In an effort to educate property owners on the eminent domain process under Oregon law and their rights to just compensation, Olsen Barton has published the Oregon Property Owners’ Handbook: Eminent Domain and Just Compensation Under Oregon Law. While it is available in hard copy, in an effort to make it easily accessible we have also made it available on our website. It covers everything from the basics of eminent domain and just compensation to handling offers from the government and the anatomy of a condemnation action. I hope folks find it helpful. Also, a big thanks to my co-author and colleague Brian Best.
In the event the government decides to take your property, you will most likely receive a visit from a “right of way agent” who will present you the government’s “offer” to acquire your property. This post explores what that “offer” typically looks like and what next steps you need to think about.
What kind of communication from the government will accompany the offer?
The government must attempt to reach agreement with you on the fair market value of the property and its acquisition. ORS 35.235(1). Without such an attempt, the government cannot initiate a condemnation lawsuit. ORS 35.245(1). As part of this negotiation, the government must make you an unqualified offer based upon what the government contends is the just compensation for the property. The offer will be in the form of a letter from the government or a private right of way agent with whom the government has contracted.
What is the government’s offer based upon?
In most cases, the government’s offer must be accompanied and supported by a written appraisal. ORS 35.346(2). However, if the government determines that the amount of just compensation is less than $20,000, it may provide you with a “written explanation of the bases and method” by which it arrived at fair market value, in place of a formal appraisal.
The offer mentions possible environmental issues. What is this about?
As part of the appraisal process, the government will often times conduct an environmental review of the targeted property. This review is looking for evidence of possible environmental contamination stemming from present or past uses of the property. A common example giving rise to governmental concern is the presence of an underground storage tank for petroleum products. If the government determines that the property will require some level of environmental remediation, it may seek to have associated costs deducted from the determination of just compensation.
Am I entitled to relocation compensation?
Yes, property owners, as well as tenants, are often entitled to reimbursement for certain relocation and business reestablishment costs resulting from displacement from the taken property. Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, 42 U.S.C. § 4601 et seq.; ORS 35.500 to 35.530. Relocation compensation is determined by an administrative process different from the process used to determine just compensation for the taking of the property.
Am I entitled to loss of value to my business?
Technically, no. In the event of a partial taking of property, however, the taking could affect your ability to use the property for a particular business purpose, which also happens to be its highest and best use—for example, a restaurant adjacent to a highway. If the taking results in a less intensive highest and best use, you may be entitled to resulting damages.
Are there benefits to securing a team of experienced advisors in responding to the offer?
Yes, definitely. A team of advisors experienced in condemnation matters can help you achieve just compensation, advise you on relocation issues, and assist you with tax planning in regard to the proceeds of condemnation. Your team may include a condemnation attorney, appraiser, relocation specialist, real estate broker, and tax planner. In certain circumstances, you may need to also enlist the services of, among others, surveyors, land use planners, architects and engineers.
How much time do I have to respond to the offer? Do I have to accept or reject the government’s offer within this time?
The government must give you at least 40 days to respond to the offer before filing a condemnation action. ORS 35.346(1). It is important to note, however, that you are not required to respond to the offer. If you fail to respond, you will be deemed to have rejected the offer. The government may then initiate the condemnation action, but negotiations will most likely continue regarding fair market value and the government’s acquisition of title up to and through the litigation process.
If I reject the offer or do not respond to it, will the government lower its offer?
No, the government generally cannot lower its offer as a negotiation strategy. For practical purposes, the government’s initial offer represents a floor for the negotiations regarding just compensation. As a matter of law, the government cannot lower the amount of its initial offer except upon an order of the court, and that order cannot be entered less than 60 days before trial. ORS 35.346(2).
Should I obtain an independent appraisal?
Yes, in most circumstances, you should obtain an independent appraisal. Though the appraiser contracted by the government is a professional and bound by professional standards, he or she is hired by the government. You also need an analysis performed by an independent professional. Further, if you know the government’s offer is imminent, obtaining an independent appraisal before receiving the offer will, in certain situations, provide you and your advisors the necessary information to develop a proper negotiation strategy.
The government wants to take your property, and you’ve heard that if “negotiations” with the government don’t work out, a lawsuit will result. There are a lot of myths and misconceptions surrounding litigation, including condemnation litigation. Let’s shed some light on the subject.
What gives rise to a condemnation lawsuit? Who files the lawsuit?
