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Eminent Domain & Real Estate Litigation Blog

Condemnation and Real Estate Litigation

VT Governor Advocates Hiring Independent Appraiser For Pipeline Cases

Posted in Appraisers, Eminent Domain

Vermont Gov. Peter Shumlin wants the VT Department of Public Service to hire an independent property appraiser to participate in eminent domain proceedings for the Addison-Rutland Natural Gas Project. “I am concerned at the transparency and equity issues that have been raised by Vermont Gas’s negotiations with landowners,” Shumlin wrote in a letter Monday. “I want to ensure consistent third-party valuations for property subject to condemnation in the event eminent domain proceedings occur.” Public Service Commissioner Chris Recchia said the department has had many complaints from landowners who are in negotiations. He said the complaints center on how Vermont Gas has been handling the land use discussions.

In his letter Monday, Shumlin said: “While landowners still may choose to retain their own valuation expert, as well as their own representation, in these proceedings, a natural valuation expert retained for all such proceedings seems appropriate and necessary in these circumstances.”

NJ Supreme Court OK Bypassing Mortgagee In Eminent Domain Grab

Posted in Eminent Domain

The NJ Supreme Court has ruled that a borough was not required to negotiate with the holder of the final foreclosure judgment prior to condemnation of the encumbered property.  In Merchantville v. Malik & Son LLC, the Court held that the borough’s effort to negotiate directly with the record titleholder was legally sufficient.  Condemnors in NJ are required to engage in good faith negotiations with property owners prior to condemnation.  In that case, a party obtained a foreclosure order regarding the condemned property and was set to acquire it through a sheriff’s sale.

In a unanimous decision, the NJ Supreme Court held the condemnor was not required to negotiate with the holder of the final foreclosure and that the borough’s negotiations with property owner Malik & Son LLC was sufficient.  It explained,

 “We hold that a condemning authority has an obligation to present an offer to acquire property and to engage in bona fide negotiations with no party other than the individual or entity that holds title to the property or the holder of the interest sought to be condemned,” the opinion said. “In addition, we determine that the offer presented in this case and the reply by the property owner satisfied the statutory requirement of bona fide negotiations with the property owner before initiating condemnation proceedings.”

US House Committee Passes USPAP Exemption Bill

Posted in Valuation

The US House Financial Services Committee approved H.R. 5148 which would grant certain “high-risk” mortgages an exemption from having an appraisal performed in accordance with the Uniform Standards of Professional Appraisal Practice (“USPAP”).  USPAP – the Uniform Standards of Professional Appraisal Practice – is provided by the Appraisal Foundation and is described as “the generally accepted standards for professional appraisal practice in North America. USPAP contains standards for all types of appraisal services.”

Supporters of the bill, including the Appraisal Institute, argue that it could open up a range of valuation services and create flexibility for lenders to order an appraisal when the development and reporting requirements suit the needs of the assignment.  AI has stated that, “While Section 2 in the legislation would provide an exemption from evaluations in cases where the value of loans classified as ‘high-risk’ is below $250,000 and kept on the creditor’s balance sheet for at least three years, the number of loans that fit this criteria is expected to be very small. And despite the exemption . . .  many banks [are expected] to still obtain an appraisal because it’s good business practice.”

Orlando Drops Taking Of Church Property.

Posted in Eminent Domain

The City of Orlando on Monday dropped its attempt to condemn a family-owned church to build a new Major League Soccer stadium.  The Church was the last holdout for the project.  Orlando will move the new stadium about a block west using property the city bought for $2 million.

Orlando and the Church have had been in negotiations since last year.  Orlando offered the Church $1.5 million for the property representing over twice the value in the City’s appraisals. The Church felt this was much lower than the value and the parties were far apart.

