Public projects take years of planning and environmental review usually involving outreach to neighboring property owners and other stakeholders. During this process, potential right of way impacts are identified and property owners (and their potential buyers or tenants) become aware of the planned project. As we have described in the past, this can result in a “cloud of condemnation” over the property, affecting the value of that property. Property owners often feel they should be compensated for this uncertainty. But it is difficult for owners to succeed on these claims. (Check out a 2011 post from my colleague Brad Kuhn, “Property and Business Owners’ Precondemnation Damages Claims Dismissed.”)

There are good public policy reasons why precondemnation claims should be difficult to prove. If the government were liable every time it announced it might need a property for a public project, the costs of acquiring right of way would sky rocket, or an agency might be less forthright about its plans, neither of which are in the public interest. Most people would agree that public participation and transparency in government are vital to the democratic process. Government should be encouraged to give more, not less, information about its plans.

So how heavy must the cloud get before it rains compensation for a property owner?

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California courts have generally made the distinction between the “planning stage” of a project, and the “acquisition phase.” (See Contra Costa Water Dist. v. Vaquero Farms, Inc. (1997) 58 Cal.App.4th 883, 900.) When I think of the “acquisition phase” I think of a notice of intent to appraise, followed by an appraisal and offer and negotiations. But several California courts have found these activities to be protected. And perhaps this makes sense – I have known agencies to redesign a project or even abandon an acquisition when negotiations break down or the impacts are too great. There is an argument that agencies should be free to do so without their own cloud of liability over their heads.

On the other hand, these rules may frustrate some property owners (and their attorneys) by blurring the line between “planning” and “acquisition” that allegedly determines liability. The courts have also found other ways of to define the line. In general, an owner must show there has been some special, direct interference targeted at his or her property, beyond the general pre-acquisition activities in the general area.

Test Yourself: Impermissible Targeting or Permissible General Planning?

To see how well you’re paying attention I’m offering this little quiz (or as we former teachers call it – “check for understanding.”) Answers are in the box below.

Case No. 1: Agency has property and business appraised, signs erected in area announcing development and Agency representatives informally told owner property would be acquired.

Case No. 2: Agency enacts zoning regulations designed to depress the market value of a property to be condemned.

Case No. 3: Agency adopted a resolution of necessity and filed an action, then adopted a second resolution to dismiss the proceedings. The second resolution also declared that the Agency had a firm intention of acquiring the property at a later time.

Case No. 4: Agency adopted an environmental report showing owner’s property as part of project. For the next 7 years, agency acquired neighboring property, obtained additional necessary permits, and refined the project’s design before it filing an action to acquire the owner’s property.

Did you get them right? Congratulations! You are a precondemnation damages expert. But don’t worry if you didn’t get them right, or if you just couldn’t be bothered to figure out the answers. You can always give me or one of my colleagues a call and we can let you know whether you’re going to need an umbrella.

Case No. 1: Permissible general planning (Joffe v. City of Huntington Park (2011) 201 Cal.App.4th 592.) Case No. 2: Impermissible targeting (City of San Diego v. Rancho Penasquitos Partnership (2003) 105 Cal.App.4th 1013. Case No. 3: Impermissible targeting (delay) (Klopping v. City of Whittier (1972) 8 Cal.3d 39.) Case No. 4: Permissible planning (Contra Costa Water Dist. v. Vaquero Farms, Inc. (1997) 58 Cal.App.4th 883, 900.)