In Eminent Domain, what must be included in a pre-condemnation offer?

Underwood-Blog-Images-1-2-300x300A pre-condemnation offer is a formal offer based on an appraisal that the government needs to offer a property owner prior to filing a condemnation claim in court. Condemnation is the special word given to eminent domain actions and should not be confused with the condemnation that is associated with those actions taken by the government against properties that pose health risks and other hazards to the public.

The pre-condemnation offer is incredibly important, and the government’s failure to comply with the strict statutory guidelines in place can result in massive expenses during a condemnation hearing. The Underwood Law Firm is familiar with Eminent Domain disputes over property values and is more than capable of assisting you from the appraisal phase to a condemnation trial.

What is Eminent Domain?

Eminent domain is a complicated and controversial subject. At its core, it is the right of the government to take the private property of its citizens for its own means. But this cannot be done without compensating the owners.

Eminent domain is enshrined in both the California and federal Constitutions. Article 1, section 19, subdivision (a) of the California Constitution provides: “[p]rivate property may be taken or damaged for a public use and only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner.”

The process for beginning an action in eminent domain (a condemnation) is quite lengthy. Before the government can even begin transmitting offers to owners, it must establish the validity of its proposed project.

The government must show (a) the public interest and necessity require the project; (b) the project is planned or located in the manner that will be most compatible with the greatest public good and the least private injury; (c) the property sought to be acquired is necessary for the project. (CCP § 1240.030.)

Once the public entity in question makes this showing, it can proceed to the negotiation phase with property owners.

Why is a pre-condemnation offer required?

California law is somewhat unique in that it forces the government to engage in negotiation with property owners before it takes a property. By code, “the public entity shall make every reasonable effort to acquire expeditiously real property by negotiation.” (Gov. Code § 7267.1) Importantly, government entities in the state must follow the spirit of this statute “to the greatest extent practicable,” meaning they have to work with property owners to the best of their ability. (Joffe v. City of Huntington Park (2011) 201 Cal.App.4th 492, 504.)

Notably, these offers and accompanying appraisals can only be waived in situations where the government acquires the property through a sale or if the property is donated and has a low fair market value. (Gov. Code § 7267.1 (b).)

How is property appraised by the government?

Before a property owner is engaged by the government in negotiations for their property, it must be appraised. (Gov. Code § 7267.1 (b).) And if the property owner wishes to accompany the government appraiser during their investigation, then the owner may do so by right. (Id.)

Importantly, a property owner can also receive government help in acquiring an independent appraisal. But this is only after an offer has been made by the agency. And the public entity will pay only up to $5,000. Finally, the independent appraisal has to be conducted by an appraiser licensed by the Office of Real Estate Appraisers. (CCP § 1263.025.)

Additionally, in conducting its initial appraisal, the government cannot take into account any decreases in the property’s market value that are a result of its planned project. (Gov. Code § 7267.2 (a).)

What is included in the government’s offer?

Once the government finishes its appraisal, it must make a formal offer subject to numerous requirements.

First, the amount offered cannot be lower than the appraisal itself. On the contrary, “courts have recognized that a prospective condemner may well pay a price in lieu of condemnation more generous than is required under the Constitution.” (Emeryville Redevelopment Agency v. Harcos Pigments, Inc. (2002) 101 Cal.App.4th 1083, 1107.) After all, if the property owner accepts the offer, the government is avoiding a costly and lengthy litigation process.

With the offer come two mandatory items. The most important is a mandatory written statement, which gives a summary of the basis for the amount it established as just compensation. (Gov. Code § 7267.2 (b).)

At the bare minimum, this statement must include: (1) the date of the valuation, highest and best use, and applicable zoning of the property; (2) the principal transactions, reproduction or replacement cost analysis supporting the determination of value; and (3) if appropriate, the just compensation for the real property acquired and for damages to remaining real property shall be separately stated and shall include calculations.

Importantly, the only times a public entity can make an offer below the appraised value is if the property itself is being offered by the owner for a lower price or if no federal funds are involved in the entity’s project. (Gov. Code § 7267.2 (d).)

Lastly, every offer must be accompanied by a pamphlet that details the process of eminent domain and the property owner’s rights under the law.

What if the offer is not enough for the owner?

If a property owner does not approve of the offer given by the agency, then in all likelihood, the parties will proceed to an official condemnation proceeding in the courts.

There, the parties will be forced to litigate over the “just compensation” for the value of the property. Over time, courts have distilled the idea of just compensation to mean “substantially that the owner [of the private property] shall be put in as good position pecuniarily as he would have been if his property had not been taken.” (Redevelopment Agency v. Gilmore (1985) 38 Cal.3d 790, 797.) And by statute, the measure of just compensation is “the fair market value of the property taken.” (CCP § 1263.310.)

Determination of fair market value in a court is immensely complicated, as it heavily involves the Evidence Code. Nonetheless, in all cases, the public entity must make a final offer of compensation prior to trial. (CCP § 1250.410 (a).) And if this offer is proven to be unreasonable, it will allow for the property owner to recover all of its litigation expenses. Thus, public entities are again encouraged to be more than fair with their offers to purchase property.

How can the Attorneys at Underwood Law Assist You?

Eminent Domain is an immensely complicated field. A property must usually be appraised multiple times to arrive at a fair market value, and even then, it can be subject to the determination of a jury.

As each case is unique, property owners would be well-served to seek experienced counsel familiar with the field of Eminent Domain. At Underwood Law, our knowledgeable attorneys are here to help. If you’re concerned that a public entity’s pre-condemnation offer is too low, or if you just have questions, please do not hesitate to contact our office.

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