10 Ways to Maximize Your Compensation In Eminent Domain

As a property or business owner, you can feel helpless when the Government takes your property or displaces your business using its power of eminent domain.  Let’s take a look at a Top Ten of simple strategies that will help you prepare for eminent domain and succeed in maximizing the compensation you recover:

  1. Get experienced lawyers on your team. Recognize that, most likely, the Government has had its team working on the project for many years before the taking.  You need firepower of your own.  Many owners tend to relax, believing that they can negotiate for themselves and wait for the Government to make its offer.  Many owners also think that the Government’s project is still far off and that they will have time to react when the Government starts to move.  The truth, however, is that the most compensation is achieved by having experienced eminent domain lawyers represent you and that the Government KNOWS you are pretty helpless unless you have experienced legal help.  The truth is that the Government typically will not take you seriously UNTIL you get experienced legal help.
  2. Get experienced forensic appraisers. Likewise, your negotiating position is strengthened if you have experienced forensic appraisers on your team.  This does not mean that you just look up values in Zillow or some other common database.  This does not mean that you hire a “drive-by” appraiser out of the phone book.  This does not mean that you hire an appraiser who mostly works behind a desk appraising for lenders, probate estates and tax attorneys.  It DOES mean that you hire someone who can both get out in the field to find the best and highest comparable sales to support your case AND who also has “forensic” experience—experience testifying in court in eminent domain cases.  Again, the truth is that the Government typically will not take you seriously UNTIL you get help from an experienced forensic appraiser.  The Government KNOWS that, until this happens, you are pretty helpless.  Getting such an experienced appraiser will help you succeed in court but also succeed in your negotiations with the Government because your position will be backed up by appraisal firepower; not just Zillow entries or other information that is not admissible as evidence.  And California law now allows you to recover up to $5,000 in appraisal costs.
  3. Be part of the team yourself. Don’t leave all the work to the people you hire.  Nobody knows your property and your business better than you do yourself.  Be proactive in your own defense.  Get your own best people on the team with your lawyers and your appraisers.
  4. Check your lease. Most leases have an eminent domain clause that sets out who gets what from any eminent domain settlement or award.  At the EARLIEST opportunity, have an experienced lawyer look at this clause (it only takes minutes) so that you know your rights and so that you can negotiate amendments or other changes to strengthen your position once eminent domain is filed.
  5. Check your loan documents. Likewise, check your loan documents and deeds of trust.  Often your lenders will be named as defendants too along with you when the Government files for eminent domain.  The lenders will be paid off FIRST out of the award of compensation for what is taken.  Many lenders have clauses in their loan documents allowing them to add their legal fees to the balance due.  Therefore, you want to be proactive with your lenders and tell them that they do not have to spend their (really your) money on a defense that you will provide.
  6. Consider taking care of accrued maintenance and upgrades before eminent domain is filed. Just as a well-maintained home is likely to obtain a higher price on the open market, a well-maintained property or business may help maximize your recovery in eminent domain.  If put in place before the filing of the eminent domain case, some of this may also be compensable as “improvements to the realty” (usually fixtures and equipment that cannot be removed without damage).
  7. “Help” the Government. The Government sends you nice smiling “helpers” who say they will help you relocate.  Unfortunately, the most they usually do is go to their computers and spit out lists of available sites for YOU to check out.  The Government people usually do NOT visit these sites themselves.  However, “help” the Government help you by being PROACTIVE yourself in finding a relocation site.  You know best what is best for you and your business.  The Government doesn’t.  Furthermore, under the eminent domain laws, you have a duty to act reasonably to TRY to relocate.  Finding your own possibilities will help you fulfill that duty.  If the Government fails to act on them, then the Government will be the one suffering the consequences, not you.
  8. Consider dealing with any environmental hazards or substances in advance of eminent domain. The Government will usually argue that the costs of any environmental clean ups should be deducted from your compensation.  Rather than have a negotiating battle with the Government over these costs, use the run-up time toward eminent domain to deal with any environmental issues and problems at a cost that you have negotiated yourself and at a time convenient to you.
  9. Do some tax planning with your lawyers, CPA or other tax advisors. There are special tax rules applicable to eminent domain.  For example, instead of the 1031 tax free exchange that most people are familiar with, there is a 1033 tax-free exchange applicable in eminent domain.  Your lawyers can give you the general tax principles.  Your CPA or other tax advisors can then apply those general principles to your specific tax situation.  Furthermore, if you seek goodwill recovery, the Government (by law) can look at your California tax returns.  These should be reviewed and amended if necessary and economically worthwhile in order to maximize your eminent domain recovery.  Since tax repercussions are almost always critical to the bottom line of what ends up in your pocket, some advance tax planning is important.
  10. Pull your own records together. Likewise, other records may be important to your case.  Work early and often with your team to put your own records in shape so they are ready and at hand when needed in your case.   Make copies of your deeds and title report.  Take photos of the business licenses and permits on your wall.  Make a list of your improvements and equipment, noting age and cost.  Make a list of your employees with their job description, compensation and dates of employment.  Gather examples of your advertising and marketing materials; including printing out your Internet website pages.

As the old saying goes:  “An ounce of prevention is worth a pound of cure.”  These strategies and others like them will help you be in front of the Government rather than playing catch up from behind.

Government agencies are using their teams of experts to protect public projects. It is only prudent for property and business owners to do the same. Make us the legal part of your team. Our attorneys have over 40 years combined experience on representing property and business owners impacted by eminent domain. Contact us to schedule a free initial consultation.

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