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What’s Just Compensation?
by Ron Davis
Officials of a California county are finding that claiming a right-of-way across a local shopping center property can be difficult—and perhaps more costly than expected.
The county is San Diego, which is battling to acquire easements in a parking lot of Crystal Lakeside Village Center in San Diego. The purpose of the easements is to allow construction of an underground floodwater-drainage system.
The shopping center owners explain, however, that they have plans for that parking lot. Because the shopping center is aging, they say they intend to redevelop the entire property so that it becomes mixed-use, with housing as well as commercial tenants. The parking lot at issue, they add, would be appropriate for some type of construction.
But the county points out that such a plan for the parking lot is not feasible. That’s because, county officials note, the shopping center owners have no existing right to develop the portion of the property impacted by the easements. In fact, the easements traverse an area of the property that is currently subject to certain conditions, restrictions and leases.
Besides, the county pointed out, the shopping center already lacks sufficient parking as required by local zoning regulations. So, they added, additional construction is not feasible.
A local court agreed with the county, ruling that the center’s owners cannot develop the parking area in question. That ruling did, however, require the county to pay the shopping center owners $107,093 in “just compensation” for the taking of the property targeted for the drainage system.
The shopping center owners appealed, arguing that none of the restrictions on the property would prohibit the redevelopment of that area of the property impacted by the easements. To back their claim, the owners hired a certified real estate appraiser, and he acknowledged that any new development at the center would have to comply with current parking regulations. But he added, “The effect of parking requirements for improvements would be irrelevant to new development and would not inhibit the new development in any way.”
The appraiser concluded that total “severance damages” to the shopping center owners would amount to $330,000. Such damages, under California law, are based on a decrease in the development potential of a piece of property and the resulting drop in the property’s fair-market value.
The county responded that it had in fact shown that the center’s owners had not suffered severance damages.
A California court rejected the county’s argument that the shopping center owners failed to produce sufficient evidence of severance damages, adding, “The center’s owners must be afforded the opportunity to present additional evidence in support of a severance-damage award.” (County of San Diego v. Crystal Lakeside Village Center, LLC, 2008 WL 3415502 [Cal.App. 4 Dist.])
Decision: August 2008
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