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

The United States Supreme Court declined hearing an important eminent domain case. Kimco of Evansville, Inc. v. State of Indiana, described below, dealt with a common condemnation issue – the extent to which a change of access can be considered in calculating eminent domain damages. Most states do not necessarily permit a property owner to include damages attributable to a change in access as part of the condemnation damages. Rather, the law in those states is that as long as there remains “reasonable access” after the condemnation, the condemnee is not entitled to change in access damages. Of course, there are numerous exceptions to this general rule. However, many property owners believe that the general rule is fundamentally unfair and that these damages should be included without needing an exception.

The Supreme Court denied the property owner’s “Petition for Writ of Certiorari” asking the Court to hear the case. Hopefully, this will not be the last chance for consideration of this important issue.
 

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The US Department of Housing and Urban Development (HUD) last week served subpeonas on 15 mortgage companies nationwide seeking information on failed FHA loans. The subpoenas part of a program reviewing FHA approved mortgage lenders with “significant” foreclosure rates.

The companies are:

•First Tennessee Bank, Memphis, TN
•Alethes, Lakeway, TX
•Security Atlantic Mortgage Co., Edison, NJ
•Pine State Mortgage Corporation, Atlanta, GA
•Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
•Alacrity Financial Services, Southlake, TX
•Assurity Financial Services, Englewood, CO
•D and R Mortgage Corporation, Farmington, MI
•Webster Bank, Cheshire, CT
•Mac-Clair Mortgage Corporation, Flint, MI
•Americare Investment Group, Inc., Arlington, TX
•1st Advantage Mortgage, Lombard, IL
•American Sterling Bank, Independence, MO
•Sterling National Mortgage Company, Great Neck, NY
•Dell Franklin Financial, Columbia, MD
 

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Pennsylvania will receive $68.8 million and New Jersey will get $46.8 million in federal stimulus funds for housing redevelopment projects. These projects will include acquiring blighted properties. It is virtually certain that many will be acquired through the power of eminent domain.

Approximately $43.9 million will go to the City of Philadelphia. However, the city was seeking $58 million. The funding for Pennsylvania also includes $5 million for the City of Reading. New Jersey's funding includes $11.9 million for the Camden Development Authority, $14.1 million for the Camden Housing Authority and $20.8 million for the City of Newark.

The funds are included in $2 billion in grants awarded nationally by the Department of Housing and Urban Development under its Neighborhood Stabilization Program.
Los Angeles received the most of any city - $100 million. Chicago received $98 million and Phoenix $60 million.

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On January 15, 2010 the United States Supreme Court will consider “in conference” whether to hear an important eminent domain case. One common condemnation fact pattern is where a property is the subject of a “partial condemnation” – part of the property is taken – where one of the driveways is closed or moved. This change in access can significantly impact the value of a property. However, most states do not necessarily permit a property owner to include damages attributable to a change in access as part of the condemnation damages. Rather, the law in those states is that as long as there remains “reasonable access” after the condemnation, the condemnee is not entitled to change in access damages. Of course, there are numerous exceptions to this general rule. However, many property owners believe that the general rule is fundamentally unfair and that these damages should be included without needing an exception.

In Kimco of Evansville, Inc. v. State of Indiana, a shopping center owner alleged that its property suffered a diminution in value due to change of access to the abutting roadway. The jury returned a verdict of $2,300,000. The State of Indiana appealed claiming that this amount improperly included damages due to the change in access. Ultimately, the Supreme Court of Indiana agreed with the State and remanded the case to the trial court for re-determination of the proper amount of damages.

The property owner filed a “Petition for Writ of Certiorari” asking the United States Supreme Court to hear the case. I was asked to file an “amicus” brief in support of the property owners by the International Council of Shopping Centers and the National Association of Real Estate Investment Trusts. Regardless of your opinion regarding this issue, it is one that arises frequently. Therefore, I believe it is important that the Court consider and decide the issue.

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I am proud to say that our team scored a significant victory for a property owner outside of Erie, PA. We were retained by a property owner in Millcreek, PA to challenge a partial taking of its property for a proposed stormwater project. The property owner firmly believed that the project was ill conceived and would be harmful to the environment.

We challenged the project on 2 fronts. We challenged the taking by filing “Preliminary Objections” – the exclusive procedural means to challenge condemnations in Pennsylvania – and challenged the PA DEP permit for the project. The permit was suspended earlier in 2009 by the Environmental Hearing Board and we are waiting for further decisions.

An evidentiary hearing was held in December regarding our Preliminary Objections to the condemnation. We had numerous bases to challenge the condemnation. However, we initially focused on the fact that the condemnor did not have the authority to take all of the condemned property. Condemnors must have express statutory authority to exercise the power of eminent domain for the particular purpose of the project. The Court agreed that the condemnor did not have the requisite statutory authority.

