When governmental authorities start taking property to widen roads or for other public purposes, the results can devastate a business. Prior planning by an organization faced with eminent domain can increase the odds of obtaining adequate compensation and reduce the stress on business.
Land ownership and rights analysis.
A business may typically recover the value of the land taken and the loss in value of the remaining property, and in some cases, it may also recover business losses. These recoveries may be artificially reduced, however, if a business operates on land that appears to be separate tracts in official land records.
Damages may be ignored unless they occur on the same tract from which the government takes land. In many cases, pre-condemnation planning can correct this problem.
Mortgage, lease and other documents may determine whether contractual relations may be terminated or altered, who has the right to control the litigation and who is entitled to all or part of the compensation awarded. Existing documents should be carefully reviewed before the taking, and the possibility of future condemnation should be considered when drafting new documents.
Physical status of the property.
The value of the property is determined as of the date of seizure. Owners should consider whether the property needs maintenance, renovations or other repairs in order to present it in its best condition on that date.
If such changes make good business sense, owners should document that they were made by the date of the taking. Similar thoughts apply if it would make good business sense to add improvements or otherwise develop the property.
Business ownership analysis.
Georgia law treats businesses that own the land on which they operate differently from those that merely lease it. In many circumstances, businesses that lease the land may recover business losses, but those that own the land may recover business losses only if the seizure permanently destroyed the entire business.
Businesses that own the land may, therefore, wish to consider forming a separate holding company to own the property and lease it back to the business. This step will put the business in a more favorable category for recovering the full measure of its losses.
Expert witnesses.
Not all expert witnesses are equally credible. A real estate appraiser should hold an MAI (Member Appraisal Institute) designation from the Appraisal Institute, and a business valuation expert should hold a CBA (certified business appraiser) or a BVAL (business valuator accredited for litigation) designation from the Institute of Business Appraisers.
Online listings for MAI appraisers can be found at www.appraisalinstitute.org, and listings for business appraisers are at www.go-iba.org.
Trial exhibits.
Condemnation litigation proves the truth of the saying, “a picture is worth a thousand words.” It is necessary to show the jury the impact of the seizure by presenting pictures of the property before seizure and after seizure.
This is done most effectively by using enlarged aerial and ground photographs, ideally from the same vantage points in both the before and the after, to show the sharp contrast between the property in its undamaged and damaged conditions. It is also useful to have similar pictures of the surrounding area and other properties that will shed light on the value of the business property before and after the taking. Other trial exhibits, such as diagrams of the entire condemnation project, site plans and summaries of business data and comparable land transactions will help the jury understand the seizure’s full impact on the business.
Charles M. Cork III is a partner in the Macon office of Gambrell & Stolz LLP. His practice focuses on appeals, eminent domain, ERISA and insurance, and general civil litigation. Reach him at (478) 750-0777 or [email protected].
