Montana Considers Repeal Of Limited Utility Condemnation Statute

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.

NJ Court: No Duty To Negotiate With Lienholders Prior To Condemnation

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.

Foreclosures Hit 6-Year Low

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

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

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

Appraisal Foundation Releases New Pamphlets for Consumers and Lenders

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

Justices Appear Skeptical Of Takings Claim

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.
 

Rights and Obligations of Landlords and Tenants When Sandy Damages Leased Premises

Sandy has created a number of difficult legal problems. One issue relates to the rights and obligations of landlords and tenants when leased premises suffer casualty damage. The obligations of a landlord as an owner of a commercial property to repair and restore casualty damage are generally found in two documents – (i) a mortgage and security agreement and (ii) the lease. My partners have put together a good summary of the relevant considerations which can be found at  www.foxrothschild.com/newspubs/newspubsArticle.aspx

Supreme Court Restates That Temporary Interference With Property May Cause Taking

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
 

Fox Challenges Real Estate Tax Legislation

Fox Rothschild has filed a class action on behalf of the owners of approximately 1,240 properties located in Philadelphia challenging recent legislation which “adopts” an artificially high Established Predetermined Ratio (EPR) for the 2013 tax year. Significantly, while the legislation expressly recognizes that real estate tax assessment in the City has become “increasingly at variance with principles of uniformity and sound assessment,” 53 Pa.C.S.A. § 8565(a)(1), it arbitrarily incorporates knowingly inaccurate 2011 property values and 2009 sales data as the foundation for the new EPR. In so doing, we allege that the legislation undermines the integrity of the assessment process by eviscerating Taxpayers’ fundamental rights to uniformity in taxation. More information about this case can be found at ww.foxrothschild.com/newspubs/newspubsArticle.aspx

Supreme Court Considers Temporary Takings Case

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/

Tax Court Eliminates Draft Reports from Discovery

One important issue for litigation experts to always consider is whether their draft reports can be obtained by another party via discovery. The rules vary by jurisdiction. Recently, the US Tax Court amended Rule 70 of its Rules of Practice & Procedure to exclude drafts of expert reports from discovery. This protection applies regardless of the form in which the draft is recorded.  This is similar to the Federal Rules of Civil Procedure. The new Tax Court regulation also protects the reports and opinions of any consulting (non-testifying) expert. 

Virginia Passes Eminent Domain Ballot Question

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.

Sandy Will Delay Loans And Require Reappraisals

Loans involving properties in the path of Hurricane Sandy will certainly be delayed according to National Mortgage News. In addition to the obvious business interruption, many properties will need to be reappraised to determine if the Hurricane caused a decrease in property value. Given the volume of reappraisals, the loan process will be severely impacted. David Stevens, president of the Mortgage Bankers Association, told National Mortgage News that he expected mortgage profits and origination volumes to dip for a short period because of days lost to the storm.

Foreclosures Reach Lowest Level Since 2007

The New Jersey Department of Banking and Insurance performed 173 examinations of mortgage licensees in 2011. According to National Mortgage News, these examinations concluded that 90 percent of the mortgage firms had some type of violation. The examinations showed a total 4,347 violations, or 25 per examination. The most common violations were deficiencies in loan documentation (accounting for 55 percent of violations) while charging impermissible fees was the second most common violation (accounting for 11 percent of violations). Apparently, this pattern is not unique to NJ. For example, according to National Mortgage News, representatives of the Maryland Department of Labor, Licensing and Regulation and the Pennsylvania Department of Banking and Securities also have stated that there are substantial problems in their states.

NJ Agency: 90 Percent of Mortgage Firms Violate Laws

The New Jersey Department of Banking and Insurance performed 173 examinations of mortgage licensees in 2011. According to National Mortgage News, these examinations concluded that 90 percent of the mortgage firms had some type of violation. The examinations showed a total 4,347 violations, or 25 per examination. The most common violations were deficiencies in loan documentation (accounting for 55 percent of violations) while charging impermissible fees was the second most common violation (accounting for 11 percent of violations). Apparently, this pattern is not unique to NJ. For example, according to National Mortgage News, representatives of the Maryland Department of Labor, Licensing and Regulation and the Pennsylvania Department of Banking and Securities also have stated that there are substantial problems in their states.

Realtors Criticize 'Excessive' Appraiser Comp Requirements

Appraisers have been the target of complaints since the fiscal crisis began in 2008. As a result, some lenders started requiring that appraisers provide as many as eight to 10 comparable transactions in their reports. Prior to the requirement, lenders generally required at least three comps on most residential appraisals. The National Association of Realtors called this new requirement “excessive” in an Oct. 11 news release. The NAR claims that the requirement was affecting home sales.
An NAR online survey showed that 11 percent of realtors indicated a contract was cancelled during the last three months due to an appraisal, and an additional 15 percent of surveyed realtors said a sale price was renegotiated to reflect a lower appraisal. However, 65 percent of realtors reported no contract issues connected to home appraisals.
The pendulum continues to move on the appraisal industry in the wake of the fiscal crisis.
 

