Eminent Domain Blog

NAIFA Issues Response To Home Valuation Code of Conduct

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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"

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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

dsnyder@foxrothschild.com (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.

U.S. House passes Mortgage Reform and Anti-Predatory Lending Act

dsnyder@foxrothschild.com (David Snyder) — Sat, 16 May 2009 17:42:06 -0500

The U.S. House of Representatives passed the Mortgage Reform and Anti-Predatory Lending Act of 2009. The bill, H.R. 1728, passed by a vote of 300 to 114 on May 7, 2009. The bill includes provisions that will impact appraisers including:

Requirements for complete interior inspection appraisals for all subprime loans;
Establishment of a federal appraisal independence standard with significant monetary penalties for violations;
Modernizing provisions of Title XI of FIRREA to provide additional resources for state enforcement and greater accountability of federal and state appraisal regulators;
Required separation and clear disclosure of fees paid to appraisers and fees paid for appraisal administration (i.e., fees paid to appraisal management companies);
Limitations on the use of broker price opinions in loan origination; and
Registration requirements, and a regulatory framework, for Appraisal Management Companies, with mechanisms to prohibit infiltration by appraisers sanctioned by state regulatory agencies.

The bill now will be considered by the SenateSenate Banking Committee. There is no timetable yet for its consideration.

Government to Condemn Land for Flight 93 Memorial

dsnyder@foxrothschild.com (David Snyder) — Sat, 09 May 2009 17:28:34 -0500

The National Park Service announced that the federal government will condemn land from seven property owners for a Flight 93 memorial. The Park Service stated that it wanted to purchase the property but “these negotiations have been unsuccessful.” However, the property owners dispute that negotiations have even taken place.

The seven property owners own about 500 acres still needed for the site. The plans are for a $58 million, 2,200-acre permanent memorial and national park at the crash site near Shanksville, Pittsburgh. The U.S. Justice Department will file a complaint in federal court exercising the power of eminent domain to acquire the property.

PA Considering Increasing Amount Of Professional Fees For Eminent Domain Cases

dsnyder@foxrothschild.com (David Snyder) — Sat, 14 Mar 2009 11:26:20 -0500

The Pennsylvanian House of Representatives is considering a bill that would increase the amount of professional fees in eminent domain cases to $25,000. The Pennsylvania Eminent Domain Code was amended in 2006 and currently provides that a property owner “shall be reimbursed in an amount not to exceed $4,000 as a payment toward reasonable expenses actually incurred for appraisal, attorney and engineering fees.” Prior to the 2006 amendment, property owners were entitled to $500 for professional fees.

This issue continues to be controversial. In 2007, the United States Government Accountability Office issued a report regarding eminent domain. In that report, the GAO stated: “Multiple property rights groups further explained that owners often are unable to fight a condemnation action if they want to retain their homes or businesses or seek additional compensation because costs related to hiring an appraiser or attorney, as well as court costs, are too high.” Of course, increasing the reimbursable amount could also increase the cost of a project.

The likelihood that this bill – House Bill 796 – will ultimately become law is unclear at this time. It was introduced by State Representative RoseMarie Swanger and was referred to the House State Government Committee on March 9, 2009.

Senate To Consider Allowing Eminent Domain For "Green" Transmission Projects

dsnyder@foxrothschild.com (David Snyder) — Sun, 08 Mar 2009 14:27:17 -0500

Senate Majority leader Harry Reid is proposing to build power lines to carry renewable energy from remote places like solar and wind-power farms. The proposal would give the President authority to declare “renewable energy zones.”

States and the federal government would jointly develop “green” transmission plans for such areas. However, the proposal would allow the Federal government to use its power of eminent domain to take land and issue construction permits if a project were stalled or killed by state action. The proposal is expected to become part of a broader energy bill the Senate plans to take up in the coming weeks.

MARSHALLS CREEK PROJECT PLANNING CONTINUES

dsnyder@foxrothschild.com (David Snyder) — Thu, 08 Jan 2009 13:25:49 -0500

Planning for the last phases of the Marshalls Creek Bypass Project – which PennDOT now calls the “Marshalls Creek Traffic Relief Project” – continues. The project was put on hold in April due to funding issues. PennDOT held a public meeting in October to discuss the options for this phase of the project which can be viewed at www.marshallscreekbypass.com/index.cfm

PennDOT posted the following update on January 2, 2009 on its website:

Project Milestones Reached
• PennDOT submitted the Final Traffic Reports to FHWA on November 24, 2008.
• PennDOT submitted the Final EIS (Environmental Impact Statement) Re-Evaluation on November 26, 2008.
• The Kick-Off Meeting for Final Design was held on December 2, 2008.
• A meeting for the Section 106 Programmatic Agreement (environmental/historical compliance agreement) amendment was held on December 4, 2008, with FHWA, SHPO (State Historic Preservation Office), and PennDOT's District and Central offices.
• The Phase III Archaeology report was delivered to FHWA and PHMC on December 30, 2008.
• A Right-of-Way review meeting was held at the PennDOT District Office on December 30, 2008.
• The Park-and-Ride project bids were reviewed and there is an apparent low bidder (Leeward Construction of Honesdale).
• Core borings have begun and will continue through February 1, 2009.

