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

The Department of Housing and Urban Development may issue eminent domain related rules. At a recent House Financial Services subcommittee hearing, Reps. Blaine Luetkemeyer, R-Mo., and Edward Royce, R-Calif., noted counties in their states are considering using eminent domain to acquire private-label underwater mortgages. They also noted that FHA has barred Fannie Mae and Freddie Mac from refinancing loans seized through eminent domain. However, FHA does not have a similar policy. HUD deputy assistant secretary Charles Coulter stated that "We will certainly take a look at it and consider something similar.”

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The Illinois Senate recently approved a casino bill which would provide casinos with the power of eminent domain. If it passes, SB 1739 would amend the state’s Eminent Domain Act:
 

“The following provisions of law may include express grants of the power to acquire property by condemnation or eminent domain: Chicago Casino Development Authority Act; City of Chicago; for the purposes of the Act”
 

The legislation further provides that acquisition of property for a casino could be considered a “public use”:
 

“For the lawful purposes of this Act, the City may acquire, by eminent domain or by condemnation proceedings in the manner provided by the Eminent Domain Act, real or personal property or interests in real or personal property located in the City, and the City may convey to the Authority property so acquired. The acquisition of property under this Section is declared to be for a public use.”
 

The bill passed 32-20 in the state Senate on May 1 and is now being considered by the House Executive Committee.
 

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The New Jersey General Assembly overwhelmingly passed a bill intending to “clarify” the use of eminent domain by a municipality and amending the due process provisions of the Local Redevelopment and Housing Law (LRHL) that fall within the area of eminent domain, according to the bill’s sponsors. Under the bill, A-3615, a municipality condemn properties if an area is determined to be in need of redevelopment and after the municipality follows established criteria in making such a determination. The bill provides notification requirements and rights of property owners if a town determines an area to be a focus of redevelopment and authorizes the taking of property by condemnation. The new provisions require property owners within such an area to be advised of the municipality’s intention of whether it will use or not use eminent domain at the outset. Unless a municipality properly notifies owners, the LRHL will not authorize the use of eminent domain.

The General Assembly passed the bill 78-0 with 2 members abstaining. The bill now will be reviewed by the NJ Senate.
 

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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 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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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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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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On Tuesday, the Supreme Court released its unanimous opinion in Arkansas Game and Fish Commission v. United States. In that case, the property owner alleged that a taking occurred when government actions caused flooding on its property. The opinion states, “We rule today, simply and only, that government induced flooding temporary in duration gains no automatic exemption from Takings Clause inspection.” However, the Court restated its prior holdings in this area which provides more broad guidance. It explained:

When regulation or temporary physical invasion by government interferes with private property, our decisions recognize, time is indeed a factor in determining the existence vel non of a compensable taking. Also relevant to the takings inquiry is the degree to which the invasion is intended or is the foreseeable result of authorized government action. So, too, are the character of the land at issue and the owner’s “reasonable investment-backed expectations” regarding the land’s use. . . .

Perhaps the most interesting aspect of this case is that the Court decided to hear the appeal. It is true that the Court reversed a clearly erroneous lower court ruling. However, a “wrong” decision does not typically cause the Court to hear a case. Rather, the Court is more interested in the broader issues presented by a case. The fact that there was a rare unanimous opinion – with no concurring opinions – demonstrates that the decision was not hard or controversial. However, for practitioners, it is always welcome to have a restatement of any eminent domain law.

The opinion can be found at www.supremecourt.gov/opinions/12pdf/11-597_i426.pdf
 

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The US Supreme Court recently heard oral argument regarding a condemnation case which could have significant impacts. In Arkansas Fish & Game Commission v. United States, the Court is considering whether a temporary “physical invasion” of property which causes permanent harm constitutes a taking warranting the payment of just compensation. Specifically, the Court is will decide whether the temporary, but reoccurring downstream flooding events caused from dam releases by the Army Corps of Engineers, constituted a “taking” of property. A description of the oral argument can be found at www.scotusblog.com/

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Earlier this year, I wrote about a Virginia eminent domain ballot question. That question passed yesterday with approximately 74% of the vote. Question 1 on the November 6, 2012 ballot in the state of Virginia was an amendment to its state Constitution restricting the power of eminent domain. It was passed by both houses of the VA legislature. It has significant eminent domain restrictions including prohibiting using the power of eminent domain for private enterprise, job creation, tax revenue generation or economic development, thereby restricting it to only being invoked to take private land for public use. It also permits a condemnee to recover lost profits as part of its condemnation damages.

 

The Amendment provides:

 

That the General Assembly shall pass no law whereby private property, the right to which is fundamental, shall be damaged or taken except for public use. No private property shall be damaged or taken for public use without just compensation to the owner thereof. No more private property may be taken than necessary to achieve the stated public use. Just compensation shall be no less than the value of the property taken, lost profits and lost access, and damages to the residue caused by the taking. The terms “lost profits” and“lost access” are to be defined by the General Assembly. A public service company, public service corporation, or railroad exercises the power of eminent domain for public use when such exercise is for the authorized provision of utility, common carrier, or railroad services. In all other cases, a taking or damaging of private property is not for public use if the primary use is for private gain, private benefit, private enterprise, increasing jobs, increasing tax revenue, or economic development, except for the elimination of a public nuisance existing on the property. The condemnor bears the burden of proving that the use is public, without a presumption that it is.

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Question 1 on the November 6, 2012 ballot in the state of Virginia is an amendment to its state Constitution restricting the power of eminent domain. It was passed by both houses of the VA legislature. It has significant eminent domain restrictions including prohibiting using the power of eminent domain for private enterprise, job creation, tax revenue generation or economic development, thereby restricting it to only being invoked to take private land for public use.
The Proposed Amendment Provides:

That the General Assembly shall pass no law whereby private property, the right to which is fundamental, shall be damaged or taken except for public use. No private property shall be damaged or taken for public use without just compensation to the owner thereof. No more private property may be taken than necessary to achieve the stated public use. Just compensation shall be no less than the value of the property taken, lost profits and lost access, and damages to the residue caused by the taking. The terms “lost profits” and“lost access” are to be defined by the General Assembly. A public service company, public service corporation, or railroad exercises the power of eminent domain for public use when such exercise is for the authorized provision of utility, common carrier, or railroad services. In all other cases, a taking or damaging of private property is not for public use if the primary use is for private gain, private benefit, private enterprise, increasing jobs, increasing tax revenue, or economic development, except for the elimination of a public nuisance existing on the property. The condemnor bears the burden of proving that the use is public, without a presumption that it is.

 

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In Reading Area Water Authority v. The Schuylkill River Greenway Association, the Reading Area Water Authority condemned land for the construction, maintenance and operation of utility lines and appurtenance of a water main. The property owners challenged the taking and alleged the facilities would be purely for the benefit of a private developer. Specifically, they alleged that the condemnation violates Section 204(a) of the Private Property Protection Act, 26 Pa. C.S. § 204(a), which prohibits the taking of private property in order to use it for private enterprise.

The trial court ruled that the taking was improper because it believed that the “primary and paramount benefactor of the proposed condemnation” for sewer and storm water facilities was [the developer] and not the general public.” The trial court stated that “[u]nder the guise of expanding their customer base and providing water to the public, RAWA is attempting to achieve its true goal and take land from one private owner and give it to another.”

The Commonwealth Court reversed and held that the condemnation was proper. It explained that RAWA is authorized by law to use its power of eminent domain to condemn land for the provision of water and sewer facilities which “constitute a public purpose. In this case, RAWA is not transferring title from one private entity to another, but is taking property . . . to hold publicly for the purpose of providing water services and to facilitate the construction of sewer and storm water management facilities. [The developer] is constructing these facilities at its own cost, providing sewer and storm water management to those members of the public who will live in the development. While the availability of these utilities will undoubtedly make the homes built by [the developer] more attractive to potential buyers, such an incidental benefit to [the developer] does not strip the project of its public purpose, to wit, providing water, sewer and storm water management to citizens living in RAWA’s service area. Accordingly, we conclude that RAWA properly exercised its powers of eminent domain.”

 

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The Commonwealth Court of Pennsylvania recent ruled that the issuance of highway occupancy permit did not cause a “de facto” condemnation of a neighboring property owner. In Ristvey v. Com., Dept. of Transp., the alleged de facto condemnees owned 23 acres of vacant, residentially-zoned land on the eastern side of Pennsylvania State Route 18 in Hermitage, Pennsylvania. PennDOT granted a Highway Occupancy Permit to accommodate a Wal-Mart on property directly across from their property.

The alleged de facto condemnees claimed that the granting of the Permit and the construction required by that Permit caused a “de facto” taking of their property. They claimed that “the issuance of the HOP rendered the Property ‘worthless’ because the ‘stacking’ of cars in the newly configured left turn stand-by lane made it impossible, at times, to safely make a left turn out of the Property. They alleged that DOT’s actions rendered the Property ‘worthless’ and ‘deprive[d] the Plaintiffs-Condemnees [Appellants] of the full and normal use and enjoyment of their property.’”

The trial court ruled that the alleged de facto condemnees did not establish a de facto taking. On appeal, the Commonwealth Court affirmed the trial court’s ruling. It held “this Court agrees with the trial court that DOT acted pursuant to its police powers, not eminent domain powers, when it required . . . the left turn, stand-by lane in front of the” Wal-Mart property. It further explained, “[i]n this controversy, this Court is unable to conclude that inclusion of the left turn, stand-by lane in front of Appellants’ Property was unreasonable in light of the fact that: (1) the Property was vacant and undeveloped; and (2) the left turn, stand-by lane did not interfere with any existing traffic patterns relative to the Property; and (3) without the left turn, stand-by lane vehicles would have to stop in the traveling lane to wait to turn into the Wal-Mart Store.”
 

