Posted by: Patricia Salkin | July 3, 2014

NY Appellate Court Remands Condemnation Case to Court of Claims to Recalculate Just Compensation Based on Property’s Highest and Best Use

Claimant, KKS Properties, LLC, was the owner of property in the Town of Bethlehem, Albany County, New York. On May 12, 2006, in conjunction with the construction of an extension of State Route 85, petitioner, the State of New York, appropriated a parcel of claimant’s property, which bifurcated the property from north to south, leaving a 3.736–acre parcel to the east of the bypass and an 18.44–acre parcel to the west. The eastern parcel continued to enjoy access, while access to the western parcel was reduced to a 43–meter conditional right of access, which was encumbered by wetlands, a fire hydrant and road signage. Claimant and petitioner entered into an agreement for payment in the amount of $718,500 for the appropriation.

However, the claimant commenced this proceeding, asserting that the limited access granted to the western parcel of its land had rendered the northernmost 16.04–acres unsuitable for development to its highest and best use, and sought consequential damages of $1,583,000. The Court of Claims concluded that claimant had suffered total damages of $532,000 as a result of the taking. Petitioner then moved pursuant to EDPL 304(H) for an order awarding it judgment against claimant for its overpayment. The court thereafter dismissed the claim and entered judgment in favor of petitioner for $304,679.57, which included petitioner’s overpayment of $186,500, plus statutory interest. Claimant appealed.

The Appellate Division reversed stating that when private property is appropriated for public use, just compensation must be paid, requiring that the owner be placed in the financial position that he or she would have occupied had the property not been taken.
Upon a partial taking of real property, an owner is not only entitled to the value of the land taken but also to consequential damages, which consist of the diminution in value of the owner’s remaining land as a result of the taking or the use of the property taken. Damages must be measured based upon the fair market value of the property as if it were being put to its highest and best use on the date of the appropriation, whether or not the property was being used in such manner at that time.

Here, the eastern portion of the subject property, as it existed prior to the taking, was rezoned from residential to hamlet while the western portion was rezoned to commercial hamlet. The Court of Claims had found that claimant’s property would not have been rezoned absent the bypass extension and concluded that it was not permitted to take into account any enhancement in value attributable to the reason for the appropriation itself, the highest and best use of the land-both before and after the taking-was for residential development. Relying primarily on residential comparable sales as a baseline and finding that claimant had sustained some consequential damages to the western parcel of its property due to limited access, the court determined that claimant suffered total damages of $532,000 as a result of the taking.

The Court of Claims erred in valuing claimant’s property based upon residential development as its highest and best use. While it is well settled that a condemnee may not receive an enhanced value for its property when the enhancement can be exclusively attributed to the reason for the taking itself, the court found that the petitioner failed to demonstrate that “but for” the bypass extension, claimant’s property would not have been rezoned. The record had demonstrated that the change in zoning of the subject property, which occurred prior to the taking, was part of a comprehensive rezoning of the entire Town. The court stated, “The predominant rule in condemnation cases is that in determining an award to an owner of condemned property, the findings must either be within the range of the expert testimony, or be supported by other evidence and adequately explained by the court” Here, because the appraisals of both parties’ experts were flawed, the appellate court was constrained to remit the matter to the Court of Claims for further proceedings to determine the valuation of claimant’s property and the calculation of claimant’s damages based on the property’s highest and best use as hamlet and commercial hamlet lands.

In re Acquisition of Real Prop. by State, 2014 WL 2972068 (NY 7/3/2014)

The opinion can be accessed at:

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