Eminent Domain Blog : Pennsylvania Eminent Domain Lawyer & Attorney : Fox Rothschild Law Firm : Condemnation, Real Estate Valuation : Philadelphia, Bucks County, Pennsylvania

Forty-two U.S. appraisal firms announced March 18 that they now are operating as Valbridge Property Advisors. The new firm is comprised of independent, local-market valuation firms with each office run by the local practice leader who must hold an MAI designation of the Appraisal Institute.

The new firm will specialize in office, industrial, retail, multifamily, hospitality, recreation and other special-purpose property types, and the MAI designation is held by appraisers who are experienced in the valuation and evaluation of these types of properties, as well as by those who advise clients on real estate investment decisions.

The firm is shareholder-owned with a board of directors and officers, including Richard L. Armalavage, MAI, serving as president and chief executive officer. It is headquartered in Naples, Fla. “Client demand for a strong independent national commercial property appraisal services platform has driven the formation of Valbridge,” Armalavage said in a news release. “Valbridge will be able to maximize opportunities for clients by elevating industry standards for accuracy, integrity, reporting and technology in service to current and future clients.”
 

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Legislation was introduced in the Pennsylvania General Assembly to expand the ability of real estate sales professionals to provide Broker Price Opinions and Comparative Market Analyses outside of the real estate brokerage context. This legislation would amend the Real Estate Licensing and Registration Act and the Real Estate Appraisers Certification Act.

A Comparative Market Analysis or Broker Price Opinion is developed by a licensed real estate broker, associate broker, or salesperson and provides an estimate of the probable selling price or leasing price of a particular parcel of property. Currently, a Pennsylvania licensed real estate broker or salesperson is permitted to perform a CMA in the real estate brokerage context for “the purpose of determining the asking/offering price for the property by a specific actual or potential consumer or for the purpose of securing a listing agreement with a seller.” Brokers and salespersons are currently prohibited from doing CMAs outside the brokerage context because a value or price opinion provided for a fee is defined in PA law as an “appraisal” and requires an appropriate appraisal license or certification to be held by the individual performing that work

The legislation – SB 869 – was introduced in the Pennsylvania Senate on April 18, 2013. It is sponsored by Sen. Robert M. Tomlinson and has 16 co-sponsors. Senator Tomlinson is the Chair of the Senate Consumer Protection and Professional Licensure Committee.
 

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One of the communities hardest hit by Hurricane Sandy is preparing to use eminent domain to take easements from oceanfront homeowners who are holding up a beach replenishment project, according to the Newark Star-Ledger. These homeowners won't sign easements that would allow federal officials to carry out the work. Mantoloking saw every one of its 521 homes damaged. The Mayor stated the town has no choice if it wants to survive. He said Mantoloking has either signed easements or has verbal commitments from 121 of 128 oceanfront homeowners.

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The Bipartisan Policy Center issued a report proposing changes to current appraisal policy. Although it was primarily focused on reducing the government’s role in the nation’s housing finance system, it had appraisal related recommendations. For example, it recommended banning the use of distressed home sales as comparables which the BPC said was helping to decrease local home values and buyers’ ability to secure financing.

The BPC Housing Commission is led by former U.S. Sens. George Mitchell, Mel Martinez and Kit Bond and former U.S. Housing and Urban Development Secretary Henry Cisneros. The report titled “Housing America’s Future: New Directions for National Policy,” can be found bipartisanpolicy.org/sites/default/files/BPC_Housing%20Report_web.pdf
 

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The Appraiser Qualification Board issued the Second Exposure Draft of Proposed Interpretation and Revision to the Real Property Appraiser Qualification Criteria. The AQB is an independent board of The Appraisal Foundation and composed of at least five practicing appraisers who are appointed by the Foundation’s Board of Trustees for three-year terms. Under the provisions of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), the AQB establishes the minimum education, experience and examination requirements for real property appraisers to obtain a state certification. In addition, the AQB performs a number of ancillary duties related to real property and personal property appraiser qualifications.

“In 2006, the AQB issued an Interpretation to the Criteria, addressing continuing education for appraisers returning from active military duty. Based on recent events such as Hurricane Sandy, the AQB has recognized that appraisers impacted by a state- or federally-declared disaster may be similarly situated,” the board wrote. “Therefore, the AQB is exposing a revision to the previously adopted Interpretation (that will apply to the current, or 2008 Criteria), as well as a revision to the already adopted Criteria (that becomes effective on Jan. 1, 2015).”