PA Considers Controversial Park Sale Bill

The Pennsylvania General Assembly is considering a bill which would permit governmental entities to sell its public parks. The concern expressed by many – including newspaper columnists and groups such as the League of Women Voters – is that government officials will improperly use this as a “quick fix” to solve fiscal problems. For example, the Patriot News Editorial Board recently wrote, “The bill has the potential to decimate local parks . . . across the state. Is this really what our state lawmakers want? Quick sales of parks and public lands to plug short-term budget holes or pander to local developers?”

These critics believe that the current procedure should not be changed. The Donated and Dedicated Property Act currently requires a municipality to request the county Orphans Court for permission to sell the property. The League of Women Voters stated in a memo to lawmakers: “What is the rationale to amend this act that appears to have worked for more than a half-century?” The bill does not apply to properties acquired by eminent domain.

The bill passed unanimously in the PA House in June. It will be interesting to see whether the public scrutiny will impact its future.
 

PA Court Allows Approval Of Second Plan During Appeal Of First Plan Approval

The Commonwealth Court of PA has ruled that while an appeal of approvals for a development is pending, a municipality has the power to approve another development plan submitted by the same developer for the same property. In James DeFilippo v. Cranberry Township Board of Supervisors, the developer proposed to construct an automobile sales and service center which required 13 waivers from Township ordinances. The Township Board of Supervisors approved the proposal and granted all 13 waivers requested by the developer. Objectors filed a land use appeal challenging the approval of the land development plan.

During the pendency of the appeal, the developer filed a new land development plan with the Township. The new plan was a revised proposal which reduced the need for waivers from 13 waivers to 5 waivers. The Township Board of Supervisors granted approval of the new plan and conditional use approval for the development.

The objectors argued that the Board of Supervisors lacked authority to act on the second plan while the appeal of the first plan was pending. The Commonwealth Court rejected that argument and held that a municipality does not lose all jurisdiction over a parcel of land when a land use appeal is filed and may consider a different land development plan or zoning application by the same developer for the same property.
 

PA Legislature Holds Property Tax Hearings

The Pennsylvania House of Representatives’ bipartisan House Select Committee on Property Tax Reform held two days of hearings in Harrisburg to review local government property tax collection, reassessments and local tax structures. The committee is conducting a review of Pennsylvania’s local tax structure. According to an article in PA Law Weekly, State Representative Tom Quigley, R-Montgomery, chairman of the committee, said, “When you mention property taxes, most people think about the school property tax, but county and municipal governments also levy proper taxes so it is important for us to talk about the local government tax structure. County governments play a very large role in property tax policy because they are responsible for reassessments. County and local governments also deliver many of the services on which citizens rely.”

More hearing days are being scheduled.
 

VA Has Eminent Domain Const. Amendment On Ballot

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.

 

National Foreclosure Rates Down From Last Year

Market researcher RealtyTrac reports that fewer foreclosure processes were initiated in August 2012 than in August 2011. Foreclosures reached a 17-year high in August 2011. RealtyTrac said the number of homes entering foreclosure is projected to continue decreasing gradually.

Approximately 99,400 homes entered foreclosure in August. This was a 1 percent increase over July, but a 13 percent decrease from August 2011. It is also significantly lower than the April 2009 peak of approximately 203,000 homes that were in foreclosure. The number of completed foreclosures in August 2012 was 52,380 which is a 2 percent decrease from July 2012 and 19 percent from August 2011.

PA Court Permits Condemnation Benefiting Private Developer

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.”

 

PA Court Rules Highway Occupancy Permit Did Not Cause De Facto Taking

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.”
 

Fed Report Examines Appraisal Processes

The Government Accountability Office recently released a report examining real estate valuations in the wake of the recent mortgage crisis. The report, used data from Fannie Mae, Freddie Mac and five of the biggest mortgage lenders. It revealed that valuations received through broker price opinions and automated valuation models take less time and are less costly than traditional appraisal reports, but traditional appraisal reports are still mandated for almost all first-lien residential loan originations due to their greater reliability. The report noted that appraisal management companies are becoming more prominent because of regulations that prevent conflicts of interest in the appraiser selection process.

The Dodd-Frank Act requires state appraisal licensing boards to supervise AMCs. The law also mandates that federal banking regulators, the Federal Housing Finance Agency and the Consumer Financial Protection Bureau create minimum standards for states to apply in registering AMCs. However, the report states that federal regulators have not finished rulemaking to establish state standards. Dodd-Frank broadened the role of the Appraisal Subcommittee, which oversees state appraiser regulatory programs, monitors requirements relating to appraisal standards for federal financial institutions, maintains a National Registry of state-certified and licensed appraisers and monitors and reviews operations of the Appraisal Foundation. However, the ASC has been restricted in meeting its responsibilities under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the report noted.

