Eminent Domain Blog

Philadelphia BRT Problems Continue

David Snyder — Fri, 05 Feb 2010 01:45:06 -0500

The Philadelphia Board of Revision of Taxes remains at the center of controversy. Last week, Richard Negrin, the BRT's interim executive director, announced that the BRT will freeze reassessments on most Philadelphia properties for up to two tax years, or until every parcel can be reassessed. Mr. Negrin stated that after only one month as its head, he had discovered numerous errors in the BRT’s data and as well as other problems with the agency. He stated last week that he could not "in good conscience" continue to value properties in Philadelphia using the "bad data."

City Council recently passed legislation that will replace the BRT with two new entities Oct. 1. This must be approved by the voters in the May 18 primary.

The moratorium will freeze property taxes through at least the 2011 tax year unless City Council raises the property-tax rate. Exceptions will include new construction and rehabilitated properties. Most importantly, the 18,000 city properties that received reassessment notices in 2009 will still be required to pay the higher assessments.

Supreme Court Declines Hearing Eminent Domain Case

David Snyder — Sun, 31 Jan 2010 10:46:15 -0500

The United States Supreme Court declined hearing an important eminent domain case. Kimco of Evansville, Inc. v. State of Indiana, described below, dealt with a common condemnation issue – the extent to which a change of access can be considered in calculating eminent domain damages. Most states do not necessarily permit a property owner to include damages attributable to a change in access as part of the condemnation damages. Rather, the law in those states is that as long as there remains “reasonable access” after the condemnation, the condemnee is not entitled to change in access damages. Of course, there are numerous exceptions to this general rule. However, many property owners believe that the general rule is fundamentally unfair and that these damages should be included without needing an exception.

The Supreme Court denied the property owner’s “Petition for Writ of Certiorari” asking the Court to hear the case. Hopefully, this will not be the last chance for consideration of this important issue.

HUD Investigating 15 Mortgage Companies For Potential Fraud

David Snyder — Thu, 21 Jan 2010 13:39:45 -0500

The US Department of Housing and Urban Development (HUD) last week served subpeonas on 15 mortgage companies nationwide seeking information on failed FHA loans. The subpoenas part of a program reviewing FHA approved mortgage lenders with “significant” foreclosure rates.

The companies are:

•First Tennessee Bank, Memphis, TN
•Alethes, Lakeway, TX
•Security Atlantic Mortgage Co., Edison, NJ
•Pine State Mortgage Corporation, Atlanta, GA
•Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
•Alacrity Financial Services, Southlake, TX
•Assurity Financial Services, Englewood, CO
•D and R Mortgage Corporation, Farmington, MI
•Webster Bank, Cheshire, CT
•Mac-Clair Mortgage Corporation, Flint, MI
•Americare Investment Group, Inc., Arlington, TX
•1st Advantage Mortgage, Lombard, IL
•American Sterling Bank, Independence, MO
•Sterling National Mortgage Company, Great Neck, NY
•Dell Franklin Financial, Columbia, MD

PA and N.J. Awarded $115 Million in Federal Housing Funds

David Snyder — Sat, 16 Jan 2010 13:27:24 -0500

Pennsylvania will receive $68.8 million and New Jersey will get $46.8 million in federal stimulus funds for housing redevelopment projects. These projects will include acquiring blighted properties. It is virtually certain that many will be acquired through the power of eminent domain.

Approximately $43.9 million will go to the City of Philadelphia. However, the city was seeking $58 million. The funding for Pennsylvania also includes $5 million for the City of Reading. New Jersey's funding includes $11.9 million for the Camden Development Authority, $14.1 million for the Camden Housing Authority and $20.8 million for the City of Newark.

The funds are included in $2 billion in grants awarded nationally by the Department of Housing and Urban Development under its Neighborhood Stabilization Program.
Los Angeles received the most of any city - $100 million. Chicago received $98 million and Phoenix $60 million.

