A temporary construction easement (TCE) is a specialized form of easement that a public agency frequently uses as part of an eminent domain project when it “seeks to obtain exclusive possession of a portion of the property for a significant, albeit temporary, period of time.” (Property Reserve, Inc. v. Superior Court (2016) 1 Cal.5th 151, 199.)
This post will seek to address those issues which commonly arrive in connection with TCE’s and how they may affect you.
What is an Easement?
Generally, easements are “nonpossessory interests in the land of another that gives its owner the right to use the land of another or to prevent the property owner from using the land.” (Kazi v. State Farm Fire and Cas. Co. (2001) 24 Cal.4th 871, 880.)
“An easement right is akin to goodwill, an anticipated benefit of a bargain, or an investment, none of which is considered tangible property.” (Ibid., see also Giddings v. Industrial Indemnity Co. (1980) 112 Cal.App.3d 213, 219.)
What is Eminent Domain?
Eminent domain ensures that private individuals receive just compensation when their property is taken by a public entity.
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.” Similarly, the Fifth Amendment to the United States Constitution states that “nor shall private property be taken for public use, without just compensation.”
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.)
As part of eminent domain projects, governmental entities frequently obtain temporary construction easements. When they do so, a question arises about the proper valuation methodologies.
How do You Value a TCE in Eminent Domain?
By statute, “the fair market value of the property taken is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular urgent necessity for so doing, nor obligated to sell, and a buyer, being ready, willing, and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available. (CCP § 1263.320(a).)
But a TCE changes this calculus. Because a TCE is temporary by its nature, the fair market value shifts to that of a rental value. “These easements are usually valued based on the fair rental value of the property taken for the time the area will be needed.” (Miller & Starr, 7 Cal. Real Estate § 24:29; citing Sacramento & San Joaquin Drainage Dist. v. Goehring (1970) 13 Cal.App.3d 58, 66.)
The question then becomes the factors that a court will consider in examining the value of a TCE.
Factors Affecting Fair Market Value
“In determining the fair market value of a property, the jury is entitled to consider any factor having the potential of affecting the market value, so long as the effect of the factor on market value is not conjectural, speculative or remote.” (Sacramento Area Flood Control Agency v. Dhaliwal (2015) 236 Cal.App.4th 1315, 1330.)
For example, if the TCE were to block a property owner’s own access to a public roadway, that would be a factor affecting the amount of compensation they ought to receive. A substantial, unreasonable interference with the property owner’s easement of access to the general system of public roadways is a deprivation of a property right; when such interference results in connection with a partial taking in eminent domain, the property owner should be compensated. (see Breidert v. Southern Pac. Co. (1964) 61 Cal.2d 659, 663-667.)
Thus, if a TCE causes injury to the property outside the scope of its stated use, then a property owner could be entitled to severance damages.
What are severance damages in eminent domain?
“Section 1263.410 provides that an owner is to be compensated when the property taken is part of a larger parcel and the compensation is not merely for the injury to the part taken but also for the injury, if any, to the remainder.” (City of Fremont v. Fisher (2008) 160 Cal.App.4th 666, 676 (“Fisher”).)
These damages “consist generally of the diminution in the fair market value of the remainder property caused by the project.” (Metropolitan Water Dist. of So. California v. Campus Crusade for Christ, Inc. (2007) 41 Cal.4th 954, 970.) Additionally, these damages can be based on “any factor, resulting from the project, that causes a decline in the fair market value of the property.” (Id. at pp. 970-971.)
But these damages can be difficult to prove, as illustrated by Fremont. There, the Fishers did not want a TCE built on their property. After several failed negotiations, the City of Fremont began its project. The Fishers brought suit, and received, among other damages, an award of $195,413 for temporary severance damages from the TCE. Notably, the Fishers obtained this award with evidence that a hypothetical buyer would pay substantially less for the property because of the presence of the TCE.
On appeal, the appellate court struck down the award. This is because a temporary easement must interfere with the owner’s actual intended use of the property. (see Placer County Water Agency v. Hofman (1985) 165 Cal.App.3d 890.)
Although a trial court is vested with considerable judicial discretion in admitting or rejecting evidence of value in these types of proceedings, it erred because there was no actual evidence in the record that the Fishers intended to sell or develop their property during the time it was encumbered by the TCE.
How can the Attorneys at Underwood Law Assist You?
Eminent Domain is an immensely complicated field. A property must be appraised properly 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 eminent domain counsel. At Underwood Law, our knowledgeable attorneys are here to help. If you are concerned that a public entity’s offer is too low, or if you just have questions, please do not hesitate to contact our office.