Appraisal Institute Releases “Standards of Valuation Practice”

Posted in Appraisers, Valuation

The Appraisal Institute has produced its Standards of Valuation Practice which may, in certain circumstances, be used as an alternative to “USPAP.” USPAP – the Uniform Standards of Professional Appraisal Practice – is provided by the Appraisal Foundation and is described as “the generally accepted standards for professional appraisal practice in North America. USPAP contains standards for all types of appraisal services.”

According to AI, the Standards of Valuation Practice:

  • Can be used as an alternative to the USPAP or the International Valuation Standards when the use of USPAP or IVS is not required and the use of the SVP would be appropriate;
  • Will serve as an alternative set of standards that could be used, not an additional set of required standards; and
  • Will not supplant USPAP or other national standards.

Effective Jan. 1, 2015, Appraisal Institute Designated members, Candidates for Designation and Practicing Affiliates will be required to comply with either:

  • The Standards of Valuation Practice, promulgated by the Appraisal Institute, and the Certification Standard of the Appraisal Institute; or
  • Applicable national or international standards, and the Certification Standard of the Appraisal Institute.


Single-tenant Net Lease Cap Rates Drop

Posted in Valuation

Data from commercial real estate firm Calkain Companies confirms that the demand for net lease assets remains strong.  Transaction volume for these properties increased 15 percent.  Retail net lease cap rates have compressed to below 7 percent.

“Net leases remain highly popular in 2014, averaging the lowest cap rates in the past three years despite interest rate increases over the same period,” Winston Orzechowski, research director with Calkain and co-author of its Net Lease Economic Report.   “Institutional investors are increasing their exposure as net leases become a significant part of general commercial real estate portfolios.”

Risk of Property Valuation Fraud Reportedly On The Rise

Posted in Valuation

According to analytics firm Interthinx, the risk of property valuation fraud increased during the first quarter.  The report noted that in addition to high property appraisals, individuals purchasing and listing multiple properties in the same neighborhood to artificially control prices to their advantage also is a contributing factor to the rise in property valuation fraud risk.

“This quarter’s report is a reminder that lenders need to be aware of emerging fraud risks,” Jeff Moyer, president of Interthinx, said in the report. “The rise in property valuation risk is troublesome because collateral values are a critical element in making sound lending decisions. To make lending decisions with increased confidence in the loan’s quality, we recommend that lenders use automated tools early in the valuation process to double check opinions of value, quality of work and regulatory compliance on issues such as licensing.”

In order, the top 10 riskiest states and regions during the first quarter are California, the District of Columbia, Florida, Maryland, Arizona, Connecticut, New Jersey, Maine, Arkansas and Colorado. For the first time since the inception of this report in 2009, Nevada is not in the top 10.

AI Member Appointed to Pa. Board of Certified Real Estate Appraisers

Posted in Appraisers

Joseph Pasquarella, MAI, has been appointed by Gov. Tom Corbett to the Pennsylvania State Board of Certified Real Estate Appraisers for a four-year term, the Appraisal Institute reported July 14.  Pasquarella, senior managing director at Integra Realty Resources’ Philadelphia office, will help establish professional standards for all real estate appraisers throughout the state and help regulate the certification process.

The State Board of Certified Real Estate Appraisers regulates the certification of real estate appraisers and assessors in the Commonwealth of Pennsylvania. The board establishes standards of professional appraisal practice, and it examines, denies, approves, issues, revokes, suspends and renews appraisers and assessors certificates.

Our Firm Defeats Statute Of Limitations Challenge To Just Compensation Demand

Posted in Eminent Domain

I recently argued a case before the PA Commonwealth Court regarding whether our client, a church, was barred by the statute of limitations to seek just compensate for the partial taking of its property.  In In re: Condemnation of Land, 2014 WL 3028035, Jenkintown Borough filed a declaration of taking in 1998 seeking to take a portion of the Church’s property.  We did not represent the Church at that time and its prior counsel filed “Preliminary Objections” challenging the taking.  After the filing of the POs, the Borough’s counsel forwarded a check purporting to be the “estimated just compensation” – or EJC – for the taking.  The Church’s counsel properly returned the check because it was not permitted to pay EJC when POs are pending and the EJC amount admittedly was not based on what was actually taken.