Supreme Court To Decide Whether To Hear Eminent Domain Case

David Snyder — Sun, 10 Jan 2010 17:06:34 -0500

On January 15, 2010 the United States Supreme Court will consider “in conference” whether to hear an important eminent domain case. One common condemnation fact pattern is where a property is the subject of a “partial condemnation” – part of the property is taken – where one of the driveways is closed or moved. This change in access can significantly impact the value of a property. However, most states do not necessarily permit a property owner to include damages attributable to a change in access as part of the condemnation damages. Rather, the law in those states is that as long as there remains “reasonable access” after the condemnation, the condemnee is not entitled to change in access damages. Of course, there are numerous exceptions to this general rule. However, many property owners believe that the general rule is fundamentally unfair and that these damages should be included without needing an exception.

In Kimco of Evansville, Inc. v. State of Indiana, a shopping center owner alleged that its property suffered a diminution in value due to change of access to the abutting roadway. The jury returned a verdict of $2,300,000. The State of Indiana appealed claiming that this amount improperly included damages due to the change in access. Ultimately, the Supreme Court of Indiana agreed with the State and remanded the case to the trial court for re-determination of the proper amount of damages.

The property owner filed a “Petition for Writ of Certiorari” asking the United States Supreme Court to hear the case. I was asked to file an “amicus” brief in support of the property owners by the International Council of Shopping Centers and the National Association of Real Estate Investment Trusts. Regardless of your opinion regarding this issue, it is one that arises frequently. Therefore, I believe it is important that the Court consider and decide the issue.

Our Team Defeats A Condemnation

David Snyder — Sat, 02 Jan 2010 13:59:09 -0500

I am proud to say that our team scored a significant victory for a property owner outside of Erie, PA. We were retained by a property owner in Millcreek, PA to challenge a partial taking of its property for a proposed stormwater project. The property owner firmly believed that the project was ill conceived and would be harmful to the environment.

We challenged the project on 2 fronts. We challenged the taking by filing “Preliminary Objections” – the exclusive procedural means to challenge condemnations in Pennsylvania – and challenged the PA DEP permit for the project. The permit was suspended earlier in 2009 by the Environmental Hearing Board and we are waiting for further decisions.

An evidentiary hearing was held in December regarding our Preliminary Objections to the condemnation. We had numerous bases to challenge the condemnation. However, we initially focused on the fact that the condemnor did not have the authority to take all of the condemned property. Condemnors must have express statutory authority to exercise the power of eminent domain for the particular purpose of the project. The Court agreed that the condemnor did not have the requisite statutory authority.

There are a few lessons from this case. First, while most property owners do not have the money or energy to challenge a taking, it is not uncommon to have a defective condemnation. Condemnors must be very careful and condemnees must scrutinize the papers filed to condemn their property. Second, many projects can be attacked outside of the eminent domain proceedings. I am fortunate to work at firm where I have partners with expertise in virtually every area of the law. In this case, my environmental law partners were invaluable.

Supreme Court To Hear Arguments Tomorrow In Eminent Domain Case

David Snyder — Tue, 01 Dec 2009 02:54:16 -0500

The United States Supreme Court will hear arguments tomorrow in the case Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection. That case deals with the Florida Department of Environmental Protection’s Beach Restoration Project. In that case, the Florida DEP, pursuant to a Florida statute, embarked upon a beach restoration project to place sand along 6.9 miles of shoreline bordered by more than 450 parcels of primarily private property.

The property owners alleged that the Florida DEP “pursued their singular goal of replacing a private beach with a public beach without paying compensation by creating an additional 75-foot wide public beach.” The Florida Supreme Court rejected this argument.

The Court granted certification of the appeal regarding 3 questions. Perhaps the most interesting question to be considered is the first one:

The Florida Supreme Court invoked “nonexistent rules of state substantive law" to reverse 100 years of uniform holdings that littoral rights are constitutionally protected. In doing so, did the Florida Court's decision cause a ''judicial taking" proscribed by the Fifth and Fourteenth Amendments to the United States Constitution?

