EMINENT DOMAIN COMMENT
What should an appraiser do if the public project for which the property is being acquired (and appraised) has affected the value of that property? Ignore that effect, sometimes. This is established law but something that is often overlooked in eminent domain appraisals.
Section 1263.330 of the California Code of Civil Procedure, which governs eminent domain appraisals, provides as follows:
“The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to any of the following:
(a) The project for which the property is taken.
(b) The eminent domain proceeding in which the property is taken.
(c) Any preliminary actions of the plaintiff relating to the taking of the property.”
Government Code section 7267.2 provides a similar rule.
So why do I say sometimes? Because there is an exception. The appraiser should not always ignore the positive effect the project has had on the value of the subject property (i.e., project enhancement).
In Merced Irrigation District v. Woolstenhulme (1971) 4 C3d 478, the California Supreme Court explained when “project enhancement” should be considered by an appraiser in the eminent domain setting.
“During that period when it was not likely that his land would be condemned, the fair market value of the property may have appreciated because of anticipation that the land would partake in the advantages of the proposed project. The owner would be entitled to such increase in value. On the other hand, once it becomes reasonably foreseeable that the land is likely to be condemned for the improvement, ‘project enhancement,’ for all practical purposes, ceases.Thus, in computing ‘just compensation’ in such a case, a jury should only consider the increase in value attributable to the project up until the time when it became probable that the land would be needed for the improvement.” (Bold added.)(Id. at 497-498.)
Why is this fair? The Court in Woolstenhulme explained it as follows:
“We have determined that it would be unfair, in computing just compensation, to eliminate the appreciation in market value which a specific piece of property in fact enjoyed before it was designated for condemnation, since that would in effect deny to the owner the market value of his property prior to the time it was pinpointed for taking.” (Id. at 484.)
(See also, People ex rel Department of Water Resources v. Andresen (1987) 193 CA 3d 1144, 1153-1154 and City of San Diego v. Barratt Am. Inc. (2005) 128 CA4th 917, 940-945.)
