ARTICLE
15 February 2024

Condemning Replacement Or Substitute Property To Mitigate Damages

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Nossaman LLP

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For more than 80 years, Nossaman LLP has delivered the highest quality legal expertise and policy advice to our clients nationwide. We focus on distinct areas of law and policy, as well as in specific industries, ranging from transportation, healthcare and energy to real estate development, water and government.
A public agency's acquisition of private property can sometimes trigger significant severance damages due to eliminating access, cutting off utility service, or taking a substantial portion of a property's parking.
United States Real Estate and Construction
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A public agency's acquisition of private property can sometimes trigger significant severance damages due to eliminating access, cutting off utility service, or taking a substantial portion of a property's parking. As agencies look to get more creative in minimizing exposure to large damages claims, they will sometimes offer up mitigation alternatives, such as providing an alternative access, or new utility service, or replacement parking, with such rights being granted from an adjacent or neighboring property. These mitigation solutions are often a win-win for property owners and public agencies, as a landowner is made whole, and an agency avoids a large damages claim. But can the government force another nearby property owner to give up their property rights for such mitigation solutions? There are a few situations, outlined below, where additional land can be acquired or substituted.

  • Acquisition of Substitute Property: Code of Civil Procedure section 1240.320 allows for substitute property to be acquired and then exchanged for necessary property, but it is limited to instances where the necessary property is held for a public use and the owner of the necessary property possesses the power of eminent domain.
  • Acquisition of property necessary to provide utility service or access to public road: Code of Civil Procedure section 1240.350 provides that when a condemning entity acquires land and that acquisition ultimately cuts off utility service or access to a public road to other private property, in those circumstances, the condemning entity may acquire additional property by eminent domain in order to provide replacement utility service or road access. However, in utilizing this statute, the agency must also analyze any hardship impacts created to the owner of additional property. The legislative comments indicate the purpose of this statute is to restore cut-off property to useful life and to avoid claims of substantial severance damages. The condemnor is minimizing the damage to the property retained by the owner.
  • Additional Property for Protection of Project: Additional land may also be acquired pursuant to Code of Civil Procedure section 1240.120. This section allows for property to be acquired if it is "necessary to carry out and make effective the principal purpose involved including but not limited to be used for the protection or preservation of the attractiveness, safety, and usefulness of the project." Property acquired pursuant to this statute can later be disposed of, so long as there are reservations or restrictions that are necessary to protect or preserve the attractiveness, safety, and usefulness of the project. There needs to be a connection between the acquisition of the additional property and the project (i.e., the additional acquisition needs to support the project). Public agencies could potentially get creative and use this statute to acquire property needed for construction of the project, including safety or attractiveness features, and then use excess portions to mitigate damages.

These statutes do not get utilized too often, but they can be helpful in certain situations where an access elimination or utility removal could create huge damages claims if not properly replaced. Public agencies should remember these options exist when designing their projects, and property owners who may be significantly impacted should consider these alternatives to keep their properties useful and viable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
15 February 2024

Condemning Replacement Or Substitute Property To Mitigate Damages

United States Real Estate and Construction

Contributor

For more than 80 years, Nossaman LLP has delivered the highest quality legal expertise and policy advice to our clients nationwide. We focus on distinct areas of law and policy, as well as in specific industries, ranging from transportation, healthcare and energy to real estate development, water and government.
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