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1 We will begin in a few moments. The call will be on mute for the duration of the presentation. If you have a question, please use the Q&A pane on your screen. Questions will be answered at the end of the presentation. A copy of the presentation is available for download and can be found at the top right corner of your screen. Simply click on the “handouts” icon located next to the “feedback” button. September 9, 2009 nossaman.com Welcome to our webinar: Precondemnation Best Practices Strategies and Steps to Avoid Unnecessary Costs and Delays

PRECONDEMNATION BEST PRACTICES - Nossaman Best Practices Webinar... · Precondemnation Best Practices Strategies and Steps to Avoid Unnecessary Costs and Delays. Precondemnation Best

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We will begin in a few moments. The call will be on mute for the duration of the presentation. If you have a question, please use the Q&A pane on your screen. Questions will be answered at the end of the presentation.

A copy of the presentation is available for download and can be found at the top right corner of your screen. Simply click on the “handouts” icon located next to the “feedback” button.

September 9, 2009

nossaman.com

Welcome to our webinar:Precondemnation Best PracticesStrategies and Steps to Avoid Unnecessary Costs and Delays

PrecondemnationBest PracticesStrategies and Steps to Avoid Unnecessary Costs and Delays

September 9, 2009

Presented by F. Gale Connor & Michael Thornton

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Gale Connor is a partner at Nossaman LLP and has a distinguished legal practice with in-depth knowledge of the valuation process and entitlement to goodwill. He has guided public agencies through the condemnation process on a variety of property types.

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Michael Thornton is a litigation partner at Nossaman LLP with over 20 years experience working on eminent domain, inverse condemnation, valuation issues, and other complex business litigation for both public agency and private clients.

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Have A Clearly Defined Project

An adequate project description is a prerequisite to condemnation.(City of Stockton v. Marina Towers (2009) 171 Cal.App.4th 93.)

Redevelopment Agency: Where RDA has followed prescribed procedures for adopting a plan that includes the power of eminent domain, the Agency need not identify specific uses for the property it seeks to acquire.

For All Others: The public entity must have a clearly defined public project for the property.

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Does the Public Entity Have the Power of Eminent Domain for the Project?

Condemnation may be exercised only by persons authorized by statute to exercise that power. (C.C.P. § 1240.020.)

General Authorizations:• Cities: Govt. Code §37350.5• Counties: Govt. Code §25350.5• State: Govt. Code §15854• School Districts: Educ. Code §1047• Redevelopment Agencies: Health & S. Code §33391(b)

Specific Authorizations:• Public Parks: Govt. Code §38010• Parking of Motor Vehicles: Govt. Code §37353• Extra Territorial Condemnation: §§1240.050, 1240.125

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Does the Public Entity Have the Power of Eminent Domain for the Project?

Condemnation may be exercised only by persons authorized by statute to exercise that power for a particular use. (C.C.P. § 1240.020.)

Specific limitations on the power of condemnation:• Cemetery Land: Health & S. Code §§8134, 8560, 8560.5• Golf courses acquired by City for same purpose: Govt. Code §37353(c).

• Land already appropriated to a more necessary public use: C.C.P. §1240.610 et seq.

Best Practices:Confirm powers of eminent domain early in planning provision.

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CEQA Compliance

Preparation of a valid EIR or negative declaration for the proposed project is a prerequisite to condemnation.(See, Burbank – Glendale – Pasadena Airport Authority v. Hensler (1991) 233 Cal.App.3d 577; City of San Jose v. Great Oaks Water Co. (1987) 192 Cal.App.3d 1005.)

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Design Project To Avoid Unnecessary Severance Damages

Severance Damages: A measure of damages, separate from the value of the take; as compensation for injury to the remainder in a partial taking.