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A Berks County trial court recently rejected the claim of property owners that the construction of sewage lagoons adjacent to their homes caused a “de facto” taking of their properties. A de facto taking can occur when a governmental action causes the equivalent of a condemnation of property. We were able to prove, for example, that PennDOT’s actions caused a de facto taking of a planned condominium project. In Arpino v. Pleasant Valley School District, the property owners alleged that “the construction of the lagoons has negatively impacted the value and enjoyment of the properties” “by generating intolerable noises . . . and, during the hottest days of summer, they emit odors that seep into the house with disgusting effect.”

After a hearing was held to consider evidence of the alleged taking, the Court found that a de facto taking has not occurred. The Court first held that the allegations – if true – could state a claim for a de facto taking. However, the Court further found that the property owners did not prove at the hearing that the noise or odors were as bad as they claimed.
 

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The Pennsylvania General Assembly recently passed the Real Property Electronic Recording Act.  H.B. 970, passed the Senate as amended 49-0 on June 25, and passed the House on concurrence 198-0 on June 29. The bill brings into Pennsylvania law the Uniform Real Property Electronic Recording Act. 

 

The Act’s purpose is to allow county clerks and recorders to electronically record information on real property and land records.  As the drafter of the Uniform Act stated, “electronic information technology has progressed rapidly in recent years” and “innovations in software, hardware, communications technology and security protocols have made it technically feasible to create, sign and transmit real estate transactions electronically.”  The Act authorizes, for example, county recorders of deeds to receive electronic documents as a means for recording real property.  It also permits “electronic signatures” for certain documents. 

 

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PA’s Commonwealth Court recently ruled that a party alleging adverse possession over condemned property may intervene and challenge a taking. In In re Condemnation of Rights of Way and Easements, a Township condemned property to construct a sanitary sewer system. The Township named the record owner as the property owner. Owners of property near the condemned property challenged the taking alleging that they had acquired an interest in the property through adverse possession and that the taking was defective for failing to name them as a party.

In affirming the trial court, the Commonwealth Court first rejected the argument that a party alleging adverse possession should have filed a quiet title action and held “that an interest in property may be properly addressed through” a challenge to a taking. The Court then held that adverse possession was established and, therefore, sustained the challenge.
 

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In Redev. Auth. of the City of York v. Bratic, a property owner took steps to remediate a blighted property after the issuance of a blight notice. After a notice of unsafe structure was sent to the property owner, he took steps to stabilize the property and retained an engineer. The Redevelopment Authority of the City of York filed a declaration of taking based on the blight certification. The property owner challenged the taking alleging that it he had taken steps to remediate the blighted conditions.
The Commonwealth Court upheld the condemnation. It ruled that the condemnor did not need to provide a property owner a reasonable time to eliminate the conditions in the blight notice. The Court also found that the property owner was provided with sufficient notice to appeal the blight designation and did not comply with the appeal process.
 

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Herb Bass, Marc Needles and I are the proud authors of a new edition of Pennsylvania Eminent Domain, the leading treatise on Pennsylvania eminent domain law. This is the first complete revision of the treatise since it was originally published in 1964. Fox Rothschild attorneys have prepared extensive supplements to the original treatise for the past 15 years. Recently, we accepted an invitation from the publishers to revise and rewrite the treatise. It was an exciting project and we are pleased that it is now available to the public.

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Our partner Wendy Rothstein was recently appointed by the Montgomery County Court of Common Pleas Board of Judges to a 3 year term to serve on one of the County Board of View Panels. Wendy was one of three attorneys under consideration and she received overwhelming support from the Judges who voted to appoint her. She will be the first woman attorney to serve on a Montgomery County Board of View.

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The Commonwealth Court of PA recently ruled that the County and not the parties must pay the compensation of a Board of View in an eminent domain case. In Spigelmyer v. PennDOT, the trial court directed the parties to each pay ½ of the Board of View’s compensation. The Board of View is appointed by the judges of the county in which the eminent domain case is pending and hold a hearing after which they determine the amount of just compensation owed to the condemnee(s). Parties may appeal from that finding to PA’s trial court – the Court of Common Pleas.

The Commonwealth Court ruled that the PA Judicial Code requires the County to pay the Board’s compensation. It found that members of the Board fall within the definition of “appointive judicial officers” under Section 3544 of the Judicial Code and, therefore, their fees are the responsibility of the County.
 

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The US Supreme Court has agreed to hear an appeal of a Federal Circuit’s decision in an eminent domain case. The case relates to an eminent domain doctrine known as a "de facto" or "inverse" condemnation which occurs when an act of a governmental entity is, in essence, a taking even if that entity has not formally initiated a condemnation action. The official question presented in that case is: "Whether government actions that impose recurring flood invasions must continue permanently to take property within the meaning of the Takings Clause."

 

In Arkansas Game & Fish Commission v. United States, the Arkansas Game & Fish Commission, sought just compensation from the United States for physically taking its bottomland hardwood timber through six consecutive years of protested flooding. The Court of Federal Claims awarded $5.7 million, finding that the Army Corps of Engineers' actions foreseeably destroyed and degraded more than 18 million board feet of timber, left habitat unable to regenerate, and preempted the Commission’s use and enjoyment. The Federal Circuit reversed that ruling and found that that the United States did not inflict a taking because its actions were not permanent and the flooding eventually stopped.

 

This will be a very interesting case to follow. Any time the Court decides an eminent domain case, it has the opportunity to opine regarding issues not necessarily presented by the specific case. I will continue to provide updates as the case progresses.

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The US House of Representatives recently passed the "Private Property Rights Protection Act of 2012." The Act prohibits the federal government and states and municipalities from exercising its power of eminent domain over property to be used for economic development if the state or municipality receives federal economic development funds during any fiscal year in which the property is so used or intended to be used. "Economic development" is defined as the taking of private property, without the consent of the owner, and conveying or leasing that property from one private person or entity to another for commercial enterprise. Any state or municipality violating this Act would render it ineligible for any federal economic development funds for two years.

The bill is now pending in the Senate. Many states, including Pennsylvania, passed similar statues in the wake of the US Supreme Court Kelo case.

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In Shelp v. City of Scranton, a Pennsylvania trial court ruled that, in some cases, property sellers and brokers may be required to disclose the fact that a property was previously condemned to potential buyers. In that case, the defendant sold property to the plaintiff that had been previously condemned. The defendant had acquired the property from the City of Scranton after it was condemned by the City. The defendant did not disclose the prior condemnation to the plaintiff. The City later evicted the plaintiff at which point the plaintiff was informed that the property was condemned.

The plaintiff alleged that seller and real estate broker should have disclosed the prior condemnation. The facts are somewhat unclear, but it appears that the plaintiff was evicted by the City due to the unsafe condition of the property. The seller and the real estate broker filed a motion – known as preliminary objections – alleging that, as a matter of law, there was no duty to disclose the prior condemnation.

The Court denied the motion as to the seller and broker and ruled that the case could proceed. It found, for example, that the plaintiff relied upon the seller and broker’s representation that the property was fit for residential habitation and ultimately it was not fit. The defendants will now have the opportunity, as the case proceeds, to contest the factual arguments so this case is far from over.
 

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US Airways and the City of Philadelphia issued a joint statement in which they state they are working out their differences regarding the Philadelphia Airport expansion project. US Airways has objected to the costs it would bear for the expansion. The City has threatened to impose new airport-use rates if US Airways did not agree to a new 15-year airport lease by July. The joint statement said recent talks between the two sides had been "very productive" and that "our paramount objective [is] to conclude an agreement on a long-term airport lease …."

The city estimates the airport expansion project would cost $6.4 billion over 13 years. US Airways and other airlines at the airport estimate the cost at about $10.5 billion. The proposed expansion would, among other things, add a fifth runway to the airport, shift the UPS airfreight operations hub to the western side of the airport, lengthen two existing runways and build a new commuter terminal.

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A bill was recently introduced in the PA Senate seeking to eliminate the doctrine of adverse possession in PA. Pennsylvania common law provides that adverse possession of a property arises by actual, continuous, exclusive, open, notorious, distinct, and hostile possession of property for a period of 21 years. The bill’s author, State Sen. Richard Kasunic, pointed to cases where community interests and economic development opportunities are hampered by squatters making last minute claims to property they never lawfully owned in the first place.

The bill would be an extraordinary change in real estate law and, therefore, seems unlikely to pass. However, it is definitely something that should be monitored.

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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. We recently were successful in establishing 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. 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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The Pennsylvania Game Commission filed a protest with the Federal Energy Regulatory Commission objecting to Central New York Oil and Gas Co. LLC’s attempt take over land the commission manages. PGC stated, "If FERC allows [Central New York Oil and Gas Co.] to file eminent domain proceedings against the Commonwealth of Pennsylvania, it will bring into contention the implicit federal preemption of state's regulatory authority. The inequitable burden placed on Pennsylvania's wildlife resources is in stark contrast to a project that neither increases the capacity of the downstream gas delivery system, nor increases the supply of gas feeding into the gas supply system, but at best only allocates the direction gas will flow for the private pecuniary benefit of some at the expense of efficiency and economy for all."

The PGC said its interests in maintaining control over state game lands in Bradford County, Pa., outweigh the interests of CNYOG in forcing an eminent domain action. This issue will undoubtedly continue be hotly contested.
 

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One of the largest and most controversial projects being discussed in Southeastern Pennsylvania is the expansion of the Philadelphia International Airport. US Airways Group Inc. is now increasing its efforts to oppose the project. As the Philadelphia Inquirer reported, “the move by US Airways, backed by other airlines, throws the massive airport project into turmoil after a decade of reviews. Philadelphia officials say they will push ahead with or without airline support - even though airlines will pay much of the bill and could cut service here.”