The parties agreed to remove the POs from the argument list in an effort to resolve the matter and neither side ever sought to have it relisted.  Many years passed and we were ultimately retained to represent the Church to obtain just compensation for the taking.  In 2013 we filed  petitions to withdraw the POs and to determine the amount of just compensation owed to the Church for the taking.  The Borough objected arguing that the statute of limitations barred the claim.  The trial court rejected that argument and the Borough appealed to the Commonwealth Court.

The Commonwealth Court affirmed and held that the statute of limitations did not bar the Church from seeking just compensation.  Although we argued numerous bases as to why the statute of limitation did not bar the claim, the Court affirmed on one specific basis.  The PA Judicial Code states that the 6 year statute of limitations commences when “the condemnor first made payment” of the EJC.  The Borough argued that forwarding the check constituted payment even though it was returned.  The Court rejected that argument and held that, since the Eminent Domain Code distinguishes between “‘payment’, which is required to trigger the statute of limitations, and ‘a written offer to pay,’” the forwarding of the check did not trigger the statute of limitations.

PA Supreme Court: Murder/Suicide Does Not Need To Be Disclosed To Home Buyer

Posted in Uncategorized, Valuation

My partner, Abe Reich, recently successfully argued before the PA Supreme Court a case determining “whether the occurrence of a murder/suicide inside a house constitutes a material defect of the property, such that appellees’ failure to disclose the same to the buyer of the house constituted fraud, negligent misrepresentation, or a violation of the Unfair Trade Practices and Consumer Protection Law’s (UTPCPL).”  The Court held that “a murder/suicide does not constitute an actionable material defect.”  Although it is an unusual setting, the case has broader applications.

In Millliken v. Jacono, the Defendant purchased a house that was the location of a murder suicide by its prior owners.  After renovating the property, the Defendant listed the property for sale and informed their listing agents of the murder suicide.  However, after consultation with attorneys and representatives of the PA Real Estate Commission, she did not disclose the murder/suicide as a known material defect in the Seller’s Property Disclosure Statement.

The Plaintiff purchased the property and after moving into the house learned of the murder/suicide.  She claimed that had she known of the incident, should would not have purchased the house.  She sued the defendant and the listing agent for fraud, negligent misrepresentation and a UTPCPL violation based on the Defendant’s failure to disclose the murder/suicide.

Defendants’ moved for summary judgment arguing that the Plaintiff’s claim failed as a matter of law.  The trial court granted summary judgment dismissing the case, a three-judge panel of the Superior Court reversed the trial court and an en banc Superior Court, on reconsideration,  affirmed the trial Court.  Plaintiff appealed to the PA Supreme Court.

The PA Supreme Court affirmed.  It explained, “Regardless of the potential impact a psychological stigma may have on the value of property, we are not ready to accept that such constitutes a material defect. The implications of holding that non-disclosure of psychological stigma can form the basis of a common law claim for fraud or negligent misrepresentation, or a violation of the UTPCPL’s catch-all, even under the objective standard posited by appellant, are palpable, and the varieties of traumatizing events that could occur on a property are endless. Efforts to define those that would warrant mandatory disclosure would be a Sisyphean task.”

The Court further explained that, even if an event is such a majority of the population would find disturbing, and a certain percentage of the population may not want to live in a house where any such event has occurred . . . this does not make the events defects in the structure itself. The occurrence of a tragic event inside a house does not affect the quality of the real estate, which is what seller disclosure duties are intended to address.”

Therefore,, even though the underlying facts are unusual, there are applications to other settings.  For example, an aspect of a house that negatively impacts value does not necessarily need to be disclosed.  Further, it appears the Court is limiting required disclosures to “defects in the structure itself” and the “quality of the real estate.”