This issue – whether a decision by a judge can constitute a “taking” – has been referenced but has never been directly addressed by the Court. An opinion deciding this issue could have significant repercussions.

Stay tuned.

New York's Highest Court Upholds Atlantic Yards Condemnations

David Snyder — Sat, 28 Nov 2009 14:48:26 -0500

New York’s highest court ruled on Tuesday that private property could be condemned for the “Atlantic Yards” project. That project involves, among other things, an NBA arena and 16 office and residential towers in Brooklyn. The properties were purportedly condemned to eliminate “blight.”

In Goldstein et al. v. N.Y. State Urban Development Corporation, the New York Court of Appeals upheld the condemnations in a 6 to 1 decision. The project was challenged, in part, on the basis that that since the condemned properties would ultimately be owned by private entities, they were not being condemned for a “public use.” The New York Constitution – as well as the U.S. and most state constitutions – provide that properties can only be condemned for a “public use.”

The Court rejected that claim ruling that projects eliminating blight satisfy the public use requirement and that the fact that the properties would ultimately be owned by private entities did not make the condemnations unconstitutional. This is consistent with the eminent domain law of most states and has been federal law since the 1950s.

The condemnations were also challenged on the basis that the properties were not truly blighted. The Court also rejected this argument and expressed the common belief among the judiciary that, other than in the most egregious cases, courts should not second guess the legislature’s decisions regarding the need for projects.

A copy of the opinion can be found at www.nycourts.gov/ctapps/decisions/2009/nov09/178opn09.pdf

Audit Faults Accounting on Philadelphia Anti-blight Effort

David Snyder — Sun, 22 Nov 2009 18:17:35 -0500

A Philadelphia City Controller audit found significant accounting and reporting problems with former Mayor John Street's anti-blight effort, the Neighborhood Transformation Initiative. The 15-month audit determined that millions in bond funds were mismanaged because of a lack of accountability within NTI.

The audit found that NTI, as of June 30, 2008, had failed to make nearly $13 million in payments on nearly 1,500 condemned properties awaiting settlement in court.

Last year, current Mayor Nutter suspended NTI after discovering serious accounting lapses in its management. The stated purpose of the NTI program was to reduce blight by demolishing 14,000 buildings and constructing 16,000 new homes with $296 million in bond proceeds. However, the program fell far short of those goals. The city controller's report said that the Nutter administration, upon taking office, discovered that it "lacked information about the funding sources used to acquire the properties, where the properties were located, and the extent of dollars required to fund committed projects."

The Nutter administration contained in the audit report said the city intended "to fully implement the recommendations in this report to ensure any future use of these funds meets requirements of state and federal laws."

The report recommended that the city improve oversight and accountability over land-assembly activity, develop accurate and timely accounting reports, and investigate discrepancies in NTI transactions. Terry Gillen, executive director of the Philadelphia Redevelopment Authority, which oversees much of NTI, said that the administration would follow the recommendations in the audit.

NAIFA Issues Response To Home Valuation Code of Conduct

David Snyder — Mon, 21 Sep 2009 05:18:14 -0500

The National Association of Independent Fee Appraisers (NAIFA) has issued a response to the Home Valuation Code of Conduct (HVCC). The HVCC became effective for single-family mortgage loans (except government-insured loans) originated on or after May 1, 2009, and delivered to Fannie Mae and has been a source of controversy for appraisers and lending institutions.

In its response, the NAIFA acknowledges a lot of the concerns about the HVCC that have been expressed by various segments of the mortgage industry. However, the NAIFA puts the responsibility on the lender. The response states:

The fact is that all of the concerns mentioned above are all the responsibility of the lending institution. They are responsible for making sure that the competency of the appraiser and the quality of the appraisal meets the standards required to execute a sound mortgage decision.