Severance damages may be caused by such factors as: substantial impairment of access; irregular size and shape of the remainder; loss of commercial frontage; and many other conditions caused by the project’s effect on the remainder property’s fair market value.Temporary severance damages? (City of Fremont v. Fisher (2008) 160 Cal.App.4th 666)

The condemnee may assume that the property will be put to the most injurious use reasonably possible.(People ex. rel. Dept. of Public Works v. Silveira (1965) 236 Cal.App.2d 604, 622)

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Design Project To Avoid Unnecessary Severance Damages

Best Practices: Allow appraiser and/or right-of-way consultant and eminent domain attorney to walk the proposed right-of-way with project engineer before plans finalize.

Team approach: Identify physical problems, legal implications and design, engineering or legal solution.

The more detailed the plans at the time of the condemnation, less room for assumptions regarding most injurious use of property.

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Potential Liability for Planning Activities?

No liability for general planning:“The deleterious consequences of haphazard community growth in this state and the need to prevent further random development are evident to even the most casual observer … If a governmental entity and its responsible officials were held subject to a claim for inverse condemnation merely because a parcel of land was designated for potential public use on one or more of these several authorized plans [general plans; specific plans; district plans; and comprehensive plans], the process of community planning would either grind to a halt, or deteriorate to publication of vacuous generalizations regarding the future use of land.”(Selby Realty Co. v. City of San Buenaventura (1973) 10 Cal.3d 110, 120.)

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Liability for unreasonable precondemnation activities: Klopping Damages

A public entity may be liable for precondemnation damages if: 1) The public authority acted improperly either by unreasonably

delaying eminent domain action following an announcement of intent to condemn or by other unreasonable conduct prior to condemnation; and

2) As a result of such action the property in question suffered a diminution in market value. (Klopping v. City of Whittier (1972) 8 Cal.3d 39, 52.)

Potential Liability for Planning Activities?

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Potential Liability for Planning Activities?

Examples of mere general planning, no liability.Enactment of general plan designating potential public uses of private land. (Selby Realty Co. v. City of San Buenaventura (1973) 10 Cal.3d 110).

Adoption of redevelopment plan designating private lands for redevelopment. (Cambria Spring Co. v. City of Pico Rivera (1985) 171 Cal.App.3d 1080)

Adoption of engineer’s report recommending right-of-way for street project and publication of project designs showing its effect onspecific parcels. (Jones v. City of Los Angeles (1979) 88 Cal.App.3d 965)

City delay in acting on building permit to study possible acquisition of property as City park. (Guinnane v. City & County of San Francisco (1987) 197 Cal.App.3d 862)

4 year delay between announcement of intent to condemn and initiation of eminent domain where highest and best use of property was a long term investment, thus unreasonable delay did not cause damages. (City of Los Angeles v. Property Owners (1982) 138 Cal.App.3d 114)

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Examples of unreasonable conduct resulting in direct and special interference with property.

Initiating then abandoning condemnation action, announcing intent to resume without doing so resulting in owners’ inability to lease property. (Klopping v. City of Whittier (1972) 8 Cal.3d 39)

Designation of right-of-way by CalTrans which would cut-off access to land and, pursuant to a Freeway Agreement, the County denied a subdivision application on the grounds that the subdivided property would lack access once the freeway built, rendering the property undevelopable and unsalable.(Jones v. People ex. rel. Dept. of Transportation (1978) 22 Cal.3d 144.)

Potential Liability for Planning Activities?

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Examples of unreasonable conduct resulting in direct and special interference with property.(continued)

Public announcement of intent to condemn with no condemnation filed for more than 4 years, coupled with denial of permits to renovate property because such renovation would increase value of property.(Eleopoulos v. Richmond Redevelopment Agency (1972) 351 F.Supp. 63.)

Excessive delay by CalTrans in either offering to purchase or condemn land, which delay resulted in City’s inability to process development plans, rendering the property unusable. (People ex. rel. Dept. of Transportation v. Diversified Properties Co. III (1993) 14 Cal.App.4th 429.)

Potential Liability for Planning Activities?

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Key Distinction: Liability arises where condemnor's activities either directly interfere with owner’s use of his/her property places obstacles in the path of such use resulting in reduction in the value of the property.