If you cannot reach agreement with the government as to just compensation after initial negotiations, the government must file a condemnation lawsuit to obtain possession of and title to the property. The condemnation lawsuit is formally initiated by the filing of a “Complaint.” The Complaint will name the property owner and, typically, all holders of legal interests in the property (mortgage lenders, etc.) as defendants in the lawsuit. ORS 35.245. The Complaint will also describe the government’s eminent domain powers, allege that the property is necessary for a particular public use, and allege the amount the government contends is just compensation. ORS 35.255. The government’s just compensation allegation will most likely restate its original offer to you.
Is arbitration available?
Yes, arbitration is available in certain circumstances at the election of the property owner. Arbitration is a process similar to trial, but less formal. In arbitration, rather than have a judge or jury decide the case, an experienced attorney or retired judge acts as the sole decision maker or “arbitrator.” If the total amount claimed by any party as just compensation does not exceed $20,000, you may elect binding arbitration, meaning that the decision of the arbitrator is final and not appealable except for very limited reasons. If the total amount claimed by any party exceeds $20,000, but is less than $50,000, you may elect non-binding arbitration, which allows either party unsatisfied with the outcome of the arbitration, to appeal the case for a normal trial. ORS 35.346(6).
How long does the lawsuit take?
A condemnation lawsuit may last between 12 and 24 months if it goes all the way through trial. That being said, the lawsuit can possibly settle at any time.
What happens in the lawsuit before the trial?
Prior to the trial, there are a number of important milestones following the Complaint.
• Immediate Possession: If the government needs immediate possession of the property, which is often the case for construction purposes, it will typically file a “Notice of Immediate Possession” at or near the time of the Complaint. ORS 35.352. The Notice of Immediate Possession basically moves the court for an order allowing the government to take possession of the property prior to the trial and judgment on its value. Except in the most extreme of cases, the court grants such requests.
• Deposit of Funds by Government; Property Owner Withdrawal: In order to obtain immediate possession, the government must deposit with the court what it contends is just compensation for the taking of the property. ORS 35.265. Upon order of the court, you are then permitted to withdraw those funds from the court without prejudicing your case. ORS 35.285. The withdrawal process can be more complicated if there is more than one defendant.
• Property Owner’s Answer: Your “Answer” is the formal response to the government’s Complaint. It is generally due 30 days after the filing and service of the Complaint, and failure to timely file an Answer may result in you being “defaulted” or forfeiting the right to contest the government’s contention of just compensation. The Answer responds to the government’s allegations, sets forth any available defenses to the government’s exercise of its eminent domain power, and alleges the amount you believe to be just compensation for the property taken and, as applicable, damages to the remaining value of the property. ORS 35.295. In certain situations, you may also allege in coordination with the Answer counterclaims against the government, including those for “inverse condemnation.”
• Discovery: “Discovery” is the formal process by which parties to a lawsuit obtain documents and information from each other prior to trial. This process may involve requests for production of documents, requests that parties admit certain facts, and depositions of parties. The parties may also request documents from and depositions of third parties by way of subpoena. In Oregon state court, there is no “expert discovery,” so a party may not seek documents from or depose the other party’s appraiser and other experts prior to trial.
• Exchange of Appraisals: While the government must in most cases provide the property owner an appraisal with its original offer, and the parties may exchange subsequent appraisals at any point in the process as part of their negotiations, Oregon law requires the exchange of appraisals at certain times prior to trial. Appraisals not exchanged prior to trial cannot be used at trial. ORS 35.346(5).
• Settlement Conference or Mediation: Many courts will require the parties to engage in a judicial settlement conference before allowing a case to proceed to trial. The parties may also engage in private mediation.
• Pre-Trial Motions; Jury Instructions: Immediately prior to trial, the parties will typically file motions with the court seeking the exclusion of certain evidence that may be irrelevant, unduly prejudicial, or otherwise inconsistent with the rules of evidence. These motions are designed to limit the information that reaches the jury, and the orders arising from them are very important to how the case is tried. The parties will also propose to the court instructions the judge should give to the jury regarding the law the jury must implement. The court’s wording of the jury instructions can significantly influence the conduct of the trial and the jury’s verdict.
• Jury Selection: The jury selection process is technically part of the trial, but it takes place prior to what most people think of the as the beginning of the trial—opening statements. The jury selection process entitles the property owner and the government to question and challenge potential jurors in a process called voir dire. More art than science, jury selection can have major impacts on the outcome of the trial.