The NAIFA will be issuing a “Consumer Guide for Quality Appraisals” which will be available soon at www.NAIFA.com. The NAIFA response can be found at www.naifa.com/about/NAIFA_Responds
_to_HVCC_Issue8_28_09.pdf.

Eminent Domain Remains In The News

David Snyder — Thu, 17 Sep 2009 05:44:29 -0500

There can be no question that eminent domain remains a hot button issue. Regardless of your role in an eminent domain project, it is critical to always be mindful of this fact which was made evident by two recent articles.

In one, George Will wrote an op-ed article regarding a Texas case in which an author was sued for defamation regarding her description of the use of eminent domain for a project for a Dallas developer. The author, Carla Main discussed that condemnation project in her book “Bulldozed: ‘Kelo,’ Eminent Domain and the American Lust for Land.” Her book is very critical of the use of eminent domain for economic development. The Dallas developer sued Main and her publisher. Will, citing the Institute for Justice -- an Arlington-based public-interest group that represented the Kelo condemnees and other condemnees nationally – claims this is an example of “a national trend of attempted intimidation by litigation.” Will’s article, which was published by numerous papers locally and nationally, can be found at www.washingtonpost.com/wp-dyn/content/article/2009/08/19/AR2009081902262.html.

The other was written by Dana Berliner, a leader of the Institute for Justice. She has taken up the cause of the property owners challenging the taking of their property for redevelopment in Brooklyn including a new New Jersey Nets arena. That case, addressed in one of my posts below, is pending before the New York Supreme Court. The New York Daily News printed a lengthy editorial written by Ms. Berliner. That article can be found at www.nydailynews.com/opinions/2009/08/24/2009-08-24_end_eminent_domain_abuse.html.

Agreements Reached On Flight 93 Memorial Land

David Snyder — Sun, 13 Sep 2009 09:04:53 -0500

The federal government and landowners have reached agreements for the purchase of 1,400 acres at the Flight 93 crash site in Somerset County, Pennsylvania. As a result, the government will not take those properties with its power of eminent domain. Interior Secretary Ken Salazar stated the property owners would be paid a total of $9.5 million.

The potential use of eminent domain has been very controversial. Negotiations between the Park Service and the property owners lasted several years. Secretary Salazar and Sen. Arlen Specter met with landowners last spring demonstrating the amount of attention given to this project.

However, not all of the property owners reached final agreements with the federal government,. The federal government through the U.S. Department of Justice has initiated eminent domain proceedings to take land owned by one property owner, Svonavec, Inc. However, that property owner will not contest the taking and will use the eminent domain process to determine the amount of “just compensation” to be paid.

FHFA Issues Notice Regarding Home Valuation Code of Conduct

David Snyder — Tue, 25 Aug 2009 09:57:12 -0500

The Federal Housing Finance Agency issued a notice seeking to address "misinformation" regarding the Home Valuation Code of Conduct. The notice, titled "Strengthening Appraiser Independence and Improving the Valuation Process," was issued July 22, 2009. According to the Notice, the Code, adopted in December 2008, "expanded on existing [Fannie Mae and Freddie Mac] appraisal standards, seeking to redress problems that contributed to the current mortgage crisis and to improve the quality of the mortgage loans they purchase. . . . The HVCC is designed to promote professional appraisals free from inappropriate pressure from lenders, borrowers or brokers."

To address the "misinformation", the Notice provides, among other things,:

"Contrary to some suggestions, the Code provides for communications with appraisers about errors, additional needed information and unprofessional conduct. . . . The real bar is on communications that seek to influence the appraiser to adopt a set valuation, which is prohibited."

"Contrary to some suggestions, the Code does not lead to lower appraisals for property. The Code insulates appraisers from pressures that led to higher or lower appraisals and should now lead to more accurate valuations."

"Contrary to some suggestion, the Code does not favor the use of [Appraisal Management Companies] over independent or in-house appraisers.

"The use of unqualified in-state or out-of-state appraisers, unfamiliar with local conditions, should be reported to state appraiser licensing agencies."

