Eminent Domain Law and Practice in Minnesota - Eminent Domain... · Eminent Domain Law and Practice in Minnesota Gary A. Van Cleve Larkin Hoffman Law Firm [email protected]

Eminent Domain Law and Practice in

MinnesotaGary A. Van CleveLarkin Hoffman Law Firm

[email protected]

Igor LenznerRinke Noonan Law Firm

[email protected]

What is Eminent Domain?

� Right of the state to take private property for public use or purposes

� Inherent right of the sovereignty� U.S. and Minnesota Constitutions require

“just compensation” be paid for the taking� Minnesota Constitution broader than

Federal� Minn. Stat. Ch. 117: Eminent domain law

Who Has Authority to Condemn?

� State and certain delegated agencies and political subdivisions:� MnDOT

Cities and Counties� Cities and Counties� Housing and Redevelopment Authorities� Port Authorities� Metropolitan Council� Watershed Districts

Who Has Authority to Condemn?

� Certain Non-Governmental Entities� Utility companies� Railroads

What is Public Use or Public Purpose?

� “Eminent domain may only be used for a public use or public purpose.” Minn. Stat. §117.012, subd. 2.“’Public use’ or ‘public purpose’ means � “’Public use’ or ‘public purpose’ means exclusively:� Possession, occupation, ownership, and

enjoyment of the land by general public/agencies� Creation or functioning of public service corp.

What is Public Use or Public Purpose?

� Mitigation of blighted area, remediation of environmentally-contaminated area, reduction of abandoned property, or removal of a public nuisancenuisance

� EXPRESS EXCLUSION: The public benefits of economic development, including an increase in tax base, tax revenues, employment, or general economic health, do not by themselves constitute a public use or public purpose. (Anti-Keloexception)

Pre-Condemnation Procedures

� Identify Project and Property Needed� Ensure Project Meets New Test for Public

Improvement� Studies, meetings, designs� Identification of land needed and

determination of value

Pre-Condemnation Appraisal and Negotiation Requirements (Minn. Stat. § 117.036)

� Duties of Acquiring Authority:� Must obtain: at least one appraisal� Must confer: with property owner “if reasonably

possible”possible”� Must provide: owner with copy of appraisal� Must inform: owner of right to obtain appraisal

Minn. Stat. § 117.036, subd. 2(a).


� Property owner’s right to reimbursement for appraisal� Entitled to “reasonable costs” of appraisal

Maximum of $1,500 for (i) one- or two-family � Maximum of $1,500 for (i) one- or two-family homes and (ii) “minimum damage acquisitions”

� Maximum of $5,000 for other property types� Reimbursement within 30 days of receiving

owner’s appraisal and reimbursement infoMinn. Stat. § 117.036, subds. 2(b) and 2(c).


� Negotiation requirement� Authority must make a “good faith attempt” to

acquire property by direct purchase� Authority must consider appraisals, including any � Authority must consider appraisals, including any

from the property owner “if available”� If both full and partial taking being considered,

authority must make good faith attempt to negotiate over both types of takings.

Minn. Stat. § 117.036, subd. 3.

The Condemnation Action

� The Petition. � Must describe the land and its owners� Filed in district court of county where land

situatedsituated� Must state public purpose for taking� Pray for appointment of commissioners to

appraise damages for taking.Minn. Stat. 117.055, subd. 1.

The Condemnation Action

� Notice of the petition� Served in same manner as summons in civil

action� Must be served at least 20 days before hearing� Must be served at least 20 days before hearing� Must state any challenge to public use or

purpose must be made at hearing� Court order approving public purpose is final

unless appealed within 60 days of order’s serviceMinn. Stat. § 117.055, subd. 2.

The “Quick Take” Statute

� “Traditional” condemnation� No transfer of title to condemning authority until

completion of the action and final payment of award award

Minn. Stat. § 117.205.

� Minnesota allows a “quick take” procedure under which title may be taken at the beginning of the process.Minn. Stat. § 117.042.

The “Quick Take” Statute (cont.)

� “Quick take” condemnation� Entitles condemning authority to take title to and

possession of the land before value determined� Authority must give minimum 90 days notice by � Authority must give minimum 90 days notice by

certified mail to property owners of quick take� Authority must pay owner or deposit money into

court representing the approved appraised value� Authority at the petition hearing must move the

court to order transfer of title and possession

The “Quick Take” Statute (cont.)� Condemning authority’s approved appraisal

value is not final� Owner still has right to seek additional damages

through the condemnation proceedingsthrough the condemnation proceedings� Tip: Attorney for fee owner should try to obtain

consent of mortgage companies, tenants and other “owners” to obtain direct payment in lieu of the court deposit for the quick take

� Owner has right to move court for release of deposit.

