If you own a home, farm or business, you could suffer huge losses when Jesse James and his Eminent Domain Gang ride onto your spread — unless you know what to do. I speak from experience here, having recently concluded a run-in with the Metropolitan Sewerage District. I’m not a lawyer, but here’s my take on how these things work.
In layman's terms, eminent domain gives the government and public utilities the right to take part or all of your property if it’s deemed to be in the public interest. This absolutely necessary law allows essential infrastructure such as power lines, railroads, sewer lines, etc. to be built without prohibitive obstruction by property holders.
The abiding, underlying principle is that if one of these entities takes your property, you’re entitled to fair and reasonable compensation for your loss, spreading the financial cost and pain over all those who will benefit from the resulting facility or service.
The typical series of events begins when you receive a letter from the utility or government agency notifying you that they intend to take all or part of your property as a "right of way" in connection with some public project.
From this moment until the matter is settled, you are usually prohibited from making any improvements to your property. Suppose you’d been planning to build a garage in the area where the city intended to build a water line: If you proceeded with construction after receiving the notice, you could be forced to tear down the garage.
Here’s how the James Gang works:
First they send in Frank James, the engineer, who’s their straight shooter. He draws the cheapest, most efficient lines across your property — with no concern for the devastating effect it will have on present or future use or the cost to the property owner. He leaves that to the other members of the gang to sort out.
Next comes Billy the Kid, the appraiser, who’s hired to shoot as low as possible in order to kneecap the property owner. He must go around the neighborhood of the "taking" (the property the engineer says he needs for the project) seeking similar properties in order to compare valuations. Using a series of mystical computations, he determines the fair value of the property owner’s loss.
Then in rides Jesse James, the right-of-way negotiator. Of course, he’s not really Jesse James, but the only difference is that Jesse had a gun. This silver-tongued salesman type explains that your land has been condemned under eminent domain but that he has a big, fat check to compensate you for your loss, in an amount an appraiser determined to be the fair value — as spelled out in a 20-page document you probably can't understand.
If you sign on the dotted line, you can get the check almost immediately. (If you attempt to negotiate, he can usually increase the original offer by 10 percent, just to make you feel you’ve gained something.)
If you refuse to sign, you’ll receive notice that they’ve taken the property anyway, and your money is in the courthouse when you want to pick it up. Now your only options are to accept the money or sue them.
It should be noted that these entities avoid taking rights of way from one another, since they all maintain a posse of legal hired guns. And if you choose not to file an appeal, you’ve allowed the appraiser to be judge, jury and executioner.
Remember when silver-tongued Jesse told you "We’re just going to take this little sliver of land, which won’t affect your property use”? You might discover later that the right of way blocked the only access to the property or made it useless for building purposes, costing you thousands of dollars.
I’m an experienced real estate investor, and over the years I’ve contested at least six right-of-way cases that began with totally unrealistic offers. I chose to handle them "pro se" (i.e., myself), even though I had no legal background. Every judge I went before told me I had a fool for a client, yet in every case, this fool won settlements or judgments equal to my original demand.
Most recently, MSD needed access to the main sewer line and chose to go right through a space a business partner and I had planned to build on. We proposed two other options for crossing our property, offering to donate them for free, but the engineer had drawn his straight bead, and he wasn't backing down.
They subsequently made us a ridiculously low offer based on the work of their own Billy the Kid, who appraised our property at one-sixth of the value he’d set for an almost identical property a half-mile away.
Just before going to jury, we received a settlement of five times the original offer. Unfortunately, this was a case I couldn’t handle myself, and the legal fees amounted to 20 percent of the final settlement. I imagine MSD’s legal fees were equivalent.
I’ve always been outraged by eminent domain’s "fair value" charade, but I wouldn’t have thought that the citizen-owned, generally well-run MSD would use low appraisals to take advantage of local property owners. It’s my understanding that only 8 percent of recent cases were contested: This suggests that many of the remaining 92 percent of property owners were victimized by unfair, low-ball appraisals.
I urge the MSD board to investigate the agency’s egregious and fraudulent practices concerning their eminent-domain privilege. But in the meantime, if the James Gang moves to take your property, buy an hour of a good right-of-way attorney’s time to consider your case.
The attorney might be willing to take it on a contingency basis, meaning they would share in any additional settlement. But you can't lose, as the agency can't take back money they’ve already paid you.
— Developer Jerry Sternberg is a longtime observer of the local scene. He can be reached at email@example.com.