In 2006 the Minnesota Legislature adopted a law intended to provide for just compensation to a property owner who is forced to relocate because of a public project. Minn. Stat. § 117.187 states as follows:
When an owner must relocate, the amount of damages payable, at a minimum, must be sufficient for an owner to purchase a comparable property in the community and not less than the condemning authority’s payment or deposit under section 117.042, to the extent that the damages will not be duplicated in the compensation otherwise awarded to the owner of the property. For the purposes of this section, “owner” is defined as the person or entity that holds fee title to the property. Minn. Stat. § 117.187 (2011).
While this so-called “minimum compensation” statute is written to provide additional protection to property owners when their entire property is taken, the language used by the legislature creates some ambiguity. Within the community of eminent domain practitioners there has been a lot of debate about how the statute should be interpreted and what is actually provided to the property owner. Our first glimpse of judicial interpretation of minimum compensation arrived on March 26, 2012, from the Minnesota Court of Appeals in County of Dakota v. Cameron IV,A11-1273 (Minn. App. March 26, 2012).
In Cameron , the owner had to relocate his business to make way for a public project; as a result, the minimum compensation statute applied, requiring that the damages payable “must, at a minimum, be sufficient for Cameron ‘to purchase a comparable property in the community.’” County of Dakota v. Cameron IV, A11-1273, pg. 6 (Minn. App. March 26, 2012); Minn. Stat. § 117.187 (2011). The court of appeals found the statute to be ambiguous and conducted statutory interpretation regarding only the issues that were necessary to review the district court’s award of damages. The limited review includes the definition of “comparable property,” the definition of “community,” and the method for calculating the damages.
1) "Comparable Property"
Cameron argued that a “comparable property” could not be a property that was already sold as of the date of taking, but instead must be a property that was actually available for purchase.
The court decided that the legislature intended to increase the damage awards to allow displaced property owners to purchase comparable properties in the community, but they recognized that relocation may not always be possible. Id. at *8. In rejecting Cameron’s argument the court then defined “‘comparable property’ according to its common usage.” Id.
The American Heritage Diction of the English Language defines “comparable” under common usage as, similar or equivalent. Id. at *11. After considering the context of real estate, the court of appeals held that, under the minimum compensation statute, “comparable property” means: a similar or equivalent property considering “land size, features, and location; the square footage, age, design, and construction quality of any structures on the land; as well as features related to the property’s usage.” Id. Although in Cameron the court determined that the use of an already sold property was acceptable as a “comparable property” it is interesting to note that they did not declare whether a “comparable property” could be an existing property available for purchase; the court only declared that it is not only an existing property available for purchase as Cameron argued. Id.
Cameron argues that the “community” is the trade area for the business. The court also found the term “community” to be non technical, so the court defined the term based on common usage. Id. The common usage definition of “community” is “[a] group of people living in the same locality and under the same government.” Id.; see also American Heritage Dictionary of the English Language, 383 (3rd ed. 1992). The court provided that the term “community” under the common definition may mean that it is an entire municipality if the municipality is smaller, or it may be a smaller neighborhood or geographic area within a larger city. Id. It naturally follows that the determination is a fact sensitive inquiry and in this case the court found the entire city of Inver Grove Heights with a population of approximately 30,000 people was the “community.”
3) Calculating Damages
The court asks, “[h]ow does one determine an amount that is sufficient to purchase a comparable property in the community?” Id. at *14. Cameron argues that it should be determined by the list price of a “comparable property” in the “community;” or if no comparable properties can be found, then the cost to construct a “comparable property” in the “community” should be used. Id. However, the court found that under minimum compensation the “focus shifts to the market value of the comparable properties in the community.” Id. at 16 (emphasis added). As a result, in this case the court determined that the sale of a single property with no adjustments represented just compensation under the minimum compensation statute.
4) Minimum Compensation - What do we know now? And, where is Cameron?
In the end, the court of appeals only defines “comparable property” and “community;” and provided a standard for calculating damages. However, the court’s interpretation of the statute left open many questions, including: whether the owner actually must purchase a property; when must the owner relocate; and what happens when no comparable properties are found.
Cameron has appealed to the Minnesota Supreme Court and the case is currently being briefed by the parties. A plain reading leaves many ways to interpret the minimum compensation statute and we will continue to follow the progress as this case and the statute evolves.