"Contrary to some suggestions, appraisals are transferable between lenders under the Code."

Battle Over Nets Arena Site Continues

David Snyder — Thu, 20 Aug 2009 09:53:53 -0500

The Battle over the taking of property for, among other things, an NBA arena and 16 office and residential towers in Brooklyn has moved to New York’s highest Court. The New York Court of Appeals decided to hear the challenge by property owners and tenants to the taking of their property. The parties are submitting briefs and the case - Goldstein et al. v. N.Y. State Urban Development Corporation - will be argued in Albany on October 14.

The properties are needed to construct the “Atlantic Yards Project” consisting of the Barclays Center Arena and 16 skyscrapers. The condemnees challenging the taking claim the use of eminent domain for Atlantic Yards violates the New York State Constitution.

Appraisal Foundation Establishes "Consistent Enforcement Task Force"

David Snyder — Sat, 15 Aug 2009 09:45:15 -0500

The Appraisal Foundation – a nonprofit organization that establishes standards for appraisers – has announced that it is establishing a “Consistent Enforcement Task Force.” The Foundation stated, that “[w]ith 55 different state real property appraiser regulatory bodies enforcing USPAP, there is a wide range of disciplinary actions taking place. While uniformity may be an unrealistic goal, there is a need for greater consistency in enforcement. One objective is the development of recommended disciplinary guidelines.”

The Task Force will provide a set of recommended disciplinary guidelines. The Task Force is composed of Trustees, current and former state appraiser regulators and an Appraisal
Subcommittee representative.

PA Supreme Court Declines Hearing "Kelo" Issues Case

David Snyder — Mon, 10 Aug 2009 09:38:07 -0500

The Pennsylvania Supreme Court declined hearing a case that could have directly addressed “Kelo” issues. In In Re: Condemnation by the Redevelopment Authority of Lawrence County, properties were condemned pursuant to Pennsylvania’s Urban Redevelopment Law (“URL”). A precondition to condemning the properties under the URL was a determination that the properties or the area in which the properties were located were “blighted.” The URL has a very broad definition of “blight” and, in this case, the Lawrence County Planning Commission determined that the condemned properties were in a blighted area under the URL because they were “maintained in economically undesirable uses.”

An en banc panel of Pennsylvania’s Commonwealth Court – the Pennsylvania intermediary appellate court that hears eminent domain cases – sustained the property owners’ challenges to the takings. It stated that “[t]he critical issue before us is whether the URL, in specifying
‘economically undesirable use’ among the criteria listed in Section 2 that render an area blighted, opens the door to a condemnation for purely ‘economic development.’” The Commonwealth Court noted that the US Supreme Court in “Kelo v. City of New London . . . upheld a condemnation of residential buildings that were clearly not blighted in the sense of dilapidated but were located in a certified redevelopment area targeted for revitalization pursuant to a carefully considered plan, which included razing the residences to build a pharmaceutical research facility.” However, the Commonwealth Court continued, the relevant state in Kelo – Connecticut – had a statute that permitted condemnations for purely economic development regardless of blight issues.

Pennsylvania, however, does not have a statute that permits condemnation for purely economic development. However, the URL does use the phrase “economically undesirable land uses” in its blight definition. The Commonwealth Court held that this phrase “does not mean property that is merely put to a use other than the most economically profitable. Such an understanding of the term fails to focus the inquiry on the actual condition of the properties labeled as ‘blighted’ and instead improperly focuses the inquiry on a comparison of the present use with the proposed redevelopment use.”

Therefore, the Commonwealth Court held that the taking was improper and sustained the property owners’ challenges. The property owners attempted to appeal to the PA Supreme Court which is not an automatic right and is at the discretion of the Court. The PA Supreme Court declined to hear the appeal and, therefore, declined an opportunity to address Kelo type issues.

We should be careful, however, not to read too much into this. The case was specific to the URL. In addition, the Eminent Domain Code was amended in September, 2006 – after the takings in this case. The amended Code added additional restrictions to condemnations under the URL which would have made it highly unlikely that the condemnor would have even attempted to take the properties let alone survive a challenge.