Generally, no bright line test, except:Cause of Action for Inverse Condemnation if public entity fails to commence eminent domain within 6 months after adoption of a Resolution of Necessity. (C.C.P. §1245.260)

Adoption of a redevelopment plan, but no condemnation within 3 years, owner of any affected parcel may offer to sell to RDA at fair market value, and if Agency does not acquire or commence proceedings within 18 months, owner may file action in inverse condemnation. (Health & S. C §33399)

Potential Liability for Planning Activities?

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Best Practices:

Until the City Council/RDA Board votes, never state that the property will be condemned.

Usually announcement of intent to condemn is adoption of Resolution of Necessity. (Contra Costa Water Dist. v. Varguero Farmers, Inc. (1997) 58 Cal.App.4th 883, 898-900.)

Potential Liability for Planning Activities?

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Access to Property for Studies, Surveys, Appraisals, and Environmental Testing

To evaluate physical characteristics of property for planning and/or appraisal purposes C.C.P. §§1245.010 et seq., provide that public entities may enter to make “studies, surveys, examinations, tests, soundings, borings, samplings or appraisals, or to engage in similar activities reasonably related to acquisition or use of the property for that use.”

Right-of-Entry Agreement with property owner (C.C.P. §1245.020)

Order Permitting Entry from the Superior Courti. Petition, initiating action separate from eminent domain litigationii. Petition must describe activities to be undertaken and be supported by

detailed declarations iii. Court must determine the probable amount of compensation for any actual

damages or substantial interference with use of property. (C.C.P. §§1245.030-1245.060)

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Access to Property for Studies, Surveys, Appraisals, and Environmental Testing

Best Practices:Include in petition detailed work plans that include clean-up and repair work to restore property to as good as condition as before work started.

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Precondemnation Appraisal

The appraisal serves a dual purpose:Precondemnation appraisal will serve as the basis for offer of just compensation required by Govt. Code §7267.2

Also serves as basis for deposit of probable compensation to obtain an order for possession under C.C.P. §§1255.010, et seq.

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Precondemnation Appraisal

Owner participation in appraiser’s inspection of property.

The owner “shall be given an opportunity to accompany the appraiser during his/her inspection of the property.” (Govt. Code §7267.1(b))

Title 25 of the California Code of Regulations, requires that public entity provide owner with written notice of decision to appraise.

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Precondemnation Appraisal

Owner participation and appraiser’s inspection of property. (continued)

Title 25 also requires that public entity furnish written explanation of its land acquisition procedures. This is usually a boilerplate pamphlet prepared by the relocation/right-of-way consultant.

Severance damages must be considered in appraisal.

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Appraisal process may include other experts in addition to appraiser.

Environmental Consultants to evaluate potential soil and groundwater contamination, asbestos, etc.

Furniture fixtures and equipment appraisers where taking may include FF&E.

Soil engineers and hydrologists where soil stability, flooding, access to water etc., may impact highest and best use.

Precondemnation Appraisal

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Goodwill appraisal not required.Constitutionally mandated “just compensation” which must be offered before commencement of eminent domain proceeding, does not require compensation for lost business goodwill.

Compensation for business goodwill is a statutory, not constitutional right. (Orange County Flood Control Dist. v. Sunny Crest Dairy, Inc. (1978) 77 Cal.App.3d 742, 763.) Furthermore, as a practical matter, loss of goodwill cannot be determined until the business either relocates or closes.

Precondemnation Appraisal

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Admissibility of precondemnation appraisal in eminent domain action?

No: If the appraisal is used as the basis for the deposit of probable compensation to obtain an order for possession, then it is generally inadmissible at trial. (C.C.P. §1255.060(b))

Yes, for impeachment purposes only: If the public entity calls that appraiser as an expert witness at trial, the precondemnation appraisal is then admissible for impeachment purposes. (C.C.P. §1255.060(c))

Best practices:Devote adequate time and resources to obtaining accurate, quality precondemnation appraisal.

