"Condemnation" is the legal process, also called "eminent domain," by which a governmental agency (and certain private bodies, such as utility companies) are given the legal power to acquire private property for a use that has been declared to be public by constitution, statute or ordinance. The "condemnor" is the public or private entity having the legal power of eminent domain. In tax increment financing projects, the private developer borrows the government's name in undertaking condemnation.

"Just Compensation" Under the Constitution, private property may be condemned so long as the taking is for a public purpose and the property owner is paid just compensation. "Just compensation" is designed to indemnify the property owner for his or her losses. This is often done by paying the "fair market value" for the value taken. If only a portion of the property is acquired, the owner may also be entitled to consequential damages to the property that remains. The owner has the right to be paid for the "highest and best use of the property", as opposed to the existing use. If the business is closely intertwined with the location, business damages may also be awarded.

THE PROCESS IN MISSOURI:

Briefly, the process is as follows:
(Click the underscored words for definitions)
 
The government (condemnor) makes an offer to purchase the property to be condemned;the offer is rejected by the property owner and the government then files a petition with the court seeking permission to condemn the property.
The judge holds a condemnation hearing whereby he or she approves the government's right to condemn. It is at this hearing the property owner challenges the government's right to condemn.
The judge appoints three commissioners to determine the owner's compensation.
The commissioners conduct a hearing to determine the amount of compensation.
The commissioners report their decision to the court.
The government (condemnor) pays into court the compensation determined by the commissioners.
The government (condemnor) takes title to the property by reason of putting the money into court.
Either side files Exceptions, which means requesting a jury trial.
Owner or tenants seek relocation benefits and services, if applicable.
If a tenant is involved , the Commissioners' Award is divided between the landlord and tenant in a hearing, if necessary, called a Motion for Apportionment.
If the case does not settle, a jury trial is held to determine the amount of compensation. The jury is not told of the commissioner's decision.
  		 

Missouri adopted new eminent domain legislation in 2006. It affects negotiations, legal procedures, valuation and compensation. Property owners, developers, government officials, appraisers and attorneys need to review the new legislation. Below is a review of the changes enacted, many of them applying to condemnation petitions filed after December 31, 2006.
Full Text of the New Laws



HOW BLIGHTING LAWS HAVE CHANGED    

Preponderance of the properties within the blighted area must be blighted (Section 523.274)

The definition of “blight” for projects, including Tax Increment Financing (TIF) project, was not changed though there was political pressure to do so. However, a municipality must now consider each individual parcel within a proposed project area and can only blight areas where a preponderance of the properties are blighted.

Eminent domain cannot be used solely for economic development (Section 523.271)

Formerly, property could be condemned for economic development purposes. That is, the reason for the condemnation was to create economic activities that would result in positive effects such as new jobs and tax revenues. While this is still allowed, it is no longer permissible to condemn “solely” for “economic development.”

Farmland cannot be blighted

Any land that is classified as farmland cannot be blighted. The law defines "farmland" broadly to include, among other things, land used as forest cropland, agricultural purposes, feeding, breeding, and management of livestock, and dairy operations. In addition, land that is included under a soil conservation or agricultural assistance program of the federal government will also be considered farmland.

The court must now find “substantial evidence” supporting a finding of blight. (Section 523.261)

When blighting is used in condemnation or when an owner is challenging a blighting ordinance, a trial court must find “substantial evidence” to support a finding of blight. Before, a court could only set aside a finding of blight that was arbitrary or was induced by fraud, collusion or bad faith. That was an almost impossible standard for owners to overcome. Now, the burden is on the local government to prove an area is actually blighted.

The legal process to challenge blight is expedited (Section 523.261)

Any time there is a blighting ordinance, it can be challenged by any targeted property owner. In addition, an owner can usually wait to challenge blight during an eminent domain case. When any of these occur, the trial judge “shall give the case preference in the order of hearing to all other cases in order to conclude the case within 30 days of having been filed.” Also, after a decision by the trial judge on blight, there is an automatic right to appeal the decision that will be expedited.

Five years to condemn after blight ordinance (Section 523.274)

An eminent domain case must be filed within five years of the ordinance adopting blight. This time period can be extended in five year increments by legislative action.

Chapter 353 Redevelopment Corporations created after December 31, 2006 cannot condemn. (Sections 523.262)

353 corporations can only condemn property if they have a redevelopment agreement effective prior to December 31, 2006. This is because, after that date, only governmental bodies or agencies whose governing body is elected or whose governing body is appointed by elected officials can exercise eminent domain powers.


NEGOTIATIONS AND PROCEDURES BEFORE COURT ACTIONS    

Pre-Condemnation Notice (Section 523.250)

At least 60 days prior to filing a condemnation petition, the condemning authority must give a written notice to the owner of record that has the following information:

  • Identifying the interest in real property to be acquired
  • Stating the purpose for which the property is being condemned
  • Information of the following property owner's rights:
    • The right to seek legal counsel at the owner’s expense
    • The right to make a counteroffer and engage in further negotiations
    • The right to obtain the landowner's own appraisal
    • The right to have compensation determined by commissioners and,
      ultimately, by a jury
    • The right to seek assistance from the office of the ombudsman
    • The right to contest the condemnation in court
  • The notice shall be by certified or registered mail

Changing the location of a proposed condemnation project (Section 523.265)

Within 30 days after receiving a Notice of Acquisition, the Owner targeted with potential condemnation on part of his land may demand the condemning authority to consider an alternate location. The new procedure involves the landowner proposing, in writing, alternate locations on the same parcel in sufficient detail. A written response by the condemning authority is required giving the reasons why the alternatives are rejected or accepted.

