Inverse Condemnation Under Oregon Law: The Basics

This post explores some of the basic concepts of “inverse condemnation” under Oregon law.

What is “inverse condemnation”?

Inverse condemnation occurs when the government takes property interests without invoking its eminent domain power and paying the owners or holders of such interests just compensation.  Examples of inverse condemnation include, but are not limited to, when:

  • The government or the “natural consequences of its actions” physically occupy or invade property, such as in the case of water diverted by the government flooding property.
  • Governmental activity substantially interferes with the use and enjoyment of property, such as in the case of noise or vibrations caused by low-flying aircraft.
  • Governmental regulations deprive property of all economically beneficial use.
  • The government conditions approval of a land use application on the property owner “agreeing” to dedicate certain property or property interests to the government.
  • The government fails to identify and compensate holders of all affected property interests when the government affirmatively condemns property using its eminent domain power, such as in the case of deed restrictions.

Who brings a claim for inverse condemnation?

The affected property owner or interest holder brings the claim against the government.

What is the statute of limitations for an inverse condemnation claim?

The statue of limitations—the deadline for filing a lawsuit—for an inverse condemnation claim is six (6) years from the date of the taking.  ORS 12.080(3).  It should be noted, however, that inverse condemnation claims can be brought in conjunction with other claims which may carry shorter statutes of limitations.  Failure to file a lawsuit in a timely manner may forever bar you from bringing a claim.

Am I entitled to fees and costs if I prevail on an inverse condemnation claim?

Yes, a property owner or interest holder who prevails on an inverse condemnation claim is entitled to court-determined attorney fees and costs.  ORS 20.085.

Columbia River Crossing: Will the Oregon-led “Phase 1” Move Forward?

The Columbia River Crossing lives.  At least for now.  After the Washington legislature balked at funding its $450 million share of the project’s budget in June 2013, Oregon pushed forward with plans to construct “Phase 1” of the project.  The Oregon-led Phase 1 would pare back the original scope of the project by eliminating all I-5 interchange improvements north of Washington’s SR 14.  Coming it at over $2.7 billion, the project would include construction of the new bridge spans, light rail facilities from Portland’s Expo Center to Vancouver’s Clark College, I-5 interchange improvements in Oregon, and I-5 interchange improvements in Washington at SR 14.  Without Washington’s contribution, funding would primarily come from federal funds, funds from the State of Oregon, and financing backed by tolling revenue.  See ODOT’s project webpage for more details.

Uncertainty still surrounds the project, though.  As has been well-covered in the media, an analysis of prospective tolling revenue shows it could arguably support the financing of a significant part of the project’s cost.  (The Oregonian: January 7, 2014).  Oregon’s Treasurer, however, still needs convincing that Oregon can legally and effectively collect the tolls.   (The Columbian:  January 10, 2014).   Beyond this, at recent hearing in Salem, legislators did not exactly give the project’s proponents a warm reception.  (The Oregonian:  January 14, 2014).  All of this is not to say that Phase 1 will not move forward; just that the project continues to face substantial challenges.

Beyond the financial and political questions, legal questions also remain.  While the General Counsel Division of Oregon’s Department of Justice opined in a September 12, 2013 memorandum that ODOT has the authority, given certain necessary agreements with the State of Washington, to move forward with the financing and construction of project elements located in Washington, DOJ has made clear that ODOT does not have the power to acquire right of way through eminent domain in the State of Washington.  To this point, the memorandum states as follows:

This proposal implicates key attributes of state sovereignty.  For example, the State of Oregon is without authority to exercise eminent domain outside its borders.  Moreover, we are informed by attorneys in the Washington Attorney General’s Office that WSDOT cannot transfer title to WSDOT right-of-way to ODOT.  Thus, ODOT will need WSDOT to secure right of way for the bridge touchdown and corresponding connections to SR-14 and provide ODOT with a long-term lease or other permit to occupy WSDOT right-of-way for, at minimum, the repayment period of Oregon’s bonds, which could exceed 30 years.  We are further informed by WSDOT’s counsel that WSDOT engineering approval must be granted to locate Oregon highway facilities on WSODT right-of-way and link it to the Washington state highway system.