The Eminent Domain Proceedings

� Two-stage (potentially) eminent domain proceedings in Minnesota� Commissioners’ hearing

Minn. Stat. §§ 117.075, 117.085, 117.105, 117.115.Minn. Stat. §§ 117.075, 117.085, 117.105, 117.115.

� District court jury trial de novoMinn. Stat. §§ 117.145, 117.155, 117.165, 117.175,

117.185.

The Commissioners’ Hearing

� District court appoints “three disinterested commissioners and at least two alternates”� To ascertain and report the amount of damages

Conflict of interest inquiry required� Conflict of interest inquiry required� Attorneys for property owners allowed input� Real estate-related qualifications required� Oath administered by court


� How commissioners’ hearings differ from court proceedings� No discovery except appraisal exchanges

Parties must produce appraisals to each other at � Parties must produce appraisals to each other at least five days before hearing. Minn. Stat. §117.036, subd. 4.

� Rules of evidence? Not enforced� Commissioners do not make rulings of law


� Duty of the Commissioners:� Commissioners must view the property� Owner typically testifies along with appraisers;

other witnesses may include engineers, brokers, other witnesses may include engineers, brokers, planning consultants

� “make a separate assessment and award of the damages which in their judgment will result to each of the owners of the land by reason of such taking and report the same to the court”

Minn. Stat. § 117.085

The Commissioners’ Hearing� File their damages report with district court by

court-established deadline (routinely extended)Minn. Stat. § 117.105� Condemning authority must give notice of report � Condemning authority must give notice of report

filing to all interested parties Minn. Stat. 117.115

District Court Proceedings

� Any party may appeal commissioners’ award to district court within 40 days of filing of commissioners’ reportAny other party may cross-appeal within 50 � Any other party may cross-appeal within 50 days of filing of commissioners’ report

Minn. Stat. § 117.145


� Proper service of notice of appeal critical to perfecting the appeal.

� File notice of appeal with court administratoradministrator

� Serve notice by U.S. mail on all parties shown on condemning authority’s affidavit of mailing

Minn. Stat. § 117.145


� Appealing parties have right to a jury trialMinn. Stat. § 117.165� Trial is de novo� Trial is de novo� Commissioners may be called as witnesses� Owner has burden to establish damagesMinn. Stat. § 117.175, subd. 1


� Trial proceeds as any other civil trial.� Appeal may be taken from the final

judgment to Minnesota Court of Appeals as in any other civil casein any other civil case

Special Issues--Attorneys’ Fees

� New attorneys’ fees provisions in 2006 amendments� Award of attorneys’ fees is based on percentage

that final damages award exceeds condemning that final damages award exceeds condemning authority’s last written offer

� Final award more than 40% greater than last written offer: court shall award owner reasonable fees and costs

Special Issues--Attorneys’ Fees� Final award at least 20% greater than last written

offer, but less than 40% greater: court mayaward reasonable attorneys’ fees and costs

� No attorneys’ fees if final judgment or award is � No attorneys’ fees if final judgment or award is less than $25,000

� Attorneys’ fees also awardable for unlawful takings or takings not for a public use: court shall award reasonable attorneys’ fees and costs

Minn. Stat. § 117.031(a) and (b)

Special Issues--Going Concern

� Going concern refers to the “going value” or business value attributable to the location of an established businessBefore 2006 amendments, very difficult to � Before 2006 amendments, very difficult to recover going concern value in condemnation

� In 2006, legislature defined going concern and circumstances where recoverable


� “[B]enefits that accrue to a business or trade as a result of its location, reputation for dependability, skill or quality, customer base, good will, or any other circumstances base, good will, or any other circumstances resulting in the probable retention of old or acquisition of new patronage.”

Minn. Stat. § 117.186, subd. 1


� General rule under new statute:� “If a business or trade is destroyed by a taking,

the owner shall be compensated for loss of going concern.”going concern.”