Upcoming Project Milestones
• The Environmental Review and Permitting will continue to be the challenge when trying to advance the Design/Build contract.
• Rettew Associates is scheduling a preliminary meeting with the permitting agencies for the “bypass” portion of the project.
• The Dewberry Team continues to advance the Final Design.
• The next Bi-Monthly Coordination Meeting is set for January 13, 2009.
• Park-and-Ride lot construction to begin in the spring and last one construction season.

PENNDOT HOPING FOR FUNDS FROM STIMULUS PACKAGE

dsnyder@foxrothschild.com (David Snyder) — Sun, 04 Jan 2009 13:14:24 -0500

One of the new buzzwords these days is “infrastructure.” It is likely that Congress will enact an ambitious economic stimulus package soon after President-elect Obama is inaugurated. One important component will be funds that will be spent on “infrastructure” including roads and bridges.

State officials are drawing up plans for bridge and road improvements in anticipation of funds from a federal economic stimulus package. PennDOT has stated that they are confident that Congress will make money available for replacements and repair projects early next year.

PennDOT has a number of projects that have been stalled due to lack of funding. It is very possible that PennDOT will use an influx of federal funds for these projects. It is unclear at this point the extent to which the projects will involve acquiring property through the power of eminent domain.

UNITED STATES TAX COURT FINDS FAILURE TO COMPLY WITH USPAP DOES NOT RENDER EXPERT APPRAISAL INADMISSIBLE

dsnyder@foxrothschild.com (David Snyder) — Sun, 16 Nov 2008 10:10:47 -0500

The United States Tax Court recently found that an appraisal does not necessarily need to comply with the Uniform Standards of Professional Appraisal Practice – commonly known as USPAP – to be admissible or reliable. In Whitehouse Hotel Limited Partnership v. Commissioner of Internal Revenue – filed October 30, 2008 – the IRS’ appraiser submitted an appraisal that did not fully comply with USPAP. The taxpayer argued that the appraiser’s report was per se unreliable since it is not in conformance with USPAP. It further argued that it should not be received into evidence.

The Tax Court rejected that argument and admitted the appraisal into evidence. It offered the following explanation for its holding:

“USPAP is widely-recognized and accepted as containing standards applicable to the appraisal profession. Adherence to those standards is evidence that the appraiser is applying methods that are generally accepted within the appraisal profession. Therefore, at a minimum, compliance with USPAP is an indication that the appraiser's valuation report is reliable. However, a noncompliant valuation report is not per se unreliable. Full compliance with professional standards is not the sole measure of an expert's reliability. Petitioner essentially asks the Court to supplant its responsibility to assess an expert’s reliability with a rigid standard of reliability. Sole reliance on USPAP is a far more inflexible definition of reliability than the definition (depending on "reliable principles and methods") incorporated into Rule 702 of the Federal Rules of Evidence. Therefore, we decline to adopt USPAP as the sole standard for reliability of an expert appraiser.”

Montco Planning Commission Considers Road Projects

dsnyder@foxrothschild.com (David Snyder) — Mon, 10 Nov 2008 08:23:34 -0500

Montgomery County Pennsylvania’s planning commission is considering a transportation program that could cost $150 million. The Commission recently met to discuss a county program that could involve local governments and the private sector paying for an improvement program for local roadways and bridges. The Commissioners stated that there have been repeated complaints from residents and businesses about traffic congestion.

According to reports, Commissioners appear to be committed to some type of program and are considering a few options. The most popular option includes a 10-year program that would involve over 70 projects. This option would require voter approval to borrow $150 million. One project example cited was widening Route 309 in Montgomery Township to six lanes between Upper State and North Wales roads along with adding turn lanes and reconfiguring accesses to businesses.

The planning board members said they hope to finalize a recommendation at the November 12, 2008 meeting and submit a proposal to Commissioners by the end of the month.

T. Boone Pickens' Energy Plan Calls For Use Of Eminent Domain

dsnyder@foxrothschild.com (David Snyder) — Sun, 02 Nov 2008 12:39:12 -0500

Billionaire oilman T. Boon Pickens has been actively promoting his energy plan. Pickens wants the private sector to build wind farms from West Texas to North Dakota and solar farms in the Southwest. This plan also contemplates obtaining easements through eminent domain so transmission lines can take electricity generated by wind and solar to other parts of the country. He compares these easements to the creation of the Interstate Highway system in the 1950s.

Pickens believes his plan will help eliminate the dependency of the United States on foreign oil. However, neither presidential candidate has committed to his proposal. Pickens has been meeting continuously with leaders from the government and private industry as well as the press to argue for his plan.