The Expert’s View: An In-Depth Look at Eminent Domain With Anthony Corby
If you own land in Pennsylvania, then you should know what eminent domain is. Eminent domain allows the government to force private owners to sell their land if the government or public utility wants to use that land for a public purpose. In exchange, the government must offer the property owner “just” compensation for the property.
While that may sound straightforward, there are many nuances to eminent domain that can be difficult to grasp if you don’t have a legal background. To help clear up questions about the subject, we talked to Anthony Corby, Associate Attorney at Faherty Law Firm, who specializes in eminent domain. Here’s what we learned.
SVN | Latus: What should commercial real estate investors understand about eminent domain?
Anthony Corby: The first thing they should know is that they are essentially the victims of a lawsuit. The government is starting a lawsuit, and it’s no different than if you get in a car crash and someone hits you. You have the right to be compensated.
These owners should know the government is not going to pay you what you want them to pay you. It won’t be fair market value. It is going to be painful, and the best way to handle it is to hire a qualified attorney to help you through the process and maximize your compensation.
SVN | Latus: What are some of the most common misperceptions about eminent domain?
Corby: People think the government is going to be honest with them and pay them fair market value. Typically, people think of the government as our friend, someone who is supposed to protect us and do what’s in our best interest. However, there are rare situations, like when using eminent domain, that the government does not act according to your best interests.
This is because in the context of eminent domain, the government’s duty is more aligned with the general public. By paying less than fair market value for your land, the government saves taxpayers money. Therefore, the government is more concerned with protecting taxpayers than you.
When the government takes your property via eminent domain, they pay you what’s called “Estimated Just Compensation.” It’s called “estimated” because it’s based upon the government’s own opinion of value. You have no say in the initial payment of Estimated Just Compensation.
However, most investors just take the first offer of Estimated Just Compensation because they don’t want to pay an attorney. This is a misconception. We use a contingency fee arrangement, which means our fee is contingent upon us getting you more money than what the government offered. We only get paid if you do, like with personal injury attorneys, so our interests are aligned.
People often assume that the government will pay for all their injuries. For example, if PennDOT widens a road in front of a commercial business and part of that widening causes business access issues, shutting down access to your shop to pave the road and reducing the number of entrances on your property to one, that will really affect the profits of your business during the one- to three-year construction project. However, you are not entitled to be compensated for that lost profit.
Many times, property owners just underestimate the power of eminent domain. They think, “This is America, they can’t take my property, that’s un-American.” But in fact, the government can.
SVN | Latus: Can you give an example of how a lawyer can assist with an eminent domain case?
Corby: The primary benefit we provide is that we maximize the property owner’s compensation. We can get involved early on and let the client know what to expect, identify possible damages, anticipate losing tenants or having trouble renting vacant apartment complexes. Per the eminent domain code, property owners are entitled to recover lost rents, though there is a cap on it — but at least that’s helpful for some commercial property owners if they’re starting to lose tenants.
We can help if there’s a government agent at the office, pushing an offer across the table — we can help property owners avoid that high-pressure situation because once you have hired a lawyer, the government has to work through the attorney. After hiring us, clients are often very relieved that they do not have to deal with the day-to-day issues.
You only have 30 days to contest eminent domain, and you can only do it for limited reasons. It’s rare to contest the actual taking. It’s designed to give the government a lot of discretion. An example of contesting might be if the boundaries were drawn wrong in the survey. However, the main focus of an eminent domain case is usually the quantification of compensation. It’s our job to maximize that compensation.
SVN | Latus: How is compensation calculated?
Corby: The way it is calculated under the code is very specific. The idea is to make the property owner whole again; however, the legislature has made clear that you’re only entitled to compensation for the value of the real estate. You are not compensated for pain and suffering or a deal that didn’t get through. It is very important that the property owner hire a highly qualified appraiser to perform a legally admissible appraisal for every eminent domain case.
Just Compensation is calculated by measuring the difference between the value of property before the taking as unaffected thereby and the value of the property after the taking as affected thereby. This is designed to capture damage to the entire parcel even if the government only took a portion of the entire parcel. A partial taking of property can often cause much more indirect damage than direct damage. For example, perhaps the taking changed access in such a way that the entire property is now less valuable to a potential buyer, thereby reducing its entire fair market value.
You can also recover relocation benefits if you have to relocate. The government must pay for the entire relocation, which can be quite expensive. Sometimes relocation can cost more than what the property is worth. For example, relocation costs may include the cost of hiring a professional moving company to move your entire business and to reinstall all equipment.
Another item of recovery includes recovery of up to $4,000 in professional fees reasonably incurred. This includes things such as appraiser, attorney, or engineering fees, although, these fees can easily exceed $4,000 on a commercial property. Nevertheless, we help maximize recovery for this as well. Practically speaking, most of the $4,000 will be spent on hiring a qualified appraiser.
SVN | Latus: What agency is responsible for most eminent domain cases in Pennsylvania?
Corby: PennDOT is the No. 1 user of eminent domain, probably 80 percent of the eminent domain cases in Pennsylvania. The other users can be either other government entities, municipalities or school districts. A big one lately has been public utility companies making way for powerlines and pipelines.