Eminent Domain Report

I attended the IRWA Chapter 1 (Los Angeles chapeter) lunch meeting today, and listened to my partner, Rick Friess, speak about the Pitfalls of Prejudgment Possession [PDF]. The most lively part of the discussion centered on the requirement that condemning agencies offer the property owner $5,000 to obtain his or her own appraisal, and whether the agencies can condition that money on anything. There was clear agreement on the fact that to date, no case has interpreted the requirement, and that there is at least some ambiguity about what, if any, conditions may be imposed.

Typically, agencies ask for any or all of the following:

1. A copy of the engagement letter/proposal from the appraiser;
2. A copy of an invoice for the work; and/or
3. A copy of the actual appraisal report.

Here’s my take on this. I think the appraisal report itself is pretty easy. I see no basis for an agency demanding a copy of the actual appraisal report. After all, the agency is not typically providing its appraisal report to the property owner, and we have strict expert disclosure rules that control when a party must exchange an appraisal report; forcing an early exchange is not fair, and probably violates the rule of a $5,000 offer (or at least the spirit of the rule).

As for engagement letters and invoices, I am much less troubled. The agency should have a mechanism to ensure that the money is actually going to an appraiser, not simply into the landowner’s pocket. On the other hand, as a landowner, I might not want the agency to know which appraiser I hired until the expert exchange. A middle ground might be a redacted copy of the proposal and/or invoice that excludes the appraiser’s name.

From a more practical standpoint, however, it is hard to imagine why an agency would demand any meaningful conditions on the $5,000. In the event the agency needs prejudgment possession, attaching strings might give the landowner a chance to argue that the agency did not comply with the precondemnation requirements, and that it should not be entitled to prejudgment possession. Spending $5,000 to avoid this possible result makes considerable sense, especially if the timing of possession is a critical path item for the construction schedule.

On the other hand, no reason exists that the agency could not ask for the voluntary disclosure of the appraisal report, as long as payment of the $5,000 is not conditioned on the landowner doing so. And, where there is a likelihood of an early settlement, the landowner may be well served in providing the appraisal, or at least a summary of it, for use in negotiations. After all, the whole point of these requirements is to facilitate early resolutions, and exchanging more information that is legally required (by both sides) may help achieve that goal.