The changes can be found at The Appraisal Foundation’s website appraisalfoundation.sharefile.com/d/s5763fd573e94aafa.
 

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The North Carolina House of Representatives has passed legislation to amend the state Constitution to limit certain eminent domain powers. House Bill 8 would specifically prohibit condemnation of private property except for a public use and provides for the payment of just compensation with right of trial by jury in all condemnation cases. The N.C. House passed the Bill 110-8.

The Bill – an obvious continued reaction to the U.S. Supreme Court decision in Kelo v. New London, Conn. (2005) – would put the constitutional amendment on the General Election ballot in November 2014. It does not appear to change the law other than to specifically include it in that state’s constitution.
 

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I am often asked whether governmental actions can cause a taking even if the government does not formally initiate an eminent domain case. These cases are known as "de facto" or "inverse condemnations" and are difficult to prove. However, establishing a de facto taking can have substantial benefits.

The Commonwealth Court recently affirmed a trial court’s ruling finding that we proved a de facto taking in Philadelphia.

Our client was in the process of developing a property for residential condominiums. It took substantial steps including obtaining architectural and engineering designs and lining up financing. PennDOT, however, targeted the property for a road project and announced in August, 2006 that it was going to condemn the property. PennDOT did not initiate a condemnation action until May, 2009. However, we alleged that PennDOT’s action destroyed any opportunity to develop the property for its "highest and best use" – condominiums – and caused a de facto taking.

After a two day hearing involving testimony of four experts and numerous fact witnesses, the Judge ruled that PennDOT’s actions constituted a de facto taking by December 2006. PennDOT appealed. After briefing and oral argument, the Commonwealth Court affirmed that ruling and found that we proved a de facto taking.

This has a significant impact on the case. For example, the property will now be valued as of December 2006 and not May 2009. PennDOT will also be required to pay professional fees (attorneys, experts, etc.) for the entire case.

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A bill seeking to repeal some eminent domain powers is being considered by the Montana Legislature.  The Montana Senate Energy and Telecommunications Committee recently approved Senate Bill 180 which would repeal the explicit grant of authority to a public utility or a developer to exercise the power of eminent domain that comes with a project permit awarded under the Major Facility Siting Act.  Property rights groups and utilities that build power and pipelines were on opposite sides of the debate.  “Nothing in Montana is more vital and more important than private property rights, so that is why I brought Senate Bill 180 and I’m still asking you to pass that,” SB 180’s sponsor Debby Barrett said at the close of the hearing.

The Montana Legislature passed House Bill 198 in 2011 which enabled public utilities and other developers of pipelines and power lines have the authority to use eminent domain if need be.  

SB 180 will be considered soon by the Montana Senate.

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The New Jersey Appellate Division recently held “that a condemning authority is not obligated under N.J.S.A. 20:3-6 to negotiate with the assignee of a mortgagee which has obtained a final judgment of foreclosure on the subject property.” In Borough of Merchantville v. Malik & Son, LLC, a lien holder appealed from a trial court’s order permitting the Borough of Merchantville to exercise its power of eminent domain. New Jersey requires a condemning authority to engage in “bona fide pre-litigation negotiations” prior to condemning property. The court found the Borough did not have a duty to engage in bona fide negotiations with the lienholder and satisfied its obligation to engage in such negotiations with only the property owner.

The Borough made a good faith offer to the property owner and, after the property owner rejected the offer, filed a verified complaint and declaration of taking. The lienholder claimed it was "the real party in interest" and the Borough should have negotiated with it regarding the proposed acquisition. The lienholder argued that, “based on the unique circumstances, it essentially stepped into the shoes of the property owner, and the [condemnor] breached its obligation to ‘turn square corners’ by not including it in the negotiations and in failing to make a bona fide offer prior to filing the condemnation action.”

The Appellate Division stated that the trial court “properly rejected this argument based on the language and spirit of the Act, as well as the case law.” The Court noted the distinction between the general definition of "condemnee" in the eminent domain statute, i.e. "the owner of an interest in the private property being condemned for a public purpose under the power of eminent domain[,]" N.J.S.A. 20:3-2(c), and the specific section, N.J.S.A. 20:3-6, mandating that the bona fide pre-litigation negotiations are to be undertaken with the condemnee "who holds title of record to the property." Id. at 70. The Court also stated that it was “satisfied that the rights of all other condemnees with a compensable interest are better protected by allowing them to participate later” when just compensation is determined and allocated.