Minn. Stat. § 117.186, subd. 2


� Avoiding liability for loss of going concern:� If authority can show that loss not caused by the

taking� If authority can show loss “can reasonably be � If authority can show loss “can reasonably be

prevented” by (a) relocating the business in same/similar and reasonably suitable location, or (b) by taking steps, adopting procedures that reasonably prudent person would to preserve, or

� To award would be duplicative compensation

Special Issues--Inverse Condemnation

� Cause of action against the government to recover value property that has been taken in fact without exercise of eminent domain.If property owner successful, entitled to � If property owner successful, entitled to reasonable attorneys’, appraiser, engineering fees and costs.

Minn. Stat. § 117.045.

Special Issues--Relocation

� Federal Uniform Relocation Assistance and Real Property Acquisition Act of 1970. 42 U.S.C. §§ 4601-4655.Incorporated by reference into Minnesota � Incorporated by reference into Minnesota law by Minn. Stat. § 117.52, subd. 1.

� Moving expenses, referred to as “relocation claims”


� Generally must submit relocation claims to condemning authority within 180 days after displaced person required to vacate or the final date of compensation for the taking.final date of compensation for the taking.

� Claim must be supported by documentation for expenses incurred.

� Condemning authority must provide “reasonable assistance” in filing claims


� Types of payments allowed:� Moving expenses (49 CFR § 24.31)� Non-residential moves (49 CFR § 24.303)

Reestablishment expenses (49 CFR § 24.304)� Reestablishment expenses (49 CFR § 24.304)� Replacement housing (49 CFR § 24.401)

What is Just Compensation?

� Measured by the fair market value of the property taken

� FMV: the amount a purchaser who is willing to buy the property would pay to an willing to buy the property would pay to an owner who is willing to sell it, taking into consideration the highest and best use of the property

What is Just Compensation?

� Determining just compensation--three valuation methods� Market approach: compare to similar properties

and adjust for differencesand adjust for differences� Income approach: value of an income-producing

property by converting cash flows and reversions into property value (capitalization of income)

� Cost approach: cost to construct less depreciation

Evidence of Market Value

� The Project Rule: enhancement or diminution in value caused by the governmental improvement not admissible

State v. Anderson, 197 N.W.2d 237 (Minn. State v. Anderson, 197 N.W.2d 237 (Minn. 1972) (enhancements)

Regents v. Hibbing, 225 N.W.2d 810 (1975)


� Highest and Best Use: law requires that property be valued at its highest and best use. Four criteria are: legally permissible, physically possible, financially feasible and physically possible, financially feasible and maximally productive

Dictionary of Real Estate Appraisal, 3rd ed. (Appraisal Institute) at 171.


� Principles applied by Minnesota courts in determining highest and best use:� Assemblage: if H&BU achieved through

assembling parcel with others, evidence of assembling parcel with others, evidence of likelihood of assembly will be heard. Regents.

� Zoning Change: if H&BU achieved through zoning change, probability of such change will be heard. State v. Briggs, 488 N.W.2d 811 (Minn. App. 1992).

Evidence of Market Value--Partial Takings

� Severance Damages.Where the entire parcel is not taken, the

owner is entitled to compensation for the diminution in value of the remainder of the diminution in value of the remainder of the property after the taking, i.e., “severance damages”, a form of consequential damages. City of Minneapolis v. Yale, 268 N.W.2d 170 (Minn. 1971).

Evidence of Market Value--Partial Takings, Severance Principles

� Larger parcel rule: parcels of land may be considered together for purposes of measuring damages to remaining property after taking if the parcels are sufficiently connected. Yale.parcels are sufficiently connected. Yale.

� Mitigation/cost to cure: Owner has duty to mitigate damages. State v. Pahl, 95 N.W.2d 85 (Minn. 1959). Severance damages may, as a result, be limited to owner’s cost to cure rather than diminution in value.


� Loss of access: Arises to level of a taking only when owner is left without reasonably convenient and suitable access in at least one direction.

Hendrickson v. State, 127 N.W.2d 165 (Minn. Hendrickson v. State, 127 N.W.2d 165 (Minn. 1964).

� “New” driveway access rule: 2006 amendments added provision allowing business owner compensation if loss of 51% or greater of driveway access and 51% decrease in revenue.

Minn. Stat. § 117.186, subd. 4.


� Loss of visibility/construction interference:� Both are factors in measuring diminution in value

of remainder after taking.

Going concern damages.� Going concern damages.� See 2006 amendments, Minn. Stat. §§ 117.186

and 117.036.

END

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Eminent Domain Law and Practice in Minnesota - Eminent Domain... · Eminent Domain Law and Practice in Minnesota Gary A. Van Cleve Larkin Hoffman Law Firm [email protected]