Sotomayor Testifies Regarding Eminent Domain

David Snyder — Thu, 23 Jul 2009 18:01:50 -0500

Judge Sonia Sotomayor was asked for her opinion regarding Kelo v. City of New London during her confirmation hearing. Sen. Herb Kohl questioned her about the controversial Supreme Court 2005 ruling that a taking for economic development satisfied the “public use” requirement of the Fifth Amendment even if the property would be sold or leased to private entities.

Judge Sotomayor was asked, “What is your opinion of the Kelo decision, Judge Sotomayor? What is an appropriate, quote, “public use” for condemning private property? She responded:

Kelo is now a precedent of the court. I must follow it. I am bound by a circuit -- a Supreme Court decision, as a 2nd Circuit judge. As a Supreme Court judge, I must give it the deference that the doctrine of stare decisis would suggest.

The question of the reach of Kelo has to be examined in the context of each situation. And the court did in Kelo note that there was a role for the courts to play in ensuring that takings by a state did in fact intend to serve the public -- a public purpose and public use.

I understand the concern that many citizens have expressed about whether Kelo did or did not honor the importance of property rights. But the question in Kelo was a complicated one about what constituted public use, and there the court held that a taking to develop an economically blighted area was appropriate.

Dodd And Frank Ask Regulators To Address 2nd Mortgage Valuation Issues

David Snyder — Sun, 19 Jul 2009 17:50:47 -0500

Senate Banking Committee Chairman Chris Dodd and House Financial Services Chairman Barney Frank sent a letter to the heads of the bank regulatory agencies asking them to address whether banks are inflating the value of 2nd mortgages on their balance sheets. They stated in the letter that these inflated values discouraged proactive efforts to modify and restructure mortgage loans and “crippled” programs designed to prevent foreclosures. The letter further states, “Across the country housing prices have dropped and many Americans owe far more on their mortgages than their homes are worth.” The Appraisal Institute commented on the letter by stating, “The letter was generated in an effort to make available refinancing opportunities for struggling homeowners who are currently not eligible for mortgage modifications because their loans do not reflect current market values.”

George Will Comments On Kelo

David Snyder — Sat, 30 May 2009 06:33:37 -0500

Confirming that the U.S. Supreme Court’s Kelo decision remains a controversial decision, George Will mentioned it Sunday on ABC’s This Week. Will is a regular member of the This Week political roundtable. One topic on Sunday was the opening on the Supreme Court created by the retirement of Justice Soutor. Will stated:

"Now conservatives are saying we don't want activist judges, we want judges who will defer to the political branches of government. The problem is the worst case since Dred Scott arguably was deferring to Franklin Roosevelt as a wartime leader in interning 110,000 Japanese-American citizens. The case that offends most conservatives recently came out of New London, Connecticut, wherein the democratically elected City Council using its eminent domain power took property away from people, gave it to businesses because they would pay higher taxes and that was deference again. What the conservatives really wanted in both cases was more activism."

Whether you agree or disagree with Will’s opinion, it is clear that Kelo, decided in 2006, remains a very controversial decision.

2 Flight 93 Memorial Board Members Resign Over Use of Eminent Domain

David Snyder — Mon, 25 May 2009 08:46:07 -0500

Two local members of the Flight 93 Federal Advisory Commission resigned because they vehemently disagree with the federal government’s plan to condemn private property in order to build a Flight 93 Memorial. The National Park Service announced that the federal government will condemn land from seven property owners for a Flight 93 memorial. As a result, Somerset County Commissioner Pamela Tokar-Ickes and Stonycreek Township Supervisor Gregory Walker resigned. Both were original members of the 15-person board. “The NPS and the Families of Flight 93 are sensitive to the community’s concerns regarding the use of eminent domain and will work hard to alleviate those concerns,” National Park Service officials wrote.