I. Make Sure That There Is “Necessity” for the Taking

Although decisions involving the engineering aspects of the project and the property necessary for its implementation might appear to be divorced from legal proceedings, these decisions might have severe repercussions if a condemnation lawsuit is filed. A property owner may challenge the legal authority to condemn private property by demonstrating that the property was not taken for a “public use” or that the condemning agency did not have the statutory authority to condemn for the purpose at hand. Although it is rare for a property owner to overcome the legal burden required to prevail in a necessity challenge, the obligatory time and avoidable expense spent resolving a necessity challenge may interfere with construction

schedules, with attendant delay and loss of public funds.

Despite the fact that the statute (MCL 213.56) requires a final decision within approximately 3 months from the filing of the condemnation complaint, resolution may take much longer. Therefore, it is essential that the condemning agency have appropriate and credible substantiation to (1) support the public necessity of the project; and (2) support the propriety of the decision to take a particular property interest. A working command of the particular limitations of the statutory authorization for the condemnation as well as controlling statutes and court decisions are critical in making this determination.

In the recent decision, County of Wayne v. Hathcock, the Michigan Supreme Court unanimously overruled Poletown Neighborhood Council v Detroit, 410 Mich 616 (1981). In Hathcock, Wayne County sought to condemn private property for the Pinnacle Project, a proposed business and technology park encompassing a 1,300‑acre area adjacent to Metropolitan Airport. This decision has enormous implications as to when it is permissible for Downtown Development Agencies to condemn one person’s private property for ultimate transfer to another private party for redevelopment. The Court essentially held that a public use must be served by the condemnation, such as removing blight. Thus, it appears that condemnation is not a viable means of redistributing ownership of land for the purpose of enhancing the tax base or economic vitality of an area.

2. The Good Faith Offer

With regard to the acquisition of a particular property interest, the first significant step involves retaining a licensed real estate appraiser to determine the value of the property sought to be taken. Condemning agencies often employ the services of a right-of-way professional, who is responsible for services that often include retention of the appraiser, negotiations with property owners, and determining relocation benefits.

As stated in MCL 213.55(1), “Before initiating negotiations for

the purchase of property, the agency shall establish an amount that it believes to be just compensation for the property and promptly shall submit to the owner a good faith written offer to acquire the property for the full amount so established. . . . The amount shall not be less than the agency's appraisal of just compensation for the property.”

If the offer is accepted or leads to a quick settlement, a voluntary purchase takes place and there is no need to file a condemnation lawsuit. If the good faith offer is rejected, the agency must file a condemnation lawsuit in order to acquire the property.

In addition to providing the basis for the good faith offer, the initial appraisal is important for at least two reasons. A thorough and well supported appraisal increases the chance of an early settlement and avoidance of litigation costs. The initial appraisal also is important because it places a cap on attorney fees. Under the Uniform Condemnation Procedures Act, the condemning agency must reimburse the property owner for all or a portion of his attorney fees. The attorney fee is capped at of the difference between the initial good faith offer and the ultimate award (verdict + interest from date of filing).

In most cases, the appraiser who values the property will be the most important witness during the litigation process. For this reason, it is extremely important that the appraiser produce an appraisal that is thoroughly substantiated, permitting the condemning agency to operate from a position of strength. It is equally important that the appraiser is able to clearly communicate his or her opinion and justify why other approaches were considered and rejected.

3. Choosing The Right Appraiser Is Critical

Just as few attorneys are knowledgeable in the practice of condemnation law, condemnation appraisal is a specialty as well. The condemnation appraiser often applies special methodologies and must adhere to laws unique to this area. In addition, even among the relatively small group of condemnation appraisers, it is important to match the right appraiser with the specific appraisal problem involved.

A deficient appraisal may expose the condemning agency to unnecessary and substantial increase in costs. Predictably, settlement prior to filing a condemnation complaint is remote when the property owner believes the government’s appraisal is inadequate. If the matter proceeds to

trial, the import of retaining a knowledgeable appraiser cannot be overestimated.

As discussed above, the condemning agency often is required to reimburse the property owner for attorney fees equal to 1/3 of the difference between the estimated “just compensation” based upon the initial appraisal and the final settlement or verdict (MCL 213.66). An appraisal that leads to an unsupported low offer may result in unnecessary additional payment of substantial attorney fees.

4. Obtain All Relevant Information Necessary To Complete The Appraisal

In order for an appraiser to complete a reliable appraisal, it is necessary to obtain all information pertinent to the task. Under the 1996 amendments to the Uniform Condemnation Procedures Act (UCPA) the condemning agency may petition the court for orders directing the property owner to provide financial information and access to the property for various purposes (e.g., inspection, environmental testing). It is important to be aware of the particular requirements of these statutory provisions, as several steps must be followed prior to requesting the court’s involvement. Improper

application of the statutes may result in unnecessary delay and/or failure to obtain necessary information.

5. It Is Essential To Obtain Competent Legal Representation As Soon As Possible

Condemnation law is a special area of practice governed by unique laws and practical considerations. As a result, there are many traps awaiting the unwary. In cases involving potentially large amounts of money, it should be presumed that the property owner has retained experienced and aggressive counsel before the initial good faith offer has been made. Where possible, it is important that the condemning agency obtain its own experienced counsel as early as possible in the acquisition process. If counsel is not retained until shortly before the complaint is filed, the agency runs the risk that the results may already have been negatively skewed by avoidable error.

Quite often, cities or counties that seldom engage in acquiring land by condemnation negotiate with a property owner’s attorney for months and months. In some cases, the negotiations go on for over a year. For various reasons, protracted negotiation generally is not a good thing for the condemning agency. The playing field often silently is being shaped during this period in a game played by one player. In most (not all) cases, the issue is not that complex - it involves the value of land or improvements - not the price of a unique piece of art. If a price can’t voluntarily be agreed upon in fairly short order, the only action that can change the paradigm is filing suit. The mere passage of time will not drastically change the parties’ perceptions of how much the property is worth.

Under the Uniform Condemnation Procedures Act (UCPA), a good faith offer based on an appraisal generally must be made and rejected prior to the filing of a condemnation complaint (MCL 213.55). Reimbursable attorney fees generally are measured by the difference between the initial offer and the final award. A fundamental legal principle dictates that the property must be valued as of the date the complaint is filed (MCL 213.70). Thus, the passage of time between the initial offer and the filing of the complaint may result in a substantial expenditure.

Conditions near the project area might be favorably changing over time. Sometimes knowledge of a project may cause values to rise in the area of the subject property. Although the law requires that any increment of value attributed to the project be disregarded, it often is extremely difficult to isolate and extract this value. The condemning agency will be liable for attorney fees equal to one third of the difference between the good faith offer and the value on the date the complaint is filled.