Business Damages Experts Can Prevent Eminent Domain Disasters
Article, Construction Claims – October 2017
When should you bring a business damages expert into eminent domain proceedings? Briggs Stahl discusses in Construction Claims.
As appeared in Construction Claims, October 2017.
By: Briggs Stahl
Let’s start with a quick primer: eminent domain is the authority by which a state or local government (the “condemning authority”) can take parcels of land for infrastructure developments, such as widening a road or constructing a highway. When the condemning authority claims these parcels of land (called the “take”), the owners of the land and – in many states – the businesses operating on the land must be compensated for their loss.
Payments for the land are constitutionally required, but business damages depend upon what individual state statues or constitutions require. The condemning authority will then work with the business and land owner to develop a solution to alleviate the damages (a “cure”) or will pay fair market value for the damage caused.
There are often several different types of experts involved in an eminent domain proceeding. The main team will be comprised of engineers to design the new infrastructure project and the cures; contractors to build the project and the cures; a real estate appraiser to evaluate real estate damages a take may cause; industry experts to advise on specific issues or challenges certain types of business may face as a result of the take and/or cure; land planners who know the local and state regulations related to where and how elements like signage and parking can be built; and a business damages expert to evaluate the damage businesses will sustain beyond the value of the real estate being taken.
In the ideal situation, all of these experts would work in concert to plan the project, the take and the cures with the aim of limiting or mitigating the amount of business damages sustained.
So, back to the question at hand: when should you hire a business damages expert in an eminent domain proceeding? The answer is simple: as early as possible.
Often, a business damages expert is brought in at the tail end of the project, after the take and cure have been planned, and after a business damage claim has been made. When brought in at the beginning of a project, a business damages expert can advise on how much potential damage a business might sustain in different take scenarios. They can also help weigh the cost of potential cures against potential business damages that may be claimed in the future.
Business damages experts work collaboratively with construction planners and engineers – and the other experts involved – to determine the take and develop and negotiate the cure for each affected business. Depending on the size, scope and location of the proceeding, this could amount to a large number of businesses and land owners who will need to be compensated. Construction planners and engineers can, by working with a business damages expert, plan a project more efficiently, reducing the time and money it will take to complete the job.
Consider an eminent domain “take” where a retail business loses four parking spaces. The cost to “cure” this damage is $100,000 (to move the spaces and repave the lot). The real estate loss of the spaces is valued at $50,000. The cure is not undertaken, because it would cost more than the damage.
What was not considered was the potential damage to the business. The business later claims $250,000 in business damages as a result of losing the parking spaces. Hence, what is thought to be a $50,000 cost is actually a $300,000 cost to the condemning authority.
A business damages expert likely would have recommended implementing the proposed cure rather than damaging the business further, saving the condemning authority $200,000.
In eminent domain proceedings, business damages experts don’t only quantify damage after it has happened. They can also assist condemning authorities in limiting the amount of damage caused from the start. All parties involved will see a benefit by appreciating the business damages expert as a key resource from the outset.