Beware the Eminent Domain Bait and Switch

Two recent cases illustrate the dangers of not carefully reviewing good faith offers and appraisals.

This year, I concluded a utility taking against a commercial property where the real estate appraiser disregarded Michigan law and made an assumption that allowed him to disregard substantial eminent domain claims. In that case, the agency sought to acquire an easement that would have resulted in significant just compensation claims stemming from zoning compliance issues. While an agency is able to obtain a “supervariance” to eliminate zoning noncompliance issues (this blog post explains supervariances), no such variance had been obtained. There was no basis for the appraiser to assume the truth of his assumption. While the appraiser complied with his statutory obligations by identifying the assumption in his report, this was not something that a layperson would have been likely to understand. If the property owner had reviewed the appraisal without noticing or understanding the impact of the taking and relied upon it to accept the good faith offer, that owner would not have been fully compensated.

I recently experienced a similar issue in a different context. I am representing property owners being subjected to avigation easement acquisitions in Niles, Michigan. In this case, the appraiser undertook his analysis based upon the impact of an easement that he included in his appraisal. However, when the City made its good faith offer, it included the appraisal based upon one form of easement and requested that a different form of easement be signed. The City changed the easement to shift the burden of future tree removal from the City to the property owners. In other words, instead of the City taking the right to remove trees at its expense in the future, the City rewrote the easement to give it the right to demand that the property owner remove the trees. If the property owner refused, the City would have the right to remove the trees and then bill the property owner what it cost. The appraiser could not have taken into account the impact of this future, expensive obligation on the owners when determining just compensation because he was asked to conduct his appraisal using a different version of the easement.

In both situations, a layperson unfamiliar with eminent domain may have been tempted to accept the offer based upon the belief that a real estate appraiser had considered the impacts on the property when calculating just compensation. In both instances, the owner would have been wrong and would have faced future, unpleasant surprises. There were likely other property owners who did not hire an attorney and who will face those surprises in the future.

Please feel free to contact me if you are faced with any eminent domain issues.