Eminent Domain Report

Two recent news articles caught my eye about a project taking place in San Diego County.  A North County Times article, ESCONDIDO: Eminent domain hearing set for Bear Valley properties, reports that the San Diego County Board of Supervisors was set to vote this week on potentially using eminent domain to acquire necessary properties for the expansion of Bear Valley Parkway.  While the project would widen the busy roadway from two to four lanes, add a center median and bicycle lanes, it would also necessitate the demolition of 18 homes and the taking of 32 slices of property -- mostly from owners' front yards.  The County had reached deals with all but seven of the 50 impacted property owners.  

An updated article in the North County Times, ESCONDIDO: County moves forward with seizing properties, notes that at the County's "Resolution of Necessity" hearing -- a required step before a government agency can commence eminent domain proceedings -- the Board approved moving forward with condemnation as to the remaining seven owners.  

This all sounds pretty typical.  But in reading the articles closely, I noticed two interesting take-aways:

• Underwater Homes:  As is now typical in today's real estate market, some of the homes may be "underwater".  One owner in particular notes that the County's appraisal and offer for his home is $90,000 less than he currently owes.  He's worried about being forced on the street with no money available for a downpayment, and having his credit ruined for not paying off his loan.  While the article does not touch on the subject, as we've covered in the past, there may be exceptions that would allow for the County to think outside the box and assist the owner with purchasing a new property or paying off a portion of his loan.  Hopefully this is something that takes place.
• Fair Market Value:  The articles both emphasize that property owners actually benefit from the use of eminent domain because the agency is required to pay on the "high end" of fair market value.  It is true that public agencies using eminent domain must comply with California's definition of fair market value -- which requires paying the "highest price" that would be paid by a willing buyer.  However, California does almost nothing to compensate owners for the transaction costs involved should they choose to fight the value offered by the agency.  While an owner may get $5,000 towards an independent appraisal (Code of Civil Procedure section 1263.025), that does not go very far for a complicated real estate valuation assignment, and it does nothing to cover the attorneys' fees and other expert fees that may be incurred when an owner wants a jury to determine the property's value.