Eminent domain — when a government pays “just compensation” to take property from a private landowner for public use — is unpleasant enough without ending up being shortchanged in the bargain. Often, the government takes a small portion of a larger property. In these situations, the owner may receive the value of the acquired parcel, as well as economic damages on the property that wasn’t acquired by the government. Understanding how to quantify the effects of eminent domain on the property’s unacquired portion can help maximize your compensation.
What is the Larger Parcel Concept?
When a government takes land, it can’t take more property than is required for its project. As a result, governments typically take land from a larger parcel, leaving the remainder behind.
The term “larger parcel” signifies that the parcel taken by the government isn’t a complete parcel in itself, but part of a bigger tract. For example, in a condemnation of a 50-foot-wide street right of way that runs through a 100-acre open space parcel, the 100-acre parcel would be the larger parcel. And that parcel would likely be negatively affected by the taking.
The allowance of damages based on the severing of a parcel from a larger parcel recognizes that the grouping of separate parcels may produce a value greater than the sum of the value of the individual parcels. The loss of one parcel, therefore, can reduce the value of the remaining parcel(s). The amount of severance damages is determined by a court based on the “highest and best value” of the larger parcel.
How Do Courts Determine the Larger Parcel?
Even though details vary by state, a larger parcel generally must satisfy two tests of unity:
1. Use. This is the most important test. It requires the property (the asserted larger parcel) to be put to a single overall use. The unity of use determination is usually based on the property’s highest and best use; it examines the property’s current uses and the time and expense necessary to terminate those uses. It also considers the property’s physical adaptability for use as an integrated whole and the property owner’s development plans, including current and proposed zoning applicable to the parcels and local regulatory issues. Finally, courts will consider local market conditions.
As these factors suggest, the determination factors in both the property’s current state and its reasonably probable future uses. Current unity of use isn’t necessarily required; courts will consider whether future unity of use is likely. In other words, what matters is if it’s reasonably likely that the property would be available for development as a single economic unit in the near future.
2. Ownership. Unity of ownership requires that different parcels be owned by the same owner or set of owners. Some courts may consider “equitable ownership” (a form of ownership that exists without legal title, such as a right of use) to satisfy this test.
Courts might also look at who controls the various ownership interests — for example, if one parcel is owned by an individual and the other is owned by an S corporation established by that individual, or the first parcel is owned by an individual and the other by a spouse. Unity of ownership can exist even if the owner doesn’t have the same quantity or quality of interest in each parcel. An owner isn’t required to have a “fee simple” interest in each parcel.
What is Contiguity?
After determining that the parcels have unity of use and ownership, the court will consider contiguity. This requires physical proximity between the parcels that form a larger parcel. Abutting parcels are more likely to have similar highest and best uses under a single ownership.
Contiguity is generally considered the least critical determinant. Property has been designated as larger parcels when separated by, for example, a highway, if there’s access between the parcels and a current or reasonably likely future unitary use.
Don’t Lose Out
Understanding the nuances of eminent domain will help if a government entity approaches you about a possible taking of property. Be sure to consult with a real estate attorney to help ensure you receive just compensation for your taken property.
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