This project has been the subject of attacks from a variety of sources including property owners in the footprint of the proposed expansion. Now, Philadelphia's biggest airline is publicly stating that another runway would not noticeably reduce delays for passengers because congestion is caused largely by traffic in the skies. However, the city is not changing its commitment to the project. Rina Cutler, Philadelphia’s Deputy Mayor for transportation said, “We are going to move forward. We are going to do the runway."

 

This fight will likely continue and become even more intense. 

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We were recently involved in a very controversial condemnation matter. We were retained by the Ludwig’s Corner Horse Show Association to challenge a condemnation filed by West Vincent Township. The Township passed a resolution and filed a declaration of taking to condemn 33 acres owned by the Association. The Association is a true treasure in the horse community as well as the community in general. A firestorm erupted and the Township agreed to rescind the condemnation.

 

I have seen governmental entities far too often become entrenched in their actions and irrationally refuse to reconsider their decisions.  Fortunately, the Township was an exception.

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A federal appeals court recently held that a condemnee who successfully challenges a taking may be entitled to “just compensation” during the period between the filing of the declaration of taking and the revesting of title. In R&J Holding Company v. Montgomery County RDA, the property owner successfully challenged the taking of its property. The property owner was awarded its attorneys’ fees and expenses as mandated by Pennsylvania law in cases where there are successful condemnation challenges. That challenge took approximately five years including a review by Pennsylvania’s appellate courts.
 

The condemning authority, the Montgomery Count RDA, held title to the property throughout the state court action. The property owner filed an action in state court alleging it was deprived of certain fundamental property rights, including the right to improve the property and the right to sell the property during the pendency of the condemnation challenge. The Pennsylvania Commonwealth Court reversed rejected the claim holding that the Pennsylvania Eminent Domain limits a prevailing condemnee's recovery to professional fees and expenses. The Commonwealth Court's opinion never explicitly addressed whether denying just compensation violated the state or federal constitutions.

The property owner then filed suit in federal court seeking the “just compensation” promised by the Fifth Amendment. The RDA argued that there was no taking and that without an accompanying attempt to take physical possession of the property, transfer of title to the government does not constitute a taking. The Third Circuit rejected the argument finding that it was “a per se” taking because title to the land actually passed upon the filing of the Declaration of Taking.
The Third Circuit did not elaborate as to the nature of the “just compensation,” however. It will be interesting to monitor this case as it proceeds.
 

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73% of Mississippians voted in favor of an eminent domain initiative earlier this month. Initiative #31 amends the Mississippi Constitution to prohibit state and local government from taking private property by eminent domain and then conveying it to other persons or private businesses for a period of 10 years after acquisition. Exceptions from the prohibition include drainage and levee facilities, roads, bridges, ports, airports, common carriers, and utilities. The prohibition would not apply in certain situations, including public nuisance, structures unfit for human habitation, or abandoned property. Mississippi is the 44th state to restrict the use of eminent domain for private development. 

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The Commonwealth Court of Pennsylvania recently addressed the requirement that a condemnor must initiate the condemnation action within one year of the action authorizing the condemnation. In In Re: Condemnation by the Redevelopment Authority of the City of Allentown, the condemned property was determined to be blighted on March 8, 2004. On June 14, 2005, the Redevelopment Authority of the City of Allentown (RACA) adopted a resolution authorizing the executive director to acquire the property through eminent domain. On June 15, 2005, the Allentown City Council adopted a resolution authorizing RACA to acquire the property through eminent domain, if necessary.

The RACA waited until September 15, 2008 to file the Declaration of Taking – the filing that initiates a condemnation case in PA. Section 302(e) of the PA Eminent Domain Code, 26 Pa.C.S. § 302(e), states: “The condemnor shall file within one year of the action authorizing the declaration of taking, a declaration of taking covering all properties included in the authorization not otherwise acquired by the condemnor within this time.”

The Condemnee challenged the taking alleging that the Declaration was not filed within the required year from the date of authorization. On December 3, 2008, the RACA adopted another resolution continuing the authorization of the taking of the property. On December 11, 2008, the RACA filed an Amended Declaration of Taking. Condemnee challenged the Amended Declaration. The Court of Common Pleas of Lehigh County sustained the challenge to both the Declaration and Amended Declaration.

On appeal, the Commonwealth Court affirmed the trial court’s ruling. The RACA argued that amended declarations may be filed as of course without instituting new court actions in order to cure technical defects. The Court rejected that argument and held that the the RACA, “only had one year from the date of the resolution to file its Declaration. Clearly, it did not do so. There is nothing in [The Code] giving RACA authority to extend the one year time period by adopting another resolution ‘continuing’ the authority to condemn.”
 

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A Philadelphia judge recently dismissed a challenge by a group of Philadelphia taxpayers challenging the city’s tax assessment practices. The suit alleged that properties were “over assessed” due to alleged illegal and unconstitutional City Property Tax practices. The complaint took issue with the citywide moratorium on property tax reassessments that went into effect in January 2010. It also alleged that the City violated the General County Assessment Law and PA Constitution. The taxpayers accused the city of unequal taxation of similar properties, spot reassessment, failure to assess all properties at the actual values, failure to perform annual assessments and failure to correct all assessment errors.

Trial Judge Idee C. Fox dismissed the suit. She found that the plaintiffs did not prove the necessary element that their properties were assessed at a higher level than the majority of other properties in their municipality. Therefore, the Court ruled, the plaintiffs cannot claim to have suffered an “adverse action” and have no standing.
 

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PennDOT has shown signs that it is pursuing property acquisitions for Route 422 projects in Berks and Montgomery Counties (PA). PennDOT published a notice on September 3, 2011 in The Pottstown Mercury newspaper that it intends to acquire property in Lower Pottsgrove (PA) Township for that portion of its 422 reconstruction project. Property owners are also receiving notices of potential acquisition for various other 422 projects.

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The U.S. Supreme Court has been asked to decide “[w]hat category of takings are subject to heightened judicial scrutiny, and when is the risk of undetected favoritism so acute that an exercise of eminent domain can be presumed invalid?” In C & J Coupe Family Ltd. Partnership v. County of Hawaii, the County of Hawaii sought to condemn private property for the purpose of constructing a highway. The property owners argued that the alleged public use - a highway bypass - was merely a “pretext” for a conferring a benefit upon a developer of a luxury residential project. The Hawaii Supreme Court rejected this argument.
The property owners filed a petition for writ of certiorari – the mechanism to have a case heard by the U.S. Supreme Court – arguing that “Since Kelo, the lower courts have been unable to
settle on consistent or clear standards for when the public purpose supporting an exercise of eminent domain is pretextual, or in what situations the ‘risk of undetected impermissible favoritism’ is such that a presumption of invalidity or a heightened standard of review is warranted.” If cert is granted, this will be the first time the Court will consider these issues since Kelo v. City of New London.
 

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The Justice Department has brought a lawsuit against Joliet, Ill., accusing the city of seeking to “limit or reduce” its number of black residents by seizing a federally subsidized housing development through eminent domain. The move displaces more than 750 low-income residents, more than 95 percent of whom are black.
The lawsuit, announced Friday, was filed in U.S. District Court in Chicago and accuses Joliet city officials of violating the Fair Housing Act when they took actions to condemn the privately owned Evergreen Terrace apartment complex, which provides 356 units of affordable housing in Joliet. The city says it is merely trying to clear up urban blight, saying Evergreen Terrace has become a crime magnet. It also said the city has long planned to redevelop the site for affordable housing and to assist with the relocation of residents, putting aside $3.5 million. But the Justice Department charged that the eminent domain action would have a “disproportionate adverse impact on African-Americans and operate to perpetuate segregation in Joliet.” It stated, “Today’s action is a reminder that when local governments take unjustified actions that reduce opportunities for affordable housing, they risk violating federal anti-discrimination laws.”
 

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I am proud to say that our successful challenge to a condemnation for a property owner outside of Erie, PA was upheld by the Commonwealth Court of Pennsylvania. 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, 2009 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 Trial Court agreed that the condemnor did not have the requisite statutory authority and the Township appealed the decision. On July 15, 2011, the Commonwealth Court unanimously affirmed the Trial Court’s decision defeating the condemnation. As part of its decision, the Commonwealth Court restated the axiom that the power to condemn must be expressly granted by statute and held that this required authority did not exist in this case.
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, our environmental law partners were invaluable.

 

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The Pennsylvania Luzerne County Court of Common Pleas recently upheld a condemnation of property for a “charter school.” In Bear Creek Township v. Riebel, decided June 2, 1011, Bear Creek Township condemned property that would ultimately be used for a “Pennsylvania Public Charter School.” The property owners alleged, among other things, that the taking violated the Pennsylvania Eminent Domain Code’s prohibition against condemning properties for “private enterprise.” That prohibition is found in Chapter 2 of the Code and was enacted in 2006 in response to the United States Supreme Court’s Kelo decision.

Although the challenge was based on Chapter 2 of the Code, the Court virtually ignored those provisions in its analysis. Instead, the Court applied cases prior to the enactment of Chapter 2 which analyzed the “public use” – also referenced as the “public purpose” – requirement of the Pennsylvania and United States Constitutions.

The Court ruled, “After careful review, this Court finds ample evidence by way of law, testimony and documentary exhibits, that the proposed Recreation/Charter School Project does primarily benefit the public and is for a public purpose.”

The property owners have appealed to the Commonwealth Court. It will be very interesting to watch this appeal to see how the Commonwealth Court will address the Code’s prohibition against condemning properties for “private enterprise.”
 