There are a few lessons from this case. First, while most property owners do not have the money or energy to challenge a taking, it is not uncommon to have a defective condemnation. Condemnors must be very careful and condemnees must scrutinize the papers filed to condemn their property. Second, many projects can be attacked outside of the eminent domain proceedings. I am fortunate to work at firm where I have partners with expertise in virtually every area of the law. In this case, my environmental law partners were invaluable.

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The United States Supreme Court will hear arguments tomorrow in the case Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection. That case deals with the Florida Department of Environmental Protection’s Beach Restoration Project. In that case, the Florida DEP, pursuant to a Florida statute, embarked upon a beach restoration project to place sand along 6.9 miles of shoreline bordered by more than 450 parcels of primarily private property.

The property owners alleged that the Florida DEP “pursued their singular goal of replacing a private beach with a public beach without paying compensation by creating an additional 75-foot wide public beach.” The Florida Supreme Court rejected this argument.

The Court granted certification of the appeal regarding 3 questions. Perhaps the most interesting question to be considered is the first one:

The Florida Supreme Court invoked “nonexistent rules of state substantive law" to reverse 100 years of uniform holdings that littoral rights are constitutionally protected. In doing so, did the Florida Court's decision cause a ''judicial taking" proscribed by the Fifth and Fourteenth Amendments to the United States Constitution?

This issue – whether a decision by a judge can constitute a “taking” – has been referenced but has never been directly addressed by the Court. An opinion deciding this issue could have significant repercussions.

Stay tuned.
 

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New York’s highest court ruled on Tuesday that private property could be condemned for the “Atlantic Yards” project. That project involves, among other things, an NBA arena and 16 office and residential towers in Brooklyn. The properties were purportedly condemned to eliminate “blight.”

In Goldstein et al. v. N.Y. State Urban Development Corporation, the New York Court of Appeals upheld the condemnations in a 6 to 1 decision. The project was challenged, in part, on the basis that that since the condemned properties would ultimately be owned by private entities, they were not being condemned for a “public use.” The New York Constitution – as well as the U.S. and most state constitutions – provide that properties can only be condemned for a “public use.”

The Court rejected that claim ruling that projects eliminating blight satisfy the public use requirement and that the fact that the properties would ultimately be owned by private entities did not make the condemnations unconstitutional. This is consistent with the eminent domain law of most states and has been federal law since the 1950s.

The condemnations were also challenged on the basis that the properties were not truly blighted. The Court also rejected this argument and expressed the common belief among the judiciary that, other than in the most egregious cases, courts should not second guess the legislature’s decisions regarding the need for projects.
 

A copy of the opinion can be found at www.nycourts.gov/ctapps/decisions/2009/nov09/178opn09.pdf

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A Philadelphia City Controller audit found significant accounting and reporting problems with former Mayor John Street's anti-blight effort, the Neighborhood Transformation Initiative. The 15-month audit determined that millions in bond funds were mismanaged because of a lack of accountability within NTI.

The audit found that NTI, as of June 30, 2008, had failed to make nearly $13 million in payments on nearly 1,500 condemned properties awaiting settlement in court.

Last year, current Mayor Nutter suspended NTI after discovering serious accounting lapses in its management. The stated purpose of the NTI program was to reduce blight by demolishing 14,000 buildings and constructing 16,000 new homes with $296 million in bond proceeds. However, the program fell far short of those goals. The city controller's report said that the Nutter administration, upon taking office, discovered that it "lacked information about the funding sources used to acquire the properties, where the properties were located, and the extent of dollars required to fund committed projects."

The Nutter administration contained in the audit report said the city intended "to fully implement the recommendations in this report to ensure any future use of these funds meets requirements of state and federal laws."

The report recommended that the city improve oversight and accountability over land-assembly activity, develop accurate and timely accounting reports, and investigate discrepancies in NTI transactions. Terry Gillen, executive director of the Philadelphia Redevelopment Authority, which oversees much of NTI, said that the administration would follow the recommendations in the audit.

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The National Association of Independent Fee Appraisers (NAIFA) has issued a response to the Home Valuation Code of Conduct (HVCC). The HVCC became effective for single-family mortgage loans (except government-insured loans) originated on or after May 1, 2009, and delivered to Fannie Mae and has been a source of controversy for appraisers and lending institutions.

In its response, the NAIFA acknowledges a lot of the concerns about the HVCC that have been expressed by various segments of the mortgage industry. However, the NAIFA puts the responsibility on the lender. The response states:

The fact is that all of the concerns mentioned above are all the responsibility of the lending institution. They are responsible for making sure that the competency of the appraiser and the quality of the appraisal meets the standards required to execute a sound mortgage decision.

The NAIFA will be issuing a “Consumer Guide for Quality Appraisals” which will be available soon at www.NAIFA.com. The NAIFA response can be found at www.naifa.com/about/NAIFA_Responds
_to_HVCC_Issue8_28_09.pdf.

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