Oregon DOJ memoranda and the “information” of attorneys in the Washington AG’s office may provide preliminary guidance to the project’s decision makers on “key attributes of state sovereignty,” but, if and as the project moves forward, actions based upon such guidance will likely be subject to judicial scrutiny.

On all counts, it should be interesting.  Stay tuned.

Surefire Signs Your Property is Targeted for Condemnation

There have been rumblings about a coming project, and you think it may impact your property.  How do you typically find out and what do you do about it?

How do I know that my property is targeted for condemnation?

You may learn months or years ahead of time through the press or public notices that your property is a possible target for taking, especially in the case of large public infrastructure projects.  Governmental entities may also post online their near and long-term plans for “capital improvements.”

In any event, you will at some point receive formal notice from the government that it wants to acquire your property and will take it by condemnation if necessary.  The notice may come in one or more of several forms:

 •           The government is required to provide the owner or occupant of the property notice prior to entering onto the property for    the purposes of examining and surveying the property.  ORS 35.220.

 •           The government’s appraiser must give the property owner at least 15 days written notice before a desired inspection of the property for appraisal purposes.  ORS 35.346(3).

 •           As a precondition to actually taking the property, the government must also declare by ordinance or resolution the necessity and purpose for which the property is required.  ORS 35.235(1).  This Declaration of Public Necessity will in most instances require a public hearing for which notices will be published.

 •           In most situations, the government cannot take property that results in a relocation of the occupant of the property without giving at least 90 days’ notice.  ORS 35.505(2).

 •           Finally, at least 40 days before filing a condemnation action, the government must make a written offer to the property owner to acquire the property.  ORS 35.346(1).

What can I do to prepare myself for possible condemnation?

You should always be aware of the possibility of condemnation, especially if your property is near a major thoroughfare, railway, airport, school, or other existing public infrastructure.  If you suspect the government may take your property, whether now or sometime in the future, you should consult with an attorney.  Your actions or inactions now could greatly affect your interests later.

Leases with tenants and mortgage agreements with lenders may affect the amount of the condemnation proceeds to which you are entitled.  Such agreements should be drafted with the possibility of condemnation in mind.

Land use and building approvals can have significant impact on the valuation of real property.  You should pursue approvals with these impacts in mind.

Finally, in taking positions regarding the value of property, for example in property tax or estate tax proceedings, you should be mindful of the effects of your positions and statements on condemnation valuation.

What if I have tenants on my property?

Most leases contain a clause setting forth the rights of the landlord and tenant in the event of condemnation of the property.  This clause may take into account such issues as the allocation of the condemnation proceeds between the landlord and the tenant, the landlord’s obligation to reconstruct improvements partially taken, and the parties’ lease termination rights in the event of condemnation.

If the tenant is entitled to share in the proceeds of the condemnation, the tenant will likely participate in the negotiations with the condemning authority and will, in the least, be party to allocation proceedings in the court.  Aside from any lease terms, a tenant may be entitled to relocation compensation as well.

Can the government enter onto my property before it obtains legal possession or title?

Yes, if a property is targeted for condemnation, and subject to certain requirements, the government may enter onto to the property, examine it, survey it, conduct tests upon it, and take samples from it.  The government, however, must first obtain the permission of the property owner or an order of the court to enter onto the property and conduct examination and testing.  In addition, the government must pay the property owner reasonable compensation for any damage caused by the entry, examination and testing, and any interference with the use of the property.  ORS 35.220.