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Congress is considering a bill that would prohibit a state or local government from exercising its power of eminent domain over property to be used for economic development or over property that is used for economic development within seven years after that exercise. The bill would establish a private cause of action for any private property owner or tenant who suffers injury as a result of a violation of this Act. The bill would also prohibit a state or local government from exercising its power of eminent domain over property of a religious or other nonprofit organization because of the organization's nonprofit or tax-exempt status or any related quality.
The bill is currently pending in the House Judiciary Committee’s Constitution Subcommittee.
 

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The politically conservative group Club for Growth attacked Donald Trump, who is apparently considering a bid for the Republican presidential nomination, for alleged abuse of the power of eminent domain. The Club for Growth claimed that in 1997, Trump tried to evict an elderly widow to expand an Atlantic City casino. It also claims that Trump stated his opinion regarding the Supreme Court case Kelo v. New London as: “I happen to agree with it 100 percent, not that I would want to use it. But the fact is, if you have a person living in an area that’s not even necessarily a good area, and government, whether it’s local or whatever, government wants to build a tremendous economic development, where a lot of people are going to be put to work and make area that’s not good into a good area, and move the person that’s living there into a better place — now, I know it might not be their choice — but move the person to a better place and yet create thousands upon thousands of jobs and beautification and lots of other things, I think it happens to be good.”

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We represent the former owners of property in Delaware County, Pennsylvania. A Township condemned the property and claimed that the property was worth only $1.26 Million.

A Board of View Hearing was held which lasted four days. Both sides presented fact and expert witnesses including appraisers and zoning experts. Our appraiser testified the fair market value of the property was $6 Million.

Last week the Board of View issued its decision. They awarded the entire $6 Million to our clients. The Report of the Board stated that the decision was made “after a full and impartial consideration of all the testimony submitted to them; after careful review of the subject property as appropriated by the Township of Haverford, and acting in accordance to their best judgment”.

Articles regarding this case can be found at:

www.mainlinemedianews.com/articles/2011/03/16/main_line_times/news/doc4d80a2c59454d334142055.txt

 

http://www.philly.com/philly/news/20110317_Value_of_plot_Haverford_bought_is_disputed.htm

delcotimes.com/articles/2011/03/20/opinion/doc4d856d7b240cb460653052.txt

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A Pennsylvania condemnee has two procedural mechanisms to assert a de facto taking. Which mechanism is appropriate depends upon whether a declaration of taking has been filed. A condemnee may file a petition for appointment of board of view before a declaration of taking is filed or file preliminary objections after a declaration of taking is filed. The Commonwealth Court recently reaffirmed that preliminary objections are the exclusive method to allege a de facto condemnation after a declaration of taking is filed.

In Lang v. Dep't of Transportation, (Pa. Commw. Feb. 18, 2011), PennDOT filed a declaration of taking and the condemnee did not file any preliminary objections. The condemnee later filed a petition for viewers as a separate action alleging a de facto taking. PennDOT filed preliminary objections to the petition alleging that the condemnee waived his right to claim a de facto taking by not filing preliminary objections to the declaration of taking.

The trial court and the Commonwealth Court both held that the failure to file preliminary objections after a declaration of taking is filed precludes the condemnee’s ability to assert a de facto taking in any action.
 

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A Lehigh County Trial Court recently held that an eminent domain action was void ab initio where the condemning authority did not file a declaration of taking within one year of the authorization of taking. In In re Condemnation by the Redev. Auth. of the City of Allentown, (C.P. Lehigh Jan. 13, 2011), the Allentown City Council adopted a resolution authorizing the Redevelopment Authority to acquire a property through eminent domain in 2005. However, the declaration of taking was not filed until Sept. 15, 2008.

The PA Eminent Domain Code was amended effective Sept. 1, 2006 – after the authorization was adopted and before the filing of the declaration of taking. One of the amendments provided that "the condemnor shall file within one year of the action authorizing the declaration of taking a declaration of taking...." The Court sustained the condemnee’s objections to the taking on the basis that the declaration of taking was filed over one year after the authorization. It reasoned that the time limit for filing a declaration of taking is analogous to a statute of limitations. "A statute of limitations is procedural; statutes relating to procedural matters, such as statutes of limitation, are applicable to cases filed after the effective date of the statute."
 

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Congressman Patrick Meehan (D-PA) recently questioned Federal Aviation Administrator Randy Babbitt regarding the Philadelphia International Airport Expansion Project. The questioning was part of a Transportation and Infrastructure subcommittee on Aviation hearing. Part of the questioning related to whether the FAA intended to condemn properties outside of Philadelphia for the project.

Congressman stated in a press release: “I sought clarification on eminent domain powers in relation to the Philadelphia Airport expansion.” However, there was no such clarification given during the hearing as Congressman Meehan’s allotted time ran out. A video of the questioning can be found at:
 

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The Pennsylvanian House of Representatives is once again considering a bill that would increase the amount of professional fees in eminent domain cases to $25,000. The Pennsylvania Eminent Domain Code was amended in 2006 and currently provides that a property owner “shall be reimbursed in an amount not to exceed $4,000 as a payment toward reasonable expenses actually incurred for appraisal, attorney and engineering fees.” Prior to the 2006 amendment, property owners were entitled to $500 for professional fees.
The same bill was introduced during the last session in 2009 and never made it out of the State Government Committee.
This issue continues to be controversial. In 2007, the United States Government Accountability Office issued a report regarding eminent domain. In that report, the GAO stated: “Multiple property rights groups further explained that owners often are unable to fight a condemnation action if they want to retain their homes or businesses or seek additional compensation because costs related to hiring an appraiser or attorney, as well as court costs, are too high.” Of course, increasing the reimbursable amount could also increase the cost of a project.
It is unclear whether this version will fare any better than its predecessor.
 

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After over a decade of planning, a $5.2 billion expansion of Philadelphia International Airport was approved by the Federal Aviation Administration. The project will require a significant amount of land acquisition in Philadelphia and Delaware County.

Those properties in Philadelphia could be acquired through the City’s power of eminent domain. However, airport chief executive officer Mark Gale stated that “We do not have eminent-domain power in Delaware County. We will try to voluntarily have a transaction with a willing seller.” His statement presumably is based upon a 2006 amendment to the Pennsylvania Eminent Domain Code which generally prohibits "extraterritorial" condemnations – i.e., condemnations beyond a municipality’s borders.

If your property is being considered for acquisition – either through a condemnation proceeding or amicably – you should know your rights and potential for compensation. It appears that this project will be a reality and should not be ignored.
 

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In Borough of Walnutport v. Dennis, the Commonwealth Court of Pennsylvania restated Pennsylvania black letter law that any claim for damages caused by an alleged condemnation must be brought pursuant to the procedures of the Eminent Domain Code. In that case, decided December 3, 2010, a borough sued a property owner for costs associated with installing curbing on the property. The property owner sought to include in his counterclaim that the Borough interfered with access to his property which effected a taking. The Commonwealth Court restated the long standing rule in Pennsylvania that any claim for an alleged condemnation must be brought pursuant to the Eminent Domain Code.

The lesson is that if you believe that the action of a governmental entity has caused the taking of your property, you may only pursue eminent domain damages pursuant to the Eminent Domain Code.
 

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The PA Supreme Court recently ruled that the PA Private Road Act may facilitate unconstitutional takings. In In the Matter of Opening a Private Road For The Benefit of Timothy P. O’Reilly, a landlocked property owner proceeded under the Private Road Act to open a private road to connect to a public road. The Private Road Act permits the owner of a landlocked property to petition the Court of Common Pleas for the appointment of a board of viewers to evaluate the necessity of a private road to connect such property with the nearest public thoroughfare or private way leading to a public thoroughfare. Upon a finding of necessity, the board will lay out a private road to cause the least damage to private property. The Act requires the owner of the landlocked property to pay damages to persons over whose property the new road is built; the owner is then afforded exclusive use of the road.

The owners of the property where the proposed private road would be located filed preliminary objections alleging that the Private Road Act facilitates an unconstitutional taking of private property for a private purpose in violation of the Fifth Amendment to the US Constitution and similar sections of the PA Constitution. They claimed that the PRA is unconstitutional because it facilitates the transfer of property from one private property owner to another private property owner for a private use. The landlocked property owner argued, in part, that the creation of a private road under the Act is not a taking, but, instead, embodies reasonable regulation of property usage or provision of an otherwise unavailable private easement, both exercised under the Commonwealth's police power.

The trial court overruled the preliminary objections and the Commonwealth Court affirmed that decision. The PA Supreme Court vacated the Commonwealth Court’s decision and ruled that the creation of a private road is a taking. It held that “irrespective of the police-powers rubric, a physical invasion and permanent occupation of private property, such as that which would be accomplished by the creation of a private road under the Act, is a taking.” The Court also concluded that the lower courts did not perform the necessary analysis to determine if the taking was proper under the test for whether a taking is for a public use. Therefore, the Court remanded the case to perform that analysis.

It will be interesting to see how the lower courts deal with this issue. It is the first time the PA Supreme Court considered this issue and it could open the door to challenges of any taking under the PRA.

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The Pennsylvania Commonwealth Court recently ruled that PennDOT met its burden to condemn agricultural property for a project in Lebanon County. In Dept. of Transp. v. Agricultural Lands Condemnation Approval Board, PennDOT sought to condemn productive agricultural lands for a transportation use. Pursuant to the Farmland Protection Policy Act, the Agricultural Lands Condemnation Approval Board considered the PennDOT project. It found that PennDOT did not prove that there was no reasonable and prudent alternative to the alternative selected by PennDOT and denied PennDOT’s request to use its condemnation power to acquire the lands. On appeal, the Commonwealth Court reversed holding that the Board acted capriciously and ignored overwhelming evidence that there was no reasonable and prudent alternative to the condemnation of the lands.

