Lenders Want a Piece of The Condemnation Award Pie

May 10, 2011

by Joaquin Hernandez

Bank or LenderMembers of our condemnation group recently attended a national conference dealing with the latest in eminent domain laws and issues. Attorneys from across the country noted that lenders nationwide more and more are intervening in eminent domain proceedings. Owner/Borrowers fail to appreciate that many deeds of trust (“trust deeds” in Oregon) address what happens when the property securing a loan is being taken by the government. Some of these clauses give a bank or other lender the right to intervene in a condemnation lawsuit at the expense of the owner/borrower. Before the economic downturn, lenders were unlikely to be involved in condemnation actions. In those days, banks just sat on the sidelines and waited for the results of a condemnation lawsuit.

Most deeds of trust or trust deeds contain a provision that gives the lender the right to any proceeds resulting from an eminent domain proceeding (read and understand your loan documents). Of course, the lender or borrower pays little attention to such clause because the odds of their property being taken by the government are slim or unknown. Sometimes these provisions require the owner/borrower to pay the lender’s attorney fees and costs in an effort to protect the lender’s security interest. An owner/borrower should urge that their attorney work on the phase of a condemnation proceeding where the fair market value of the property is determined. Then each party can have their own attorney represent their respective interest in the apportionment phase—where the court determines how to apportion the proceeds—if the lender and borrower cannot agree on how the proceeds should be apportioned.

Is the lender entitled to all of the proceeds? What happens if the determined fair market value of the property does not sufficiently cover the amount of the loan? These questions can be answered in the apportionment phase of a condemnation proceeding.

Local Projects Requiring Private Property Acquisition Still Moving Forward

April 5, 2011

By Jill Gelineau

Despite the down economy and budget problems for most governmental agencies, there are a number of big projects in the area still moving forward. The Milwaukie Light Rail Project – an extension of TriMet’s Green Line into Milwaukie from Portland State University – is slated to receive $200 million in funding from the Obama Administration through the New Starts program. With these funds, and others obtained thus far, the project is moving full steam ahead with acquisition of private property. TriMet’s appraisers are contacting property owners within the rail corridor to set appointments for appraisal inspections, and many offers have already been made by TriMet. Construction is scheduled to start this year.

The Columbia River Crossing (replacement of the I-5 bridge between Portland and Vancouver) continues to be in the news as stakeholders consider the bridge type. With a goal of construction starting in 2013, property acquisition is not that far off if the project can stay on schedule. The Final Environmental Impact Statement is on track to be released this year.

Also of note and gaining traction again is the Newberg-Dundee Bypass Project, which has been in the planning stages for over 20 years. With funding from the 2009 State Legislature now available in 2011, ODOT has been actively acquiring property within the Phase I area. Phase I will ultimately result in a two-lane limited access road connecting Highway 99W southwest of Dundee to Highway 219 south of Newberg.

Local utility companies are also busy as of late with their own projects. Bonneville Power Administration’s I-5 Corridor Reinforcement Project is currently working to release a Draft Environmental Impact Statement later in the year, after which BPA will hold public meetings to discuss all of the route alternatives currently on the table. While the agency does not plan to announce the final transmission line route until 2013, the time to potentially influence the project’s location is this year.

Portland General Electric’s Cascade Crossing Project is also in the works, with the environmental review and permitting process currently underway and scheduled to last another two years. PGE is indicating that private property, or right-of-way, acquisition will begin this year; however the debate between the proposed and alternate corridors from Boardman to Salem continues.

Other statewide projects proceeding with plans for private property acquisition in the near future include the Murphy Road Corridor project in Bend, the Glen Creek Road NW at Wallace Road NW Intersection Widening project in Salem, and the Salem-Keizer School District’s acquisition of property for a new elementary and middle school in west Salem.

Washington Supreme Court Asked to Award Interest on Relocation Benefits

February 4, 2011

By Jamila Johnson

The Washington Supreme Court heard oral arguments in Union Elevator v. Department of Transportation, last week, seeking to determine whether the state can be sued for interest on awards of relocation benefits.

Union Elevator operated a grain elevator. In 1996, the Washington Department of Transportation (WSDOT) eliminated access to Union Elevator’s property. Union Elevator instituted a successful lawsuit for inverse condemnation, and then sought the relocation benefits it would have received if WSDOT had instituted a proper condemnation proceeding. It was awarded its relocation benefits seven years later, and the company sought interest for the delay.

During the inverse condemnation lawsuit, Union Elevator was forced to build a new grain elevator on other property. It had issues relocating its equipment because of the cost, and had to purchase new equipment in order to keep its business. Union Elevator argues that where compensation has been delayed as a result of the government’s wrongful refusal to acknowledge that it has in fact taken private property – the essence of an inverse condemnation – interest should be paid along with relocation benefits.

You can watch the argument before the Supreme Court online.

Schwabe Attorney Quoted in Article Challenging ODOT on Eminent Domain Practices

November 30, 2010

JG_smThe Bulletin in Bend, Oregon, quoted Schwabe, Williamson & Wyatt Shareholder Jill Gelineau,  on Sunday, November 28, 2010, in an article exploring the fairness of the Oregon Department of Transportation’s eminent domain practices.

