Consumers Alters Taking to Save Highest and Best Use of Interchange Commercial Property
I recently concluded negotiations resulting in the modification of a Consumers Power electrical transmission line taking to preserve the highest and best use of highway interchange commercial land. Consumers sought an easement running the entire primary road frontage of a property, plus additional right of way along a portion of the secondary road. The easement allowed installation of multiple transmission line towers, allowed removal of vegetation, and restricted development within a certain distance of the centerline of the facilities. Just compensation requires evaluating both the extent that the area in the easement is diminished in value as well as the impact on the property outside the easement. Consumers retained an appraiser who opined that the taking caused no damage to the remainder.
Consumers’ appraisal was incorrect, as is fairly common, because it failed to either recognize the true highest and best use of the property and the impacts upon it. While the appraisal recognized that the property could be developed for a commercial purpose benefitting from its location bordering a major highway interchange, it assumed that only a single use could be implemented. However, the property was large enough to accommodate multiple commercial buildings. This highest and best use was impacted in a number of ways.
The local zoning required vegetation to be placed along the road frontage in what would normally be the setback. However, vegetation could not be planted in that location due to the restrictions imposed by the easement. This effectively extended the setback into the property, pushing the gas station farther from the road, and eliminating the area contemplated for the business.
The contemplated pole placement prevented two driveways from being constructed on the main road due to the need to respect safety standards relating to the spacing between curb cuts.
Easement restrictions prevented constructing any ponds in certain areas, pushing the necessary drainage detention facilities deeper into the property, further reducing the area that could be dedicated to the business.
My client was more interested in preserving the ability to develop commercial property than collecting just compensation for the diminution in value of the vacant land. While the loss of potential future income is relevant to determining the highest and best use of vacant property and establishing its value, a property owner cannot collect the lost income perpetually. For that reason, I spent extensive time negotiating solutions with Consumers.
First, we addressed the pole placement. I worked with a civil engineer to determine where the curb cuts could be located. Consumers agreed to alter the easement to that the access would not be restricted.
Second, we focused on the impact of the vegetation restrictions. MCL 213.54(2) allows an agency to obtain an easement that forever cures the impacts of a taking. “If the acquisition of a portion of a parcel of property actually needed by an agency would leave the remainder of the parcel in nonconformity with a zoning ordinance, the agency, before or after acquisition, may apply for a zoning variance for the remainder of the parcel…. If a variance is granted under this subsection, the property shall be considered by the governmental entity to be in conformity with the zoning ordinance for all future uses with respect to the nonconformity for which that variance was granted.” Based on this language, only the agency can seek the variance. If it is granted, the variance is not specific to a site plan or use, it protects the property moving forward. Consumers sought and obtained the variance after consulting with me about what was required from my client’s perspective to avoid the impacts.
Finally, we negotiated an alteration to both the language and physical dimensions of the easement. The language was amended to allow construction of the detention pond within certain parameters. The area of a portion of the easement was actually extended to require a contemplated guy wire (a tensioned cable that provides stability to freestanding structures like utility poles) to span over the contemplated location of the detention pond rather than being placed in the middle of that area.
A number of factors made this resolution possible. First, having represented many developers of vacant commercial land, I was able to spot the impacts attributable to the taking. Second, I coordinated with a skilled civil engineer to document these concerns. Third, Consumers recognized that I had the ability to present significant claims in a persuasive manner. Fourth, Consumers would have been required by MCL 213.66 to reimburse the reasonable civil engineering and appraisal expenses attributable to my documenting these issues and their responding to them. Consumers reasonably determined that they were better off devoting professional time to solving rather than documenting these issues. Finally, Consumers recognized that my clients and I wanted to engage in good faith negotiations to create a win/win situation that would allow for a resolution that preserved the highest and best use without significant litigation, thus reducing Consumers ultimate payment.
This post excludes any discussion of the financial aspects of the resolution due to confidentiality requirements imposed by Consumers.
Please feel free to contact me if your commercial property is threatened with a taking.