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

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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The Georgia Real Estate Appraisers Board recently adopted its final regulations regarding standards for developing and reporting an “evaluation appraisal.” The regulations state that, where permitted by federal law and policies, a state-licensed or certified appraiser performing an evaluation appraisal need not comply with the Uniform Standards of Professional Appraisal Practice.

The new regulations state that a licensed or certified appraiser may offer “an appraisal which is limited in its scope and development” where an appraisal by a licensed or certified appraiser is not required by federal law. These situations include transactions with a value less than or equal to $250,000, transactions where there is no advancement of new money other than funds necessary to cover reasonable closing costs and transactions with business loans with a value equal to or less than $1 million in which rental income from the property is not the primary source of repayment.

The regulations contain a list of approximately 20 items that a certified appraiser must include in each evaluation appraisal.

Also significant: the regulations state that the evaluation must contain “an estimate of the property’s market value” and that “a valuation that does not provide a property’s market value or sufficient information and analysis to support the value conclusion is not acceptable as an evaluation appraisal. While a broker price opinion, a competitive market analysis, an automated valuation model and a tax assessment value may be useful in developing an evaluation appraisal, the information obtained from these methods of valuation is insufficient standing alone to meet all of the criteria necessary to be an evaluation appraisal.”
 

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Forty-two U.S. appraisal firms announced March 18 that they now are operating as Valbridge Property Advisors. The new firm is comprised of independent, local-market valuation firms with each office run by the local practice leader who must hold an MAI designation of the Appraisal Institute.

The new firm will specialize in office, industrial, retail, multifamily, hospitality, recreation and other special-purpose property types, and the MAI designation is held by appraisers who are experienced in the valuation and evaluation of these types of properties, as well as by those who advise clients on real estate investment decisions.

The firm is shareholder-owned with a board of directors and officers, including Richard L. Armalavage, MAI, serving as president and chief executive officer. It is headquartered in Naples, Fla. “Client demand for a strong independent national commercial property appraisal services platform has driven the formation of Valbridge,” Armalavage said in a news release. “Valbridge will be able to maximize opportunities for clients by elevating industry standards for accuracy, integrity, reporting and technology in service to current and future clients.”
 

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Legislation was introduced in the Pennsylvania General Assembly to expand the ability of real estate sales professionals to provide Broker Price Opinions and Comparative Market Analyses outside of the real estate brokerage context. This legislation would amend the Real Estate Licensing and Registration Act and the Real Estate Appraisers Certification Act.

A Comparative Market Analysis or Broker Price Opinion is developed by a licensed real estate broker, associate broker, or salesperson and provides an estimate of the probable selling price or leasing price of a particular parcel of property. Currently, a Pennsylvania licensed real estate broker or salesperson is permitted to perform a CMA in the real estate brokerage context for “the purpose of determining the asking/offering price for the property by a specific actual or potential consumer or for the purpose of securing a listing agreement with a seller.” Brokers and salespersons are currently prohibited from doing CMAs outside the brokerage context because a value or price opinion provided for a fee is defined in PA law as an “appraisal” and requires an appropriate appraisal license or certification to be held by the individual performing that work

The legislation – SB 869 – was introduced in the Pennsylvania Senate on April 18, 2013. It is sponsored by Sen. Robert M. Tomlinson and has 16 co-sponsors. Senator Tomlinson is the Chair of the Senate Consumer Protection and Professional Licensure Committee.
 

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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 Bipartisan Policy Center issued a report proposing changes to current appraisal policy. Although it was primarily focused on reducing the government’s role in the nation’s housing finance system, it had appraisal related recommendations. For example, it recommended banning the use of distressed home sales as comparables which the BPC said was helping to decrease local home values and buyers’ ability to secure financing.

The BPC Housing Commission is led by former U.S. Sens. George Mitchell, Mel Martinez and Kit Bond and former U.S. Housing and Urban Development Secretary Henry Cisneros. The report titled “Housing America’s Future: New Directions for National Policy,” can be found bipartisanpolicy.org/sites/default/files/BPC_Housing%20Report_web.pdf
 

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The Appraiser Qualification Board issued the Second Exposure Draft of Proposed Interpretation and Revision to the Real Property Appraiser Qualification Criteria. The AQB is an independent board of The Appraisal Foundation and composed of at least five practicing appraisers who are appointed by the Foundation’s Board of Trustees for three-year terms. Under the provisions of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), the AQB establishes the minimum education, experience and examination requirements for real property appraisers to obtain a state certification. In addition, the AQB performs a number of ancillary duties related to real property and personal property appraiser qualifications.

“In 2006, the AQB issued an Interpretation to the Criteria, addressing continuing education for appraisers returning from active military duty. Based on recent events such as Hurricane Sandy, the AQB has recognized that appraisers impacted by a state- or federally-declared disaster may be similarly situated,” the board wrote. “Therefore, the AQB is exposing a revision to the previously adopted Interpretation (that will apply to the current, or 2008 Criteria), as well as a revision to the already adopted Criteria (that becomes effective on Jan. 1, 2015).”

The changes can be found at The Appraisal Foundation’s website appraisalfoundation.sharefile.com/d/s5763fd573e94aafa.
 

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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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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).
 

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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
 

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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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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

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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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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

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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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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. 

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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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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.

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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.

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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.

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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.
 

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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.
 

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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.
 

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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.
 

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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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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.

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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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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.

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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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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.”
 

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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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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

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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.

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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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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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