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Terry Gillen has resigned as Executive Director of the Philadelphia Redevelopment Authority. She will be replaced by Ed Covington, a Wachovia Bank executive. Covington was the marketing manager for community lending and investment for Wachovia's mid-Atlantic region. The change was voted on at a special RDA board meeting Wednesday and later announced by Mayor Nutter at City Hall. It is effective immediately. Gillen will work for Mayor Nutter on federal lobbying efforts.

 

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The Government Accountability Office provided an update of its study of real estate appraisal issues as mandated by the Dodd-Frank financial regulatory reform bill. The GAO is conducting a year-long study of appraiser independence. As required by the Dodd-Frank legislation, the GAO must study the effectiveness and impact of options for selecting appraisers, different valuation methods and the effectiveness of the Home Valuation Code of Conduct.

 

The GAO’s study will focus on appraisals of one- to four-unit residential properties to answer four broad questions:

 

How often are different options for selecting appraisers and valuation methods used?

 

What are the potential advantages and disadvantages of these options and methods, and how do policies, including HVCC, affect their use?

 

To what extent do valuation costs and disclosures to consumers vary by appraiser selection option and valuation method, and how has HVCC affected these costs and disclosures?

 

How do federal and lender policies, including HVCC, address conflicts of interest in the valuation process, and how have these policies affected industry stakeholders?

 

At this point, the GAO study is still in its preliminary stages. For example, it is in the process of “evaluating potential data sources, analyzing federal policies and academic and industry research, and interviewing federal agency officials and appraisal industry stakeholders.” Stay tuned.

 

The update can be found at www.gao.gov/products/GAO-11-158R

 

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In a move that sent tremors throughout the appraisal community, the Appraisal Institute withdrew its sponsorship of The Appraisal Foundation on September 7. (See my September 16, 2010 entry).

The Appraisal Foundation has now posted a “Q&A” on its website regarding this important issue. That post can be found at: www.graphicmail.com/new/viewnewsletter2.aspx

According to the Appraisal Foundation,

“the Appraisal Institute once again failed to communicate with the Foundation regarding a matter directly related to our organization. In this case, without the Foundation’s knowledge or approval, the Appraisal Institute approached three other organizations with the following proposed revision to the federal law (FIRREA) which grants authority to The Appraisal Foundation:

“to maintain the independence of the Appraisal Standards and Appraiser Qualifications Boards and to avoid potential conflicts of interest, The Appraisal Foundation shall not directly or indirectly offer or sponsor any qualifying or continuing education courses for certified or licensed real estate appraisers beyond the National Uniform Standards of Professional Appraisal Practice course specifically required for licensure and certification.”

According, to the Appraisal Foundation, this was not the first time the Appraisal Institute allegedly violated similar Foundation rules.

The Foundation also stated that “under the right circumstances, there will always be a door open for the Appraisal Institute to return to The Appraisal Foundation.” However, the Foundation expressly stated, “we are always willing to talk with their representatives. We hope and believe the opportunities associated with a change in their leadership in a few months may be constructive.”

Once again, I truly hope these important organizations resolve their differences.
 

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I just completed a 2 week trial in Burlington County, New Jersey in which the jury awarded my client – the property owner – $1,607,000. The case involved a “partial taking” by the New Jersey Dept. of Transportation of a portion of the frontage of a shopping center in Marlton, NJ. The NJDOT’s last offer was $194,000.

The biggest issue in the case was the extent to which the property owner was permitted to seek damages caused by a closed driveway. New Jersey, like many states, limits a property owner’s ability to obtain damages for a change in access. Generally, New Jersey property owners are not permitted to seek such damages as long as the remaining access is reasonable. However, there are exceptions including if the change in access caused “on site impact” such as vehicular maneuverability issues.

This is an issue that is likely to receive a great deal of attention given the spike in roadway projects.
 

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In a move that sent tremors throughout the appraisal community, the Appraisal Institute withdrew its sponsorship of The Appraisal Foundation on September 7.

The Appraisal Institute is the most prestigious real estate organization and has more than 25,000 members and 91 chapters throughout the world. I am an affiliate member of AI (the designation for non-appraiser real estate professionals). The Appraisal Foundation was founded in 1987 by eight major appraisal organizations to help regulate the appraisal profession within the US. It is perhaps best known for its promulgation of the Uniform Standards of Professional Appraisal Practice (“USPAP”) which contains the generally accepted standards for professional appraisal practice in North America.

AI and the Appraisal Foundation have been fighting throughout this year regarding AI actions relating to proposed legislation. The Appraisal Foundation claimed that AI improperly sought to influence other Appraisal Foundation members to support legislation that may have been contrary to the Foundation’s interests. The Foundation ultimately sanctioned AI for its alleged actions.

The AI Board of Directors’ letter to the Foundation stated: “The Appraisal Institute must be able to discuss freely issues of concern to, and advance the interests of, its members, the profession and the public, which The Appraisal Foundation has made clear, is inconsistent with Foundation sponsorship. Moreover, the Foundation has decided to punish the Appraisal Institute for actions that it did not commit. That decision is grossly unfair, unacceptable, and attacks the very integrity of the Appraisal Institute.”

AI’s statement regarding its withdrawal can be found at appraisalinstitute.org/newsadvocacy/news/2010/090710_AI_WithdrawalFromTAF.aspx

It is truly sad that these two important organizations cannot work together. Hopefully, cooler heads will prevail and will close this rift.
 

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Since condemnations are almost always involuntary, condemnees/property owners have very little say over when their property will be taken and valued. Condemned properties are generally valued at the time of the taking and, as a result, condemnees are often stuck with a bad valuation date. Since the real estate market has been depressed for some time, more property owners, left alone, would not normally sell their property now and would wait until the market is better. However, they don’t have that choice when their property is condemned.

The bad new continues. Moody’s/REAL Commercial Property Price Indices reported on August 23, 2010 that Commercial real estate prices in the U.S. dropped 4 percent in June from the previous month. At the end of June, commercial real estate prices were down 41 percent since peaking in October 2007. By sector, retail properties had the biggest drop at 11 percent in the second quarter, followed by industrial properties at 2.9 percent. However, prices for both apartments and industrial properties increased 4 percent.

There can be times when you can attempt to change the valuation date. This is something property owners should consider.
 

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The Pennsylvania General Assembly is considering creating “land banks” as a way to deal with vacant or abandoned properties. House Bill 712 (J. Taylor, R-Philadelphia) provides for the creation of land banks by counties, cities and/or boroughs with populations of 10,000. The proposed Land Banks Authority Act authorizes those municipalities to establish a land bank authority and sets forth the parameters by which the authority may act to acquire, manage and sell property. The Act expressly prohibits the use of eminent domain to acquire the targeted property.  The bill passed the House by a vote of 190 to 8 and has been referred to the Senate Urban Affairs and Housing Committee.

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The U.S. Supreme Court recently handed down a very interesting decision. The Court’s decision in Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection (No. 08-1151) must be viewed in two parts.  The opinion can be found at www.supremecourt.gov/opinions/09pdf/08-1151.pdf

First, the Court unanimously rejected property owners’ claims that a Florida beach reclamation project constituted an unconstitutional taking. Under Florida law, beachfront property seaward of the median high-water mark belongs to the state, while the owners of beachfront property own the land between that line and their homes. Florida cities put new sand on beaches which extended the beaches into the sea by seventy-five feet. The new land would belong to the state and owners of adjacent property would not have exclusive access to the water or own any new land subsequently added naturally.

Justice Scalia wrote the opinion for the unanimous Court (Justice Stevens did not participate) ruling that there was no taking. The decision was based upon Florida law that property owners do not have any right to the filled-in land and that the state has the right to fill in its own seabed.
The second and more interesting issue, was whether there can be a “judicial taking” – that is, whether a decision by a Judge could constitute a taking. 4 members of the Court – Justices Scalia, Roberts, Thomas and Alito – went out of their way to consider and find that there can be a judicial taking. They stated that a judicial taking occurs in situations where a “court declares that what was once an established right of private property no longer exists.” Justice Scalia, writing for this plurality, opined that “it would be absurd to allow a State to do by judicial decree what the Takings Clause forbids it to do by legislative fiat.”

There were 2 opinions dissenting from this part of Justice Scalia’s opinion. Justices Sotomayor, Kennedy, Breyer and Ginsburg, in essence, concluded that they should not address the question of whether there could be a judicial taking since they found that, in any event, there was no taking in that case.

It is very difficult to predict what, if any, impact this case will have. The first part of the case is limited to Florida property law. The second part – whether there can be a judicial taking – did not have a majority opinion. Further, it is uncertain, if not unlikely, that a lower court judge will want to conclude that a Judge’s decision constituted a taking.

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In response to questions by Republican Senator Charles Grassley on July 1, 2010, Supreme Court nominee Elena Kagan discussed property rights and the Court’s Kelo decision. The following are some excerpts of her testimony:
GRASSLEY: Do you believe that the Supreme Court correctly decided the Kelo case or do you believe that the Supreme Court improperly undermined constitutionally protected private property rights?
KAGAN: Senator Grassley, it was obviously a very controversial decision that has inspired a great deal of action in the state legislatures. Of course, what what the court in Kelo did was to say that the question of public use was not necessarily use by the public, but instead was use for a public purpose. And the court said that in the context of a taking of property that was done pursuant to a broad-scale urban development plan. So I think it remains an open question whether that public purpose test would apply in any other context without such a broad– scale urban development plan . . . .
[W]hat states have done in the wake of that decision, in a very striking manner, I think, is to say, “Thanks, but no thanks, you know. We don’t want that power. We don’t want to be — we don’t want to do this. We think doing this, taking property from one person to give it to another person, even in the context of a broad redevelopment plan, is not appropriate public policy.”
And so a number of states . . . have passed these kinds of anti-Kelo legislation, which makes sure that the question never arises because the state government doesn’t try to affect such a taking in the first instance.
GRASSLEY: Can you think of any areas where, in your opinion, the Supreme Court has failed to provide adequate protection of constitutional property rights? And if you can think of any, then I’d like to know examples — or an example.
KAGAN: Well, you know, I’ve tried very hard, Senator Grassley, not to suggest where I see deficiencies with — in — in — in the court’s handling of cases. So I think, you know, I think I won’t answer that question with that degree of specificity.
GRASSLEY: The president who appointed you, in “Audacity For Hope,” his book, said our Constitution places the ownership of private property at the very heart of our system of liberty. Do you agree with that statement?
KAGAN: Well, I do think that property rights are a foundation stone of liberty, that the two are intimately connected to each other in our society and in our history.
 

