One of the first bills introduced in the newly convened North Carolina State Legislature seeks to limit condemnation powers. House Bill 3, seeks to amend the North Carolina State Constitution to ban the use of eminent domain for private use. Specifically, House Bill 3 seeks to amend N.C.G.S. 40A-3 to limit takings by “private condemnors” to those for “public use” only, a change from the current “private condemnor” power to take for “public use or benefit”. However, it also adds takings by “private condemnors” for the construction of “facilities related to the distribution of natural gas” to the list of permitted takings.
NC is one of the few states that did not pass legislation in the wake of the 2005 US Supreme Court Kelo case. That case held that a condemnation for economic development satisfied the US constitutional “public purpose” requirement even if a private entity would ultimately own the condemned property. The Kelo Court stated, however, that it was only ruling on the constitutionality of the taking and that federal and state legislatures could limit the powers if they felt it was necessary. If passed, the NC bill would appear to prevent that type of taking.
One issue that continues to be litigated around the country is the extent to which an appraiser is liable to a borrower for a negligent appraisal prepared for a lender. This issue was recently addressed by the Georgia Court of Appeals.
In Adams v. DeWitt, 2014 WL 2609974, a purchaser of a property allegedly relied upon an appraisal in deciding to purchase the property. However, the appraisal expressly stated that the appraisal was intended solely for the use of the lender. This is generally standard language in appraisals for lenders. The Court of Appeals held that the appraiser owed no duty of care to the borrower and that it was proper for the appraisal to contain limitations such as those contained in the appraisal.
The law on this subject varies by state and should be consulted if this is an issue.
An Oklahoma appellate court recently reconfirmed that a taking by a state or local entity must satisfy, among other things, both the state and U.S. Constitutions. In that case, the City of Muskogee condemned a property for a parking lot. The property owners alleged that the taking was not for a “public use” as that term is used in the Oklahoma Constitution because the city and its parking authority “agree[d] to lease the parking spaces to [a private entity’s] employees first before they are offered to the public.”
The Oklahoma Court of Civil Appeals agreed and found that the taking violated the Oklahoma Constitution and explained that it “is clear ‘that private property may not be taken or damaged by the condemning agency unless the taking … is necessary for the accomplishment of a lawful public purpose.’” In a footnote the court stated that the city “cannot avoid constitutional restrictions on the power of eminent domain by merely labeling the proposed parking facility as a public utility.” The court held the parking lot “was designed and established primarily for the purpose of serving a private entity” and “employees of that entity’s tenant.”
It is unclear whether this taking would have been constitutional under the U.S. Constitution’s “public use” requirement. However, this case illustrates that states can have stricter eminent domain requirements and a taking by a state or local entity must satisfy both Constitutions.
About a year ago, the Philadelphia RDA condemned property owned by a nationally recognized artist. This condemnation received a great deal of local and national attention including newspaper and radio coverage (I was interviewed by one station). The property owner, James Dupree, used this property as his studio. The property was one of 17 properties condemned by the RDA allegedly to cure blight in that neighborhood and would have been used to build a new supermarket.
Dupree challenged the taking and the RDA has now decided to abandon the condemnation and the project. Brian Abernathy, executive director of RDA, said in a statement, “Unfortunately, the legal costs associated with Mr. Dupree’s appeals make it impossible to continue . . . . While we have explored the potential of building around Mr. Dupree’s property, a viable project under these conditions is not possible. In short, the inability to acquire Mr. Dupree’s property puts the prospect of bringing fresh food to this community at serious risk.”
This decision has also attracted the attention of the press locally and nationally including the Washington Post. Once again, this show the sensitivity of issues relating to the taking of private property.
The Appraiser Qualifications Board of The Appraisal Foundation released a new exposure draft of proposed revisions to the 2015 Real Property Appraiser Qualification Criteria. It includes a new requirement that all applicants for real property appraiser credentials have a background that does not call into question public trust. Applicants would be required to provide state appraiser regulatory agencies with all information and documentation necessary for a jurisdiction to determine an applicant’s fitness for licensure. An applicant will not be eligible for an appraiser credential if they have been convicted of or pleaded guilty or nolo contendere to a crime that would call into question the applicant’s fitness for licensure.
Due to the original effective date of the background check requirements (Jan. 1, 2015, but now delayed until Jan. 1, 2017), some states already have implemented new laws, some of which contain provisions that go far beyond what is required as minimum criteria by the AQB.
Two D.C. Council committees advanced legislation allowing for the use of eminent domain in the construction of a $300 million professional soccer stadium in Washington, D.C. The bill will now go before the full council for a vote on Tuesday. While the legislation allows for eminent domain to be used to acquire the land, Mayor-elect Muriel Bowser, chair of the economic development committee, said she remains hopeful they will be able to come to a new agreement with the city for the land.
One frequent issue in eminent domain and other valuation cases is the admissibility of appraisals obtained by a party other than the appraisal they intend to actually use. For example, in a case that will be heard by the VA Supreme Court, VDOT had two appraisals in an eminent domain case. VDOT chose only to present the lower value appraisal to the jury and the judge prohibited any reference to VDOT’s higher appraisal. VDOT has been criticized for this tactic and have been accused of bullying tactics by one newspaper. http://hamptonroads.com/2014/11/states-high-court-should-put-vdot-its-place-unfair-property-appraisals
It is not uncommon for a property owner or a condemning authority to have more than one appraisal. Condemnors have been criticized for paying property owners the lower of the appraisal amounts. The VA Supreme Court will decide the admissibility of these appraisals.
It is also not uncommon for property owners to obtain more than one appraisal in eminent domain and other settings. One way we try to protect these appraisals from being obtained by third parties is to retain the appraiser – or other experts – as “consulting experts.” These experts’ work product can then be protected as confidential “work product.”
So, if you are considering retaining valuation experts, it is important to consider retaining these experts through an attorney.
The City of Hartford has used its power of eminent domain to assemble land for a stadium. The Hartford City Council approved a $350 million plan to build a minor league baseball stadium for the New Britain Rock Cats. However, it does not own all of the land necessary for the stadium. The City has filed an action to take 14 properties for $1.98 million. The city would then enter into a 99-year lease with the stadium’s developers, who would likely use that land for retail, housing, and other uses.
Jon Stewart used eminent domain debates to criticize Republicans over their support of the Keystone Pipeline in a recent Daily Show. In his usual method, he juxtaposed statements by Republicans decrying the use of the power of eminent domain and supporting its use for the Keystone Pipeline project.
The Show’s use of this topic shows two things. First, eminent domain remains a very controversial topic and a hot button issue. Second, when and how this power should be used is very complicated. Permitting utilities – including privately owned utilities – to use the power of eminent domain is hardly a new concept. However, it is rarely the focus of debate. Controversial projects often draw attention to this issue which was the case with Jon Stewart.
The clip can be found at little-seizers
Mortgage Daily has reported that there was no quarterly change in the risk of mortgage fraud, according to the 2Q 2014 National Mortgage Fraud Risk Index published by analytics firm Interthinx. However, the risk of Valuation fraud was up for the quarter.
The mortgage fraud risk index, which is based on an analysis of loans processed through the FraudGUARD system. California has the highest fraud index. Florida and New Jersey are tied at second place for highest overall risk. The national Property Valuation Fraud Index was higher than the first quarter and the same point last year.