Eminent domain is the sometimes controversial practice where the government takes private land for public use. Under the federal and New York State constitutions, no private land may be taken unless the owner receives “just compensation.” New York courts interpret this to mean the state or municipality invoking eminent domain must “compensate the owner so that he may be put in the same relative position, insofar as this is possible, as if the taking had not occurred.” Put another way, the government must offer fair market value for the property.
Matter of County of Orange v. Monroe Bakertown Road Realty, Inc.
But determining fair market value is often easier said than done. A long-running dispute in Orange County offers a useful illustration. The village of Kiryas Joel invoked eminent domain in 2006 to take approximately 1.5 acres of land from a 70-acre parcel owned by a Bronx-based developer. The village needed the land to improve a county road. Although the road was completed nearly a decade ago, litigation continued over the “just compensation” owed to the developer.
The developer's appraiser valued the 1.5-acre parcel at $1.1 million. Orange County's appraiser offered a significantly lower valuation of $33,000. Both appraisals were based on the estimated reduction in fair market value of the overall 70-acre parcel. An Orange County Supreme Court judge agreed with the county's appraisal and awarded $33,000 to the developer, who understandable appealed.
On July 15, the Appellate Division, Second Department, reversed the Supreme Court's decision and ordered a new valuation. The appeals court noted in eminent domain cases, the fair market value of a property is based on its “highest and best use,” not necessarily its current use. The land in question here is vacant. The county's appraisal was based on its belief the land would remain vacant. The developer, in contrast, argued the land could be used to construct valuable condominiums, which would significantly increase the property's overall value.
The county agreed such condos would be the “highest and best use” of the property, but it nonetheless argued it was unreasonable to believe such construction could be accomplished “within the reasonably near future.” The county argued such development could not approved due to a lack of sufficient water supply within the village. The Supreme Court accepted this argument when it ruled for the county's appraisal. But the Second Department said the evidence was inconclusive on this point. And in any event, the important thing was to determine how “uncertainty” over the water issue would affect the market valuation of the property. The Supreme Court was therefore wrong to simply assume the land could never be developed and adopt the county's appraisal without question.
The Second Department did not accept the developer's appraisal at face value either. Instead, it directed the Supreme Court to conduct a new trial on the issue of how to value the property, taking into account all relevant market factors.
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Eminent domain is just one type of legal issue involving land ownership and market valuation. As these are often complex issues, it is important to work with an experienced New York real estate attorney. If you need help with a land issue, contact our offices today to speak with an attorney.