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According to the firm RealtyTrac, national foreclosure filings fell to a six-year low in January. The report states that foreclosures dropped 7 percent in January from December 2012, with foreclosure activity down 28 percent from January 2012. It further found that U.S. bank repossessions dropped 5 percent from the previous month and were down 24 percent from January 2012 to the lowest level since February 2008.

One possible reason for the declines, according to RealtyTrac, was a steep drop in California notices of default issued in January, which fell 62 percent from December and were down 75 percent from January 2012 to the lowest level since October 2005.

Of course, areas of the country are still feeling the effects of the recession. RealtyTrac reported that 1 in 300 Florida housing units had a foreclosure filing in January — more than twice the national average and the highest in the U.S. for the fifth consecutive month. Nevada posted the nation’s second highest foreclosure rate for the fourth consecutive month, with 1 in every 344 housing units filing a foreclosure in January. Other states topping the list for highest foreclosure rates in January include Arizona (1 in 501 housing units filing a foreclosure), Georgia (1 in 513 housing units) Ohio (1 in 612 housing units) and Washington (1 in 674 housing units).
 

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The Appraisal Foundation, a national non-profit organization dedicated to the advancement of professional valuation and protecting the public trust, has released two new pamphlets benefitting consumers and lenders. According to the Foundation, A Guide to Understanding a Residential Appraisal was developed specifically for consumers. This pamphlet is intended to provide consumers an overview of the residential appraisal and how it relates to the home buying process. Appraisers, Appraisals & You: A Lender’s Guide to USPAP was developed for lenders working in the loan underwriting process. This pamphlet is intended to provide insight to lenders in working with appraisers as well as an overview of the entire appraisal process.
Both pamphlets are available from the Foundation by a downloadable PDF on its website www.appraisalfoundation.org
 

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The U.S. Supreme Court recently heard oral argument a property owner’s claim that the denial of a permit to develop his land constituted an unconstitutional taking of his property. The Court seemed skeptical of the claim. As the National Law Journal reported, Justice Antonin Scalia asked the landowner’s counsel, "What has been taken?" This case, Koontz v. St. Johns River Management District, is being closely watched by property rights advocates, environmentalists and government officials. It could have a major impact on the ability of government agencies to attach conditions to land development permits.

In this case, the state designated all but a small portion of the property as protected wetlands and uplands. Koontz needed to obtain permits to develop his land. His requests were rejected and the government made numerous suggestion of ways to mitigate the loss of wetlands. Koontz rejected the suggestions and declined to negotiate further. His permit applications were formally denied.

Justices Stephen Breyer, Sonia Sotomayor and Ruth Bader Ginsburg also were skeptical of the property owner’s claim. Breyer said the analysis should be whether this was a form of regulatory taking that would fall under the court's 1978 takings precedent, Penn Central Transportation Co. v. New York City. "So we simply look to see if [the regulation] went too far. The lower courts could do that."

According to the National Law Journal, Deputy Solicitor General Edwin Kneedler told the Justices that extending the law to permit denials would be a "radical change." He explained, "It is standard procedure when someone applies for a permit from the government, it is the permit applicant's burden to establish that he complies with the regulatory program. [Prior cases] shift that burden to the government. That has never been the case under regulation, including land use regulation."

Eminent domain experts will be anxious to see the Court’s ruling and opinion. The opinion is an opportunity for the Court to also delve into tangential issues not necessarily fully at issue in the case.
 

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A new rule passed Jan. 15 gives mortgage lenders an additional year to institute appraisal standards for higher-risk loans. Six agencies were involved in approving the rule, including FDIC, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Housing Finance Agency and the National Credit Union Administration. According to the Appraisal Institute, the rule takes effect Jan. 14, 2014, and will require lenders that issue loans that don’t meet the qualified mortgage standard to get written reports by certified appraisers who have conducted physical inspections of homes. In addition to the physical inspection, the rule will require a second appraisal in situations where a home is being flipped for a quick, higher resale. However, a second appraisal will not be required if the new sale price increased only slightly.

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On January 17, 2013, the Pennsylvania Supreme Court rescinded the Pennsylvania Rules of Evidence and adopted “restyled rules of evidence” which take effect on March 18, 2013. According to the Rules Committee, the reasons for the change included the desire to mirror some of the Federal Rules of Evidence, the US Supreme Court approved restyled Federal Rules of Evidence in 2011 and the dissimilarities between the Federal and the Pennsylvania Rules led to confusion. The Rules Committee noted, however, that the stylistic changes were not intended to change the substantive meaning of the rules.

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