“When I meet with my clients that are property owners and talk to them about comparing the different agencies, I always say — and I said it to somebody this morning — that ODOT is the most challenging to work against,” Gelineau, who has been practicing eminent domain law for 25 years, was quoted saying. Gelineau has earned substantial praise in the legal community: she is endorsed by Owners Counsel of America and has also been listed in Best Lawyers in America for the last three years as well as in the publication Oregon Super Lawyers.

The article focused ODOT’s attempts to condemn a 25-acre plot of industrial land in Millersburg owned by Viewcrest Investments LLC, but also questioned whether Oregon tax payers should be paying for some acquisitions and how the property owners are treated.

“Roads must be built and expanded, and sometimes homes and businesses stand in the way. But it’s not hard to find examples of how ODOT’s condemnation work seems unfair to property owners or unnecessarily costly for the state,” the article begins. ODOT’s representatives provided comment but declined to provide information regarding the number of properties acquired each year or how much ODOT spends annually on private land acquisition. The Bulletin will have an upcoming series examining how the Oregon Department of Transportation operates around the State.

Seattle Chooses Designers for New Central Waterfront

September 22, 2010

By Jamila Johnson

The City of Seattle announced yesterday that it has selected James Corner Field Operations from a shortlist of four design firms to lead the redesign of Seattle’s Central Waterfront.

As we blogged in August, the City of Seattle short-listed four finalist teams to compete the redesign parts of the 20 acres of waterfront public property that will be unearthed after the removal of the SR-99 Alaskan Way Viaduct and its replacement with the Deep-Bored Tunnel.

“This is not a proposal for development,” said new Seattle City Planning Director Marshall Foster last Thursday. But this public project has significant potential for impacts on the property owners in the vicinity of Seattle’s central waterfront.

September 15, 2010, each of the shortlisted firms presented their general approach to the redesign project at a well-attended public meeting at Benaroya Hall.

Each design team expressed a vision that involved connecting the waterfront to the rest of the city in a way that is free of barriers and pedestrian friendly. The sufficiency of the existing street grid to accommodate this will be driven by the final design.  The big question is whether these “connections” can be accomplished without taking property away from private owners by eminent domain; or, to the same effect, imposing burdensome land use regulations.

For up-to-date information on the progress and planning for the central waterfront redesign find Seattle Central Waterfront on Facebook  or go to the webpage for the Department of Planning and Development.

Washington Supreme Court Supports Constitutional Remedy for Government Flooding of Private Property

September 9, 2010

By Dennis Dunphy and Jamila Johnson

floodAdvocates for private property rights in Washington State rarely have reason to cheer decisions of our State Supreme Court. They have instead been met with a string of decisions such as the so-called Convention Center Case and the Sinking Ship Parking Garage Case that have brought only disappointment. Last Thursday, however, the Court gave property owners a rare cause to celebrate.

In Fitzpatrick v. Okanogan County, the Fitzpatrick family claimed that the government’s construction of dikes at side channels of the Methow River resulted in the destruction of their cabin home during a high water event. The Washington Supreme Court has ruled that the government can be held liable for damages for flooding despite two state statutes that explicitly provide immunity to government for its flood prevention efforts. In a 7-2 decision, the Supreme Court sustained the right of property owners to bring inverse condemnation claims based on the Washington State Constitutional provision that prohibits government from taking or damaging private property without just compensation. Inverse condemnation occurs when the government, without instituting formal eminent domain proceedings, takes or damages private property for public use. The Court also held that the “common enemy doctrine” does not bar inverse condemnation claims for damage to property caused by the government’s diversion of water by blocking access to the natural flood-relief side channels of a natural watercourse.

More information about this case can be found on the Pacific Legal Foundation website or as a PDF.

Waterfront Redevelopment Design Teams Shortlisted

August 27, 2010

By Jamila Johnson

The City of Seattle announced the four finalist teams for leading the central waterfront design process yesterday. On September 15, Gustafson Guthrie Nichol, James Corner Field Operations, Michael Van Valkenburgh Associates, and Wallace Roberts & Todd will make public presentations at Benaroya Hall to inform the public about their experience and approach to the project. The City of Seattle is redesigning the waterfront in step with its replacement of the Alaskan Way Viaduct–a public project that will have substantial effects on the property rights of owners in the vicinity of Seattle’s central waterfront. The City of Seattle anticipates it will begin the design process for the new waterfront in October 2010.

The presentations will take place on:

Wednesday September 15th, 2010

6:00 p.m. – 9:30 p.m.

Benaroya Hall, S. Mark Taper Foundation Auditorium

200 University Street, Seattle, WA 98101

No RSVP required.

Sound Transit Board Endorses Controversial New Route Through Bellevue

July 30, 2010

By Dennis DunphyPuget Sound Transit

Last Thursday, July 22, the Sound Transit Board of Directors adopted a revised “Preferred Alternative” for East Link light rail through downtown Bellevue.  This action likely resolves the last of the major route alignment issues leading to a final decision and subsequent condemnation of properties in 2011. Click here.