Newberg-Dundee Bypass Project: ODOT Right of Way Acquisition Moving Forward

ODOT is moving forward with Phase I of its long-time coming Newberg-Dundee Bypass Project.  Check out my December 23, 2013 piece in the Daily Journal of Commerce:  “Bypass project inflicting collateral damage.”  Here’s an excerpt:

While Phase 1 of the project will go toward effecting ODOT’s goal of decreasing traffic congestion on OR 99W in Newberg and Dundee, the project will have dramatic effect on property owners, homeowners and business in its path.  Armed with over $76.2 million in right of way acquisition funds for Phase 1, ODOT will acquire by condemnation or threat of condemnation over 156 acres of real estate, comprised of 147 properties or parts of properties.  These takings will displace approximately 59 residences and 11 businesses. 

For more information on the Project, see ODOT’s Project website:  http://oregonjta.org/region2/?p=highway99w

Just Compensation Under Oregon Law: The Basics

This post explores some of the basic concepts surrounding the constitutional right to “just compensation,” which is one of the foundations of condemnation law.

What is “just compensation”?

When the government takes private property for a public use, it is constitutionally required to pay the property owner “just compensation” for the property.  Just compensation embodies the fundamental ideas of justice and fairness; that one private property owner should not shoulder an unfair share of the burden of providing for public uses.  Just compensation provides an express constitutional counterweight to the government’s power to take private property for public use.

How is “just compensation” determined?

Just compensation is the amount of money necessary to make whole a property owner for the taking of his or her property.  This amount is determined by the fair market value of the highest and best use of the property taken by the government, plus, in the case of a partial taking, the reduction in fair market value to the remainder of the property.  For example, if the government takes part of your property for a highway project, it must compensate you for the property it physically took, but also for the diminished value of your remaining property considering that it is now adjacent to a highway.

What is fair market value?

In normal market conditions, fair market value is generally defined by what a private buyer would pay a seller for the property at the time of the acquisition or taking, with no compulsion to either buy or sell.

What is highest and best use?

The highest and best use of real property is the most profitable use of the property.  It can be a use other than the current use of the property if it is reasonably probable that the property has an actual potential for a higher and better use.  For instance, if the property currently has a residential structure on it, but under current or reasonably imminent zoning laws, it could be developed as a retail shopping center, redevelopment as a retail shopping center is most likely its highest and best use.

What is included in the determination of “just compensation”?  What is not included?

In the typical condemnation matter, in which the government is taking the whole or part of a parcel of real property, you are entitled to just compensation for (1) the real property taken and the effects to remaining real property; and (2) fixtures (personal property that is considered part of the real property).  You may also qualify for just compensation if the government takes from you permanent or temporary easements, or deed restrictions.

A property owner is not typically entitled to just compensation for (1) private property that can be removed from the real property; (2) the costs of relocating a home or a business; and (3) loss in value to business—i.e., the value attached to a business being in the same place for 20 years, reduced revenue, etc.  Certain relocation and business reestablishment costs, however, qualify for “reimbursement” under the federal and state law.

Who determines just compensation?

The government will typically employ an appraiser to render an opinion of value of the property it intends to take.  This is usually the basis for the government’s initial “offer.”  The property owner will also typically employ an appraiser, in addition to formulating his or her own opinion of value.

The final amount of just compensation may be reached either in pre-trial negotiations or after a jury renders its verdict.  In the latter case, subject to a judge’s instructions on the law, the jury will have the final say as to what constitutes just compensation.

Welcome to the Oregon Condemnation Law Blog!

This is my inaugural post.  The blog is designed to provide insights and updates on Oregon law as it relates to eminent domain, regulatory takings, inverse condemnation and property rights litigation.  It will provide readers, among other things:

  • Explanations of basic principles of Oregon condemnation law;
  • Updates on public works projects impacting the rights of Oregon property owners;
  • Analysis of relevant statutory and regulatory changes;
  • Analysis of new Oregon and federal case law relevant to condemnation law;
  • Analysis of select cases from other states that may or should affect Oregon condemnation law; and
  • My commentary regarding takings, just compensation and everything else related to Oregon condemnation law.

The blog also serves as an outlet for my passion for this area of law, and hopefully fills what I perceive is a void of quality and timely commentary on Oregon condemnation law.  I hope you find the blog interesting and helpful.

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