Offer made to property owner 30 days prior to condemnation and with attached appraisal (Section 523.253)

No less than 30 days prior to filing condemnation petition, a written offer must be made to the owner and shall be held open for 30 days. In most cases, an appraisal must be included with the offer.

Negotiations and good faith offers (Section 523.256)

Condemnors have always been required to negotiate in good faith, but the requirement lacked definition. The new legislation sets out what constitutes “good faith” by requiring:

  • All notices under the statute must be timely given to the property owner
  • The off must be no less than the appraised value prepared by a state-certified appraiser
  • Owner has had an opportunity to obtain his or her own appraisal
  • Condemning authority considered an alternate location suggested by the owner under section 523.265

If the court finds that there were no good faith negotiations, then the case will be dismissed and attorney’s fees and costs shall be assessed against the condemning authority.


CHANGES IN PROPERTY VALUATION    

Methods of Valuation (Section 523.001)

Three methods to value property are expressly approved - the comparable sales approach, income approach and cost approach.

Generally accepted appraisal practices are to be used in condemnation proceedings (Section 523.001).

Expressly approves “generally accepted appraisal practices” to measure fair market value.

Definition of fair market value (Section 523.001)

"Fair market value" is defined as: “the value of the property taken after considering comparable sales in the area, capitalization of income, and replacement cost less depreciation, singularly or in combination, as appropriate, and additionally considering the value of the property based upon its highest and best use, using generally accepted appraisal practices. If less than the entire property is taken, fair market value shall mean the difference between the fair market value of the entire property immediately prior to the taking and the fair market value of the remaining or burdened property immediately after the taking”

This section requires that a jury be given this definition of value. (Note that this conflicts with Missouri Supreme Court approved Jury Instructions).

Valuation - Heritage Property - 50% bonus (Section 523.001)

Property condemned which has been in the same family for more than 50 years will receive an additional 50% to the fair market value of the property. This only applies to cases that are filed after December 31, 2006.

Valuation - Homestead Property - 25% bonus (Section 523.001)

When a primary residences is condemned, the owner will receive an additional 25% to the fair market value of the property. This only applies to cases that are filed after December 31, 2006. This only applies to partial takings when the taking is within 300' of the residence and the owner shows that the taking prevents the owner from utilizing the property. Note that if the property is owned for more than 50 years in the same family, it is better for the owners to seek the Heritage Value of 50%. An owner cannot seek both Homestead Value and Heritage Value.

Valuation - Business Damages

The legislation does not address compensation for business losses caused by condemnation. However, nothing prevents municipalities, developers, or state government agencies to offer such compensation for these losses.


COMMISSIONERS’ HEARING PROCEDURES    

Commissioners Hearing - time requirements added (Section 523.040)

The new law requires that the commissioners view the property, hear arguments and review information offered by the parties. The commissioners shall file a report within 45 days after being appointed, which may be extended by the court for good cause shown. Before their hearing, the Commissioners are required to give at least 10 days notice to the parties. While these provisions are new under the law, they will most likely not change typical procedures where the parties and commissioners agree to a place and time for a hearing and the commissioners return an award. The time requirement of 45 days may speed up the process that can sometimes take months.


OTHER CHANGES    

Relocation benefits (Section 523.205)

Minimum residential payment increases from $500 to $1,000. Alternatively, actual costs are paid.

The minimum benefit for businesses was increased from $1,000 to $3,000 for moving expenses. In addition, a new benefit was created entitling businesses to an additional $10,000 for reestablishment expenses.

Abandonment of condemnation, award of attorney’s fees, expenses, and damages (Section 523.259)

In the event a condemning authority abandons a condemnation, the owner may recover attorney’s fees, expert fees, expenses, and damages.

Procedures to Abandon Easements.

If any easement created after Dec. 31, 2006 is abandoned for more than 10 years, the owner may petition to eliminate the easement. The owner must pay the compensation originally paid when the easement was acquired. This right may be waived at time of conveyance, or later.

Taxes

A property owner may reduce his gross adjusted income by the amount recognized as a gain under Federal tax code section 1033.

Blanket Easements are abolished.  (Section 523.282)

This section abolishes blanket easements created after Dec. 31. 2006 as against public policy

Does not include easements that become fixed after completion of the initial improvements.

Easements cannot expand their uses (Section 523.283)

Road easements, utility easements and railroad easements that are acquired by condemnation or by negotiations in lieu of condemnation after August 28, 2006 cannot have expanded uses beyond the original purposes of the acquisition.

Ombudsman Office (Section 523.277)

An office of ombudsman for property rights is created to assist citizens involved with eminent domain. The statute clearly states that the ombudsman shall not provide legal advice.        

 
 

   

© Copyright 2001 Denlow & Henry, Attorneys at Law.