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The Philadelphia International Airport will embark upon a $5.2 billion expansion plan for over the next 12 to 15 years. The proposal would lengthen two of the airport's four runways and build a fifth runway along the Delaware River, where UPS now operates. UPS would move to the airport's west end on 200 acres in Tinicum Township that the airport would acquire. The FAA plans to issue a final environmental impact statement by late summer, and a "record of decision" on the project by the end of 2010.

A significant amount of property will need to be acquired for the project. According to the Philadelphia Inquirer, the airport will acquire and demolish buildings at the International Plaza, and acquire 106.5 acres of private land east of the airport from 13 owners and demolish the buildings. Two public streets, Escort Street and Executive Avenue, would be closed. The plan also calls for relocating or closing several public roads and relocating railway facilities. The Airport has stated that construction would be paid for by Philadelphia revenue bonds, passenger-facility charges, and federal FAA grants

 

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Utah’s Legislature passed and its Governor signed a bill authorizing that state to condemn property owned by the U.S. Government. As the bill states, it “authorizes the state to exercise eminent domain authority on property possessed by the federal government unless the property was acquired by the federal government with the consent of the Legislature and in accordance with the United States Constitution Article I, Section 8, Clause 17.”

More than 60 percent of Utah is owned by the U.S. and many in that State have complained that federal ownership hinders their ability to generate tax revenue and adequately fund public schools. It has been reported that the state would initially target three areas for the use of eminent domain, including the Kaiparowits plateau in Grand Staircase-Escalante National Monument, which is home to large coal reserves.

This bill could induce other Western states to try to reclaim their own national monuments and landmarks, eventually opening them for energy production and other development. Utah lawmakers say they have contacted representatives in Arizona, Montana, Nevada, New Mexico and Wyoming about adopting similar legislation in their states, with the goal of taking the issue to the Supreme Court.  However, it is likely that this bill will ultimately be found to be unconstitutional. Similar laws have been struck on the basis that they violate the U.S. the Constitution's "supremacy" clause.
 

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One of the issues confronting the next Governor of Pennsylvania is whether there should be a Pennsylvania Constitutional Convention. This idea has had received more attention and support recently. The proponents have ranged from those with particular issues of concern to those who simply want to modernize the Pennsylvania Constitution. The last Pennsylvania Constitutional Convention was in 1968.

If there is a convention, the issue of eminent domain could be one of the “hot button” issues. This was recognized recently in debate among PA Gubernatorial Candidates. During that debate, the candidates were asked whether they support a Constitutional Convention. Sen. Anthony Williams, a Philadelphia Democrat, expressed reservations saying that there is too much risk in opening up the constitution to issues. One of those issues, he said, is eminent domain.

Right now, Article I, Section 1 of the Pennsylvania Constitution provides, “nor shall private property be taken or applied to public use, without authority of law and without just compensation being first made or secured.” That is similar the US Constitution’s Fifth Amendment. Other states have different variations on the wording and concepts. It is an issue to watch.

 

 

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Justice John Paul Stevens, the author of the controversial “Kelo” decision has announced that he will retire this decision. In Kelo v. City of New London, the US Supreme Court ruled that it was not unconstitutional to condemn private property for economic development and transfer ownership of the property to another private party. That opinion set off a huge backlash that exists to some extent today.

Stevens has since stated that, although he believes that the ruling was legally correct, the opinion was "entirely divorced from my judgment concerning the wisdom of the program." It is safe to assume that President Obama’s nominee will be asked about his/her opinion regarding eminent domain.
 

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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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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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There can be no question that eminent domain remains a hot button issue. Regardless of your role in an eminent domain project, it is critical to always be mindful of this fact which was made evident by two recent articles.

In one, George Will wrote an op-ed article regarding a Texas case in which an author was sued for defamation regarding her description of the use of eminent domain for a project for a Dallas developer. The author, Carla Main discussed that condemnation project in her book “Bulldozed: ‘Kelo,’ Eminent Domain and the American Lust for Land.” Her book is very critical of the use of eminent domain for economic development. The Dallas developer sued Main and her publisher. Will, citing the Institute for Justice -- an Arlington-based public-interest group that represented the Kelo condemnees and other condemnees nationally – claims this is an example of “a national trend of attempted intimidation by litigation.” Will’s article, which was published by numerous papers locally and nationally, can be found at www.washingtonpost.com/wp-dyn/content/article/2009/08/19/AR2009081902262.html.

The other was written by Dana Berliner, a leader of the Institute for Justice. She has taken up the cause of the property owners challenging the taking of their property for redevelopment in Brooklyn including a new New Jersey Nets arena. That case, addressed in one of my posts below, is pending before the New York Supreme Court. The New York Daily News printed a lengthy editorial written by Ms. Berliner. That article can be found at www.nydailynews.com/opinions/2009/08/24/2009-08-24_end_eminent_domain_abuse.html.
 

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The federal government and landowners have reached agreements for the purchase of 1,400 acres at the Flight 93 crash site in Somerset County, Pennsylvania.  As a result, the government will not take those properties with its power of eminent domain.  Interior Secretary Ken Salazar stated the property owners would be paid a total of $9.5 million. 

The potential use of eminent domain has been very controversial.  Negotiations between the Park Service and the property owners lasted several years.  Secretary Salazar and Sen. Arlen Specter met with landowners last spring demonstrating the amount of attention given to this project.

 

However, not all of the property owners reached final agreements with the federal government,.  The federal government through the U.S. Department of Justice has initiated eminent domain proceedings to take land owned by one property owner, Svonavec, Inc.  However, that property owner will not contest the taking and will use the eminent domain process to determine the amount of “just compensation” to be paid.

 

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The Battle over the taking of property for, among other things, an NBA arena and 16 office and residential towers in Brooklyn has moved to New York’s highest Court. The New York Court of Appeals decided to hear the challenge by property owners and tenants to the taking of their property. The parties are submitting briefs and the case - Goldstein et al. v. N.Y. State Urban Development Corporation - will be argued in Albany on October 14.

The properties are needed to construct the “Atlantic Yards Project” consisting of the Barclays Center Arena and 16 skyscrapers. The condemnees challenging the taking claim the use of eminent domain for Atlantic Yards violates the New York State Constitution.
 

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The Pennsylvania Supreme Court declined hearing a case that could have directly addressed “Kelo” issues. In In Re: Condemnation by the Redevelopment Authority of Lawrence County, properties were condemned pursuant to Pennsylvania’s Urban Redevelopment Law (“URL”). A precondition to condemning the properties under the URL was a determination that the properties or the area in which the properties were located were “blighted.” The URL has a very broad definition of “blight” and, in this case, the Lawrence County Planning Commission determined that the condemned properties were in a blighted area under the URL because they were “maintained in economically undesirable uses.”

An en banc panel of Pennsylvania’s Commonwealth Court – the Pennsylvania intermediary appellate court that hears eminent domain cases – sustained the property owners’ challenges to the takings. It stated that “[t]he critical issue before us is whether the URL, in specifying
‘economically undesirable use’ among the criteria listed in Section 2 that render an area blighted, opens the door to a condemnation for purely ‘economic development.’” The Commonwealth Court noted that the US Supreme Court in “Kelo v. City of New London . . . upheld a condemnation of residential buildings that were clearly not blighted in the sense of dilapidated but were located in a certified redevelopment area targeted for revitalization pursuant to a carefully considered plan, which included razing the residences to build a pharmaceutical research facility.” However, the Commonwealth Court continued, the relevant state in Kelo – Connecticut – had a statute that permitted condemnations for purely economic development regardless of blight issues.

Pennsylvania, however, does not have a statute that permits condemnation for purely economic development. However, the URL does use the phrase “economically undesirable land uses” in its blight definition. The Commonwealth Court held that this phrase “does not mean property that is merely put to a use other than the most economically profitable. Such an understanding of the term fails to focus the inquiry on the actual condition of the properties labeled as ‘blighted’ and instead improperly focuses the inquiry on a comparison of the present use with the proposed redevelopment use.”

Therefore, the Commonwealth Court held that the taking was improper and sustained the property owners’ challenges. The property owners attempted to appeal to the PA Supreme Court which is not an automatic right and is at the discretion of the Court. The PA Supreme Court declined to hear the appeal and, therefore, declined an opportunity to address Kelo type issues.

We should be careful, however, not to read too much into this. The case was specific to the URL. In addition, the Eminent Domain Code was amended in September, 2006 – after the takings in this case. The amended Code added additional restrictions to condemnations under the URL which would have made it highly unlikely that the condemnor would have even attempted to take the properties let alone survive a challenge.
 

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Judge Sonia Sotomayor was asked for her opinion regarding Kelo v. City of New London during her confirmation hearing. Sen. Herb Kohl questioned her about the controversial Supreme Court 2005 ruling that a taking for economic development satisfied the “public use” requirement of the Fifth Amendment even if the property would be sold or leased to private entities.