 

Court Finds Construction Of Sewage Lagoons Did Not Cause De Facto Taking

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.
 

PA Court Rules That "Ongoing Subdivision Concerns" Should Not Be Considered In Valuing Individual Subdivision Lots

In Greth Development v. Berks County Board of Assessment Appeals, the Berks County trial court considered whether the tax assessment of individual lots of a residential subdivision should take into account “ongoing subdivision concerns, including cash flow, absorption rate of lot sales, and ongoing expenses.” The case involved a residential subdivision in which 25 lots remained unsold. The property owner argued that “to obtain an appropriate value, the assessment should take into account the owner’s ongoing concerns relating to the subdivision, including the time and cash flow considerations. While the subdivision has been divided into individual lots, improvements have been made and a few lots have been sold, there remains an extensive inventory of remaining lots, which likely will be sold over the course of several years, particularly given the current state of the economy. . . . During the pendency of the sales, [the property owner] would continue to be saddled with taxes, maintenance, and other subdivision costs.”

The taxing authority argued that “one the subdivision has been divided into individual lots, each lot becomes an independent entity, subject to its own assessment. [The property owner’s] subdivision costs become irrelevant, for those costs do not affect what a buyer of a lot would be willing to pay.”

The court agreed with the taxing authority and held that the lots should be assessed on an individual basis and, therefore, the considerations that would impact the valuation of a subdivision do not necessarily apply to the valuation of individual lots. “A prospective buyer of an individual lot of that subdivision, however, even assuming the lot would be purchased for income producing purposes, would not be concerned with the ongoing subdivision costs, or the time lag in sales of neighboring lots, for that would have no effect on his income projections, capital expenses incurred in preparing the lot to produce income, or the ongoing expenses incurred thereafter.”
 

Pennsylvania Passes Real Property Electronic Recording Act

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. 

 

Appraisal Institute and Appraisal Foundation Representatives Testify Today Before Congressional Committee

Today at 10:00 am ET, representatives of the Appraisal Institute and the Appraisal Foundation will testify before the US House of Representatives, Committee on Financial Services, Subcommittee on Insurance, Housing and Community Opportunity. The topic of the hearing is “Appraisal Oversight: The Regulatory Impact on Consumers and Businesses.” The following link is to the hearing website which includes the written testimony of those witnesses as well as other participants. financialservices.house.gov/Calendar/EventSingle.aspx

PennDOT Awards Record Contract for Second Stage of I-95/Cottman Avenue Interchange Project

PennDOT announced the award of the largest construction contract in agency history, a $212.3 million contract to improve Interstate 95 and its interchange at Cottman Avenue (Route 73) in Northeast Philadelphia. According to PennDOT, “This record-setting contract is for the second stage of our two-stage program” for this project. PennDOT awarded the low-bid $212,325,000 contract to Walsh Construction Company II, LLC of Canonsburg, Pa. The contract is financed with 90 percent federal and 10 percent state funds. Construction is scheduled to begin in August and finish in late summer 2017.

Adverse Possession Owner May Challenge Taking

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.
 

PA Court Rules Condemnors Not Required To Provided Owners Of Blighted Properties Opportunity To Remediate

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.
 

Our Group Authors Eminent Domain Treatise

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.

Fox Partner Rothstein Appointed To Montco Board Of View

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.

PA Court Confirms County Must Pay Compensation of Board of View

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.
 

US House Passes Eminent Domain Limitations Bill

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.

Court Rules That Sellers And Brokers May Need To Disclose Prior Condemnation To Buyers

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.
 

US Airways and Philadelphia Say They Are Working Through Disagreement Regarding Airport Expansion

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.

PA Agency Objects To Eminent Domain For Pipeline Project

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.
 

US Airways opposes Philadelphia International Airport Expansion Plan

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. 

Ludwigs Corner Horse Show Condemnation Rescinded

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.

Federal Court Permits "Just Compensation" Claim For Condemnation Challenge Period

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.
 

Mississippi Passes Eminent Domain Initiative

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. 

PA Court Affirms Requirement Of Condemnation Filing Within 1 Year Of Authorization

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.”
 

Tax Assessment System Challenge Dismissed

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.
 

PennDOT Moving Forward With 422 Project In Berks And Montco (PA)

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.

Congress Considering Property Rights Protection Act

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.
 

Our Team Obtains $6 Million Award

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

Congressman Meehan Questions FAA Administrator Regarding Use Of Eminent Domain In Philadelphia Airport Expansion

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:
 

PA Considering Increasing Amount Of Professional Fees For Eminent Domain Cases (Again)

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.
 

Philadelphia RDA Changes Executive Director

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.

 

Pennsylvania Considers "Land Banks" Without Eminent Domain Power

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.

Supreme Court Decides Eminent Domain Case

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.

Kagan Testifies Regarding Eminent Domain

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.
 

Supreme Court Declines Reconsideration of Kelo Issues

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.