Will I testify?
Yes, in many cases you, as the property owner, may testify regarding your opinion of the value of the property taken and, as applicable, the damages to the remaining value of the property.
Who else will testify?
Depending on the nature of the taking, a variety of fact and expert witnesses may testify at trial as to just compensation. These witnesses will include, in the least, the respective appraisers hired by the government and the property owner.
Will the jury view my property?
Yes, in many cases the jury will take a court-sanctioned “field trip” to view the property. Either party may request the jury view by motion to the court prior to the formation of the jury. ORS 35.315. In many cases, by the time of trial and the jury view, the government has taken possession of the property and the project for which the property was taken is under construction or complete. The jury view typically happens right before or right after the lawyers’ opening statements to the jury.
How long will the trial take? How does it progress?
Generally, a trial on a condemnation action will take four days. Depending on the complexity of the case and the number of witnesses for each side, the trial could last longer. After the steps already described above (jury selection, jury view, opening statements), and if the property owner elected to proceed first in the presentation of evidence under ORS 35.305, the property owner’s lawyer will present its case through the testimony of witnesses and presentation of documentary and demonstrative evidence. The government’s lawyer will then present its case in a similar fashion. After the parties are given the opportunity to call rebuttal witnesses, the court will give the jury its final instructions on the law, the lawyers will give closing arguments, and the jury will retire for deliberations on the verdict. It should be noted that the order of the trial may be altered by the judge in certain respects.
What happens after the jury returns a verdict?
The verdict is reduced to a judgment, which is a document that states the just compensation the government must pay the property owner. Upon the government satisfying the judgment, it also operates to transfer title to the property to the government. ORS 35.325. In many cases, the property owner is also then entitled to petition the court for an award of attorney fees and costs. Based upon the court’s determination of the property owner’s reasonable attorney fees and costs, a supplemental judgment is typically entered requiring the government to pay the property owner in such an amount.
What kinds of fees and costs are involved in such a lawsuit?
Property owners can expect to incur attorney fees, expert witness fees, filing fees, the costs associated with appraising the property, related planning and engineering costs, and general expenses associated with litigation. Depending on the nature of the case, other types of fees and costs may be incurred. The amount of fees and costs varies widely depending on the complexity of the matter, the length of the dispute, and other factors.
Can I recover my fees and costs from the government?
In many cases, yes. Oregon law allows a property owner to recover fees and costs, as determined by the court, in three instances:
• If the amount of just compensation determined by the jury exceeds the government’s highest written offer in settlement submitted to the property owner before the government filed its Complaint, ORS 35.346(7)(a);
• If the court determines that the first written offer made by the government before filing the Complaint did not constitute a good faith offer of an amount reasonably believed by the government to be just compensation, ORS 35.346(7)(b); or
• The government “abandons” the condemnation lawsuit by dismissing it or filing an election not to take the property after the jury’s verdict, ORS 35.335.
If the government does not abandon the action, its first offer was in good faith, and the jury’s determination of just compensation does not exceed the government’s highest written offer before filing its Complaint, the government is entitled to a judgment against the property owner for certain limited costs and disbursements, but not attorney and expert witness fees. ORS 35.346(9).
The amount of fees and costs to which you are entitled may be affected by an “offer of compromise” by the government. An offer of compromise is a formal offer by the government to settle the case after filing the Complaint. If you do not accept the offer of compromise, but do not obtain a judgment after trial in an amount greater than the offer, your entitlement to fees and costs can be reduced and the government’s entitlement to costs and disbursements can be increased. ORS 35.300.
Finally, attorney fees and costs should be included in negotiations with the government, and they are often accounted for in settlement agreements reached with the government.
Can either side appeal? Am I entitled to fees and costs on appeal?
Yes, either the government or the property owner may appeal a judgment of the court. An appeal, however, will not prevent the government from taking possession of the property and using it for the designated public use. If you prevail on appeal, you are entitled to an award of reasonable attorney fees and costs incurred during the appeal process. ORS 35.355.
What is the effect of withdrawing funds awarded by the jury on my appeal rights?
If you withdraw from the court the compensation awarded by the jury and deposited by the government (as opposed to the government’s original deposit of its contention of just compensation), you will likely waive your right to appeal. ORS 35.365.
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.
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.
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.