Precondemnation Appraisal

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Precondemnation Offer

With only a few exceptions, amount of offer may not be less than approved appraisal of the fair market value of the property (Govt. Code §7267.2(a))

Along with the offer, public entity is required to provide written statement of, and summary of the basis for, amount established as just compensation. (Govt. Code §7267.2(b).)Where the property is an owner occupied residential property containing 4 or fewer units, homeowner is allowed to review a copy of the appraisal. Otherwise, the information which must accompany the offer, includes: 1) the date of value, highest and best use, and applicable zoning of the

property2) the principal transactions, reproduction or replacement costs analysis,

or capitalization analysis supporting the determination of value;3) calculations for, and a narrative explanation of, any severance

damages

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Together with offer, public entity must also provide informationpamphlet detailing eminent domain process and property owner’s rights under the eminent domain law. (Govt. Code §7267.2(2).)

At the time offer is made, the public agency must also offer to pay reasonable costs, not to exceed $5,000, of an independent appraisal for the property owner. (C.C.P. §1263.025(a).)

Offer made in compliance to Govt. Code §7267.2 is an absolute pre-requisite to the adoption of a Resolution of Necessity (C.C.P. §1245.230; City of San Jose v. Great Oaks Water Co (1987) 192 Cal.App.3d 1005 [written summary of the basis for the amount established as just compensation must consist of more than a one page statement generally describing the property and the appraiser’s conclusions regarding fair market value].)

Precondemnation Offer

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I’m from Simmersby, Blomm & Tuggarton, down the hall. Can you spare us a few dense paragraphs of legal boilerplate?”

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Relocation Assistance

Public entities must provide relocation advisory and financial assistance to any person, business or farm operation displaced as a result of acquisition for public project. (Govt. Code §§7260-7277; 25 Cal. Code Regs. §§6000-6176)

Public entities must adopt regulations governing relocation assistance conforming to Department of Housing and Community Development Rules and Regulations. (Govt. Code §7267.8; 25 Cal. Code Regs. §§6000-6198.)

Best Practices: Hire relocation consultant well before beginning acquisition process and build time into project schedule for relocation of people and business.

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Adoption of Resolution of Necessity

Notice Requirements:Notice must be sent, by first-class mail, to each person who’s property is to be acquired by eminent domain and who’s name and address appears on the last equalized county assessment role. (C.C.P. §1245.235(a).)

The notice must state the following:

• Intent to adopt a resolution;

• Right to appear and be heard; and

• Failure to file a written request to appear within 15 days afterthe notice was mailed, results in waiver of right to appear and heard.

Notice should also advise that amount of compensation will not be considered at hearing.

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Adoption of Resolution of Necessity

Best Practices:

Send out notice not less than 20 days in advance of the hearing and allow property owner to appear and be heard, whether or not a written request is filed.

Make certain that staff report to public body holding hearing clearly states that issue of amount of compensation is not before that body.

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Contents of Resolution must contain all of the following:General statement of the public use for which the property is to be taken and reference to statutory authorization for condemnation;

Description of the location and extent of the property to be taken;

Declaration that the public entity has determined that public interest and necessity require proposed project;

Project is planned or located in the manner that will be most compatible with the greatest public good and at least private injury;

Property described in the Resolution is necessary for the project; and

That either the offer required by Govt. Code §7267.2 has been made or that the owner cannot be located with reasonable diligence.(C.C.P. §1245.230)

Adoption of Resolution of Necessity

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Resolution must be adopted by two-thirds vote.(C.C.P. §1245.240)

Be aware of §1245.245 (applies only to property acquired after 1/1/07); property must be used for public use stated in resolution.

If property is put to new public use, carefully follow §1245.255

Adopt new resolution for new use.

If property not used for use identified in original resolution within 10 years, adopt a “Reauthorizing Resolution” or property will be sold.

Adoption of Resolution of Necessity

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Questions?

ContactsF.Gale Connor

[email protected]/gconnor

Michael Thornton415.438.7202

[email protected]/mthornton

nossaman.com/eminentdomain