Debate about the East Link alignment from the south and through downtown Bellevue has been contentious, and the route decisions continue to be highly controversial. The Sound Transit Board faced a storm of protests from the Bellevue City Council and residents of neighborhoods to the south of downtown upon its initial selection of a preferred route in the spring of 2009. The City wanted the route to run underground through downtown Bellevue.  It fought the surface route on the basis that it would create huge traffic problems.  When it lost that battle, it then proposed an alternative routing, to the east of downtown, essentially paralleling I-405 along the BNSF right of way.  The new routing Sound Transit has adopted instead (Option #2) fundamentally maintains Sound Transit’s initial southern approach, but modifies it to run along the west side of 112th Avenue Southeast.  Downtown, the City will get a mini-tunnel on 110th NE, between Main Street and NE 6th Street. Click here.  The Bellevue City Council has expressed its strong continuing opposition. Click here

More information regarding potential impacts should be available and vetted in a supplemental environmental impact statement scheduled to be published this fall.

A Silver Lining For the Protection of Property Rights, Despite Supreme Court’s Ruling Against Florida Beachfront Owners?

June 25, 2010

By Dennis DunphyFlorida Beach

Earlier this month the United States Supreme Court issued its much anticipated decision in Stop the Beach Renourishment v. Florida Department of Environmental Protection. The case involved a property rights challenge to a Florida statute that can have the effect of radically changing access and adjacency to the ocean for beachfront property owners through government “beach renourishment”

The owners lost. Eight of the nine Justices participated in the case. They unanimously agreed with the Florida Supreme Court that the changes allowed by the statute were not contrary to the owners’ existing common law property rights. On the other hand, an opinion joined in by four of the Justices has potentially far reaching implications for restricting any court’s ability to render a decision that “rewrites” the common law in a way that would reduce an owner’s property rights.

Justice Scalia, joined by Chief Justice Roberts and Justices Thomas and Alito, authored a powerfully written opinion that champions a principle they find under the Fifth Amendment “Takings Clause”. They opine that if a court, including a state Supreme Court, were to deviate from the recognition of a property right already established by the common law, the result would constitute an unconstitutional “Judicial Taking”. The other four Justices who participated in the case declined to follow this reasoning, stating that the analysis was
unnecessary to resolve the present case since all Justices agreed that the Florida Supreme Court had not departed from established common law.

The Scalia opinion represents a view just one short of the court’s majority. Two Justices explicitly oppose Scalia’s reasoning. Three Justices have not spoken on the issue. Ironically, despite the outcome adverse to the property owners who brought the case, the decision will likely serve as a beacon for property rights advocates that will be useful in future cases.

Assemblage Bonanza :– An Emerging Sound Transit Board Policy Dispute?

June 11, 2010

By Dennis DunphyCondemnation Light Rail pic

Earlier this spring, the Sound Transit Board authorized its staff to accelerate the condemnation of property at planned station locations on Brooklyn Avenue in the University District and in the Roosevelt neighborhood near NE 65th. But the consent came after a rare open debate over the extent to which the Agency needs to condemn private property for the North Link light rail project.

At the March 25th Board Meeting, board member Richard Conlin questioned whether acquisitions at the station areas could be made on a temporary lease basis rather than by a complete taking of the needed property. The underground construction of a station requires temporary use of a great deal of property during the construction phase, while much less real estate is needed once the station is completed. The one-and-one-half square block area condemned by Sound Transit for the Broadway Capitol Hill station is a good example of this. Very little of the condemned property will be used by the Agency once construction is complete. Sound Transit executive director Joni Earl defended full acquisition, citing prior Board direction to acquire needed property and then utilize the remaining for “possible future projects”. She also noted that where leases had been used in the past, this had not resulted in long-run cost savings.

Sound Transit will likely reap enormous profit from the sale of the assemblages it has created at the conclusion of construction. An assemblage is the process of purchasing a number of smaller parcels and putting them together into one large parcel that will support a larger, more intensive (and profitable) project. That is exactly what happened at the Broadway Station. When Sound Transit is referencing the long-term benefits of condemning entire properties, rather than leasing, it is looking forward to the enormous payday it expects to reap from the assemblages it is creating at this and other station locations. Leasing the property, or some other form of shared interest approach, would require the Agency to cut existing property owners in on the action.

From a budget standpoint, one cannot easily fault the agency’s foray into real estate wheeling and dealing. Moreover, the Washington Supreme Court has left the door open for this approach in its decision in the aptly named Sinking Ship Parking Garage Case. However, it appears that at least one Board member is questioning the appropriateness of the government taking more property than it really needs for a project and instead condemning aggressively as a means of revenue enhancement. Longstanding property owners on Capitol Hill and elsewhere have complained about being forced out of their ownership by the Agency, just at the time when their long wait for the re-development boom to arrive was about to end. Their effort to convince Sound Transit to take the lease approach, or some other form of agreement that would allow them to partner in the future of the site, has consistently fallen on deaf ears. Whether Mr. Conlin’s initiative one day leads to a more open consideration of public-private partnerships with existing owners remains to be seen.

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