Judge Sotomayor was asked, “What is your opinion of the Kelo decision, Judge Sotomayor? What is an appropriate, quote, “public use” for condemning private property? She responded:

Kelo is now a precedent of the court. I must follow it. I am bound by a circuit -- a Supreme Court decision, as a 2nd Circuit judge. As a Supreme Court judge, I must give it the deference that the doctrine of stare decisis would suggest.

The question of the reach of Kelo has to be examined in the context of each situation. And the court did in Kelo note that there was a role for the courts to play in ensuring that takings by a state did in fact intend to serve the public -- a public purpose and public use.

I understand the concern that many citizens have expressed about whether Kelo did or did not honor the importance of property rights. But the question in Kelo was a complicated one about what constituted public use, and there the court held that a taking to develop an economically blighted area was appropriate.

 

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Confirming that the U.S. Supreme Court’s Kelo decision remains a controversial decision, George Will mentioned it Sunday on ABC’s This Week. Will is a regular member of the This Week political roundtable. One topic on Sunday was the opening on the Supreme Court created by the retirement of Justice Soutor. Will stated:

"Now conservatives are saying we don't want activist judges, we want judges who will defer to the political branches of government. The problem is the worst case since Dred Scott arguably was deferring to Franklin Roosevelt as a wartime leader in interning 110,000 Japanese-American citizens. The case that offends most conservatives recently came out of New London, Connecticut, wherein the democratically elected City Council using its eminent domain power took property away from people, gave it to businesses because they would pay higher taxes and that was deference again. What the conservatives really wanted in both cases was more activism."

Whether you agree or disagree with Will’s opinion, it is clear that Kelo, decided in 2006, remains a very controversial decision.
 

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Two local members of the Flight 93 Federal Advisory Commission resigned because they vehemently disagree with the federal government’s plan to condemn private property in order to build a Flight 93 Memorial. The National Park Service announced that the federal government will condemn land from seven property owners for a Flight 93 memorial. As a result, Somerset County Commissioner Pamela Tokar-Ickes and Stonycreek Township Supervisor Gregory Walker resigned. Both were original members of the 15-person board. “The NPS and the Families of Flight 93 are sensitive to the community’s concerns regarding the use of eminent domain and will work hard to alleviate those concerns,” National Park Service officials wrote.

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The National Park Service announced that the federal government will condemn land from seven property owners for a Flight 93 memorial. The Park Service stated that it wanted to purchase the property but “these negotiations have been unsuccessful.”  However, the property owners dispute that negotiations have even taken place. 

The seven property owners own about 500 acres still needed for the site. The plans are for a $58 million, 2,200-acre permanent memorial and national park at the crash site near Shanksville, Pittsburgh. The U.S. Justice Department will file a complaint in federal court exercising the power of eminent domain to acquire the property.

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The Pennsylvanian House of Representatives is considering a bill that would increase the amount of professional fees in eminent domain cases to $25,000. The Pennsylvania Eminent Domain Code was amended in 2006 and currently provides that a property owner “shall be reimbursed in an amount not to exceed $4,000 as a payment toward reasonable expenses actually incurred for appraisal, attorney and engineering fees.” Prior to the 2006 amendment, property owners were entitled to $500 for professional fees.

This issue continues to be controversial. In 2007, the United States Government Accountability Office issued a report regarding eminent domain. In that report, the GAO stated: “Multiple property rights groups further explained that owners often are unable to fight a condemnation action if they want to retain their homes or businesses or seek additional compensation because costs related to hiring an appraiser or attorney, as well as court costs, are too high.” Of course, increasing the reimbursable amount could also increase the cost of a project.

The likelihood that this bill – House Bill 796 – will ultimately become law is unclear at this time. It was introduced by State Representative RoseMarie Swanger and was referred to the House State Government Committee on March 9, 2009.
 

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Senate Majority leader Harry Reid is proposing to build power lines to carry renewable energy from remote places like solar and wind-power farms. The proposal would give the President authority to declare “renewable energy zones.”

States and the federal government would jointly develop “green” transmission plans for such areas. However, the proposal would allow the Federal government to use its power of eminent domain to take land and issue construction permits if a project were stalled or killed by state action. The proposal is expected to become part of a broader energy bill the Senate plans to take up in the coming weeks.
 

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One of the new buzzwords these days is “infrastructure.” It is likely that Congress will enact an ambitious economic stimulus package soon after President-elect Obama is inaugurated. One important component will be funds that will be spent on “infrastructure” including roads and bridges.

State officials are drawing up plans for bridge and road improvements in anticipation of funds from a federal economic stimulus package. PennDOT has stated that they are confident that Congress will make money available for replacements and repair projects early next year.

PennDOT has a number of projects that have been stalled due to lack of funding. It is very possible that PennDOT will use an influx of federal funds for these projects. It is unclear at this point the extent to which the projects will involve acquiring property through the power of eminent domain.

 

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Montgomery County Pennsylvania’s planning commission is considering a transportation program that could cost $150 million. The Commission recently met to discuss a county program that could involve local governments and the private sector paying for an improvement program for local roadways and bridges. The Commissioners stated that there have been repeated complaints from residents and businesses about traffic congestion.

According to reports, Commissioners appear to be committed to some type of program and are considering a few options. The most popular option includes a 10-year program that would involve over 70 projects. This option would require voter approval to borrow $150 million. One project example cited was widening Route 309 in Montgomery Township to six lanes between Upper State and North Wales roads along with adding turn lanes and reconfiguring accesses to businesses.

The planning board members said they hope to finalize a recommendation at the November 12, 2008 meeting and submit a proposal to Commissioners by the end of the month.
 

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Billionaire oilman T. Boon Pickens has been actively promoting his energy plan. Pickens wants the private sector to build wind farms from West Texas to North Dakota and solar farms in the Southwest. This plan also contemplates obtaining easements through eminent domain so transmission lines can take electricity generated by wind and solar to other parts of the country. He compares these easements to the creation of the Interstate Highway system in the 1950s.

Pickens believes his plan will help eliminate the dependency of the United States on foreign oil. However, neither presidential candidate has committed to his proposal.  Pickens has been meeting continuously with leaders from the government and private industry as well as the press to argue for his plan.
 

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The National Park Service may use its power of eminent domain to acquire the land necessary for a “Flight 93 Memorial.” Flight 93 was the fourth plane to crash on 9/11. Passengers of the plane stormed the cockpit, bringing the plane down in rural western Pennsylvania.

The National Park Service has been trying to acquire the land necessary for a memorial at the crash site. However, if the properties cannot be acquired amicably, they may be condemned. Negotiations are continuing.
 

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The Department of Housing and Urban Development has established a program to provide grants to state and local governments to purchase abandoned and foreclosed properties. According to HUD, the $3.92 billion Neighborhood Stabilization Program will provide emergency assistance to state and local governments to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. The Neighborhood Stabilization Program (NSP) provides grants to every state and certain local communities to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes. The purpose it to “stabilize neighborhoods and stem the decline of house values of neighboring homes.” Although the wording is unclear, it appears that these funds may be used to acquire property through eminent domain.
 

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Funds for widening Route 202 on the section of the highway that runs from near Route 29 to the Exton Bypass will be delayed until at least 2011. The Delaware Valley Regional Planning Commission voted 17-1 to wait until 2011 to begin releasing the PennDOT funds needed to widen this section of the highway. PennDOT’s current plans for this section – known as “Section 300 – anticipate expanding from four to six lanes. It appears that this delay is another example of budget concerns being felt at PennDOT. PennDOT made a decision this year to focus its funding on projects involving bridge repairs.

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Our eminent domain team won a $17.25 million jury verdict for client, Peter Alecxih, in a controversial eminent domain case that has played out in York County, Pennsylvania, over the past four years. The award was $15.25 million higher than the County’s original offer when it seized the land. The award is believed to be one of the highest ever awarded in an eminent domain case in Pennsylvania.

The case involved a 79-acre tract of land known as Highpoint, which was taken in May 2004 by the County for use as a park. Working on behalf of Alecxih, the Fox team, led by Herbert Bass and his team of Fox Rothschild attorneys David Snyder, Marc Needles and Brett Berman, took the case to trial. After presenting the testimony of various witnesses who valued the property between $16 and $17.775 million, the jury returned a verdict in Alecxih’s favor of $17,250,000.

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PennDOT has re-launched its Marshalls Creek Bypass website. The Monroe County, Pennsylvania project’s website was unavailable for at least a few months. It is now up and running again at www.marshallscreekbypass.com/main.cfm. You can find information regarding PennDOT’s intended construction schedule and other topics. However, the site does not shed any new light on the third phase of construction which was temporarily put on hold in the spring. It appears that PennDOT still intends to move forward at some point with phase 3 of the project. However, it is still considering design issues. Stay tuned.

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The City Commissioners of Ventnor, New Jersey, have passed a law limiting that City’s ability to condemn properties. On July, 17, 2008, the City Commissioners voted to prohibit Ventnor's use of eminent domain for redevelopment projects that involve private developers. According to press accounts of the meeting, there was overwhelming support for the law and no contrary opinions.

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A New Jersey Senate Committee has passed a statute that is designed to deal with alleged eminent domain abuses. This statute has been discussed for two years and is purportedly designed to protect homeowners from developers seeking the land for private development. Senator Ronald Rice, the sponsor, said that the bill would limit the use of eminent domain for redevelopment. It also adds new requirements regarding pre-condemnation negotiations between the condemning authority and the property owner. The bill was passed by the Senate Committee and Urban Affairs Committee and can be found at  www.njleg.state.nj.us/2008/Bills/S1000/757_I1.HTM.  The bill now moves to consideration by the full Senate.

