona fide offer owner had ignored these consequences at its peril MTO was awarded costs for its appraisal fees and motion costs in the order of $15,000

On behalf of Altus Expert Services TM : Thank You!