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The U.S. Supreme Court has declined to revisit its controversial decision in Kelo v. City of New London. In Goldstein v. Pataki, property owners challenged the project in Brooklyn known as the Atlantic Yards Arena and Redevelopment Project. The properties were condemned for a new basketball arena for the New Jersey Nets as well as high rise apartments and office buildings.

The challengers to the project argued that the purpose of the project was improper and raise some of the issues that were raised by the Kelo decision and the response to the Kelo decision. The justices, without comment, refused to hear the argument that the seizure of their property would violate the United States Constitution. Justice Alito, however, noted that he wanted to hear the case.
This was one of the first opportunities for the United States Supreme Court to address many of the issues that were raised by Kelo and its backlash. However, the Supreme Court – which as two new justices since the Kelo decision – decline to consider these issues in this context.

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The Pennsylvania Commonwealth Court recently found that a Borough cannot condemn property owned by a school district. In that case, the Borough of Hanover condemned property owned by the Hanover Public School District. The school district challenged the taking and argued that the Borough could not condemn property owned by another public entity – as opposed to private property. Rather, the school district argued, the Borough could only private property. The trial court and the Commonwealth Court agreed and found that, because the Pennsylvania Borough Code does not expressly provide for condemnation of public property, there was no authority for the Borough to condemn the school district’s land.

This case points out the need to analyze whether a condemnation is authorized by statute. To do so, it is necessary to review the applicable code – for example the applicable Township Code, County Code or Borough Code – to determine whether there is authorization for the contemplated condemnation.

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The Superior Court of New Jersey has ruled that a property owner that withdraws the “estimated just compensation” deposited into court waives its right to challenge the condemnation.

In Township of Piscataway v. South Washington Ave., LLC., the Township of Piscataway condemned a 75 acre farm to preserve it for open space. In New Jersey, condemnors initiate a condemnation action by filing a complaint and also file a “declaration of taking” either at the time the complaint is filed or some time thereafter. In this case, the property owners challenged the condemnation when the Township filed its complaint. While that challenge was pending, the Township filed its declaration of taking and deposited its estimate of the fair market value of the property – known as “estimated just compensation” or “EJC” – into court. The property owners withdrew the money but continued the challenge to the condemnation.

The New Jersey Superior Court held that a condemnee who withdraws the EJC funds is barred from asserting any other than those relating to the amount of compensation owed to the condemnee. The Court explained that “having accepted the benefit” of the funds, the condemnee cannot now challenge the taking.

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The Commonwealth Court of Pennsylvania recently upheld the condemnation of a strip club for the use of a Charter School. The property, located in the City of Chester, Delaware County, Pennsylvania, was located in an area certified as blighted. The property owner challenged the condemnation primarily on the basis that the project would allegedly benefit the private developer retained for the project. Therefore, the property owner argued, the taking violated the Fifth Amendment’s requirement that condemnations must be for a “public use.”

The Commonwealth Court rejected the property owner’s argument and restated the principal that “a taking is proper if the benefit to the public is primary and any benefit to a private individual is only incidental.” In this case, the Court found the Charter School and the elimination of blight were “public uses” and the fact that the developer may profit from the project does not negate those public uses.

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Pennsylvania Governor Ed Rendell announced a plan to repair 1,145 bridges across Pennsylvania. The list and a county-by-county map of all the bridges are available on PennDOT’s Web site at www.dot7.state.pa.us/RebuildPA/Main.htm

Rendell has asked the General Assembly to approve this plan which he estimates will require state funding of an additional $200 million a year for three years, to be combined with federal road repair funds. The "structurally deficient" bridges include 91 in Southeastern Pennsylvania including 35 in Bucks County, 26 in Chester County, 15 in Montgomery County, nine in Philadelphia, and six in Delaware County. Most are smaller bridges.

It is unclear at this time whether the General Assembly will approve this project. According to press accounts, Senate Republicans acknowledged repairs were necessary but expressed reluctance to borrow more funds. This issue will likely by an important part of budget negotiations.

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PennDOT has been planning a project known as the “Marshalls Creek Bypass” for many years. It is aimed to alleviate gridlock at the bottleneck of Routes 209 and 402 in Smithfield and Middle Smithfield townships, Monroe County Pennsylvania. PennDOT has already acquired some properties for this project and was sent to acquire more properties when it decided to put the project on hold in April.

I represent some of the property owners that will be impacted by this project and spoke with a PennDOT representative about its plans. PennDOT still intends to go forward with the project. However, it is revisiting some of its plans to determine if there are ways to cut costs.

It appears that we will know more about PennDOT’s plans later in the summer or early fall.

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Eminent domain remains a popular campaign issue. John McCain recently repeated his criticism of the U.S. Supreme Court’s Kelo decision.  In Kelo, the Court held that the use of eminent domain to acquire property for “economic development” was not unconstitutional.

On May 6, 2008, McCain reiterated his feelings during a speech regarding his judicial philosophy and said:

The year 2005 also brought the case of Susette Kelo before the Supreme Court.  Here was a woman whose home was taken from her because the local government and a few big corporations had designs of their own on the land, and she was getting in the way.  There is hardly a clearer principle in all the Constitution than the right of private property.  There is a very clear standard in the Constitution requiring not only just compensation in the use of eminent domain, but also that private property may be taken only for "public use."  But apparently that standard has been "evolving" too.  In the hands of a narrow majority of the court, even the basic right of property doesn't mean what we all thought it meant since the founding of America.  A local government seized the private property of an American citizen. It gave that property away to a private developer.  And this power play actually got the constitutional "thumbs-up" from five members of the Supreme Court.

Eminent domain is likely to remain a local and national topic during this campaign year. 

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The Philadelphia Redevelopment Authority – which regularly uses its power of eminent domain – will have a new chairperson.  Labor Leader John Dougherty, who recently lost his bid for State Senate, announced that he will step down as chairman of the RDA.  His term was not slated to end until early next year.  The stated reason for his resignation is to provide Mayor Nutter, who took office this year,  with the opportunity to select his own chairperson.

Dougherty was appointed to the RDA chairmanship shortly after Mayor John Street took office in 2000.  Dougherty was a major supporter of Street and did not support Nutter in last year’s primary.

The RDA was very active during the Street Administration.  It was the main governmental vehicle for his anti-blight program, the Neighborhood Transformation Initiative.  It regularly used its power of eminent domain and condemned thousands of parcels of property citywide.

Mayor Nutter has stated that the authority will play an important role in his administration.  However, he has not provided many details.  Nutter said he would appoint a successor to Dougherty and fill an existing vacancy on the five-member board as soon as possible.

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The Pennsylvania Department of Transportation ("PennDOT") recently announced its preliminary construction plans for a portion of I-95 in Northeast Philadelphia. These plans include rebuilding two interchanges – one at Bridge Street and one at Betsy Ross Bridge and Aramingo Avenue. PennDOT also intends to rebuild a three-mile stretch of I-95 between Cottman Avenue and the Betsy Ross Bridge. Construction is scheduled to start in 2012. However, according to PennDOT, preliminary engineering is to be completed late this year.

Businesses and residential properties will be acquired for the project – either amicably or through the eminent domain process. I spoke with the outside consultant for the project who told me the acquisition for the project will be in about 2 years. However, we always counsel our clients to engage in “pre-condemnation” planning. This involves a number of potential actions including working with PennDOT to see if you can avoid losing your property. However, most planning involves taking steps to ensure that you receive the maximum payment for your property if it is condemned.

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An appeal recently filed with the U.S. Supreme Court asks the Court to revisit its controversial decision in Kelo v. City of New London. In Goldstein, et al., v. Pataki, et al., property owners are challenging a project in Brooklyn known as the Atlantic Yards Arena and Redevelopment Project.  The properties were condemned for a new basketball arena for the New Jersey Nets as well as high rise apartments and office buildings. 

The challengers — owners of homes and businesses that would be taken to make room for a major part of the development — argue that the purpose of the project is to transfer property from one private owner to another.  The Second Circuit Court of Appeals affirmed the District Court’s dismissal of the lawsuit.  If the appeal is granted, it will be the Court’s first chance to revisit its 2005 Kelo decision. 

Click here to see the petition filed by the property owners.

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One critical aspect of any eminent domain case is selecting the right valuation expert.  Recently, the Commonwealth Court of Pennsylvania ruled that real estate brokers can serve as valuation experts in eminent domain cases even if they do not have a real estate appraiser license.

In King v. West Penn Power Company, a power company acquired a portion of a privately-owned airport for an electronic transmission line by its power of eminent domain.  The property owner in King challenged the amount of “just compensation” that was offered by the power company.  The property owner sought to present the testimony of a real estate broker to testify regarding the negative effect of the taking on the fair market value of the property.

The power company filed a motion to preclude the broker’s testimony on the basis that that the broker did not have a real estate appraiser license.  The trial court granted the motion and precluded the broker’s testimony. The property owner appealed.

The Commonwealth Court reversed the trial court’s decision and found that the broker did not need a real estate appraiser license to qualify as a valuation expert in a condemnation case.  The alleged basis for the motion to preclude the broker’s testimony was the Real Estate Appraiser Certification Act which provides that it is unlawful to perform real estate appraisals “in non-federally related transactions” without a valid certificate from the State Board of Certified Real Estate Appraisers.  However, the definition of “federally related transaction” in the State Board of Certified Real Estate Appraisers’ regulations does not include appraisals for condemnation proceedings.  In addition, the definition of “condemn” in the Pennsylvania Eminent Domain Code does not include “transactions.”   Therefore, the Court held the phrase “nonfederally related transaction” in the Appraisers’ Act does not encompass condemnations of property.

The Court also continued to explain its decision by stating that “it makes no sense to require that qualified valuation experts in condemnation proceedings possess real estate appraiser licenses.”

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