Source: Public Domain

The Virginia General Assembly concluded its 2016 session on April 20, and continued its efforts to improve the property rights of Virginians by adopting three eminent domain bills that will become effective July 1, 2016.

Arguably the most significant bill is SB 478, which further strengthens the cost reimbursement provisions now set out in Virginia Code Section 25.1-245. Currently, Section 25.1-245 provides that if a landowner in a condemnation case meets certain procedural requirements, like providing a written appraisal to the condemning authority, the landowner may be reimbursed reasonable costs, fees (other than attorneys’ fees) , and travel costs charged by up to three testifying experts. This reimbursement occurs when the award at trial is 30 percent greater than the condemnor’s final written offer of just compensation. SB 478 provides that this provision remains applicable to a public service company, public service corporation, or railroad in a condemnation case, but it also creates a new code section that applies to all other condemning authorities—VDOT and localities.

This new Section 25.1-245.1 will allow the recovery of these same costs and fees when the award is 25 percent or greater than the condemnor’s initial written offer, but without the requirement to provide a written appraisal to the condemning authority. For the full text of this bill, click here. Hopefully, the legislation will encourage condemning authorities to work with their appraisers to prepare thorough and fair just compensation appraisals so that an agreement with the landowner can be reached well in advance of trial, thereby reducing the costs the landowner must expend in an eminent domain matter.

The second bill, SB 719, amends Virginia Code Section 55-516.2 to provide that when common area owned by a property owners association is condemned, it “shall be valued on the basis of the common area’s highest and best use as though it were free from restriction to sole use as a common area.” This statutory amendment was instigated by a real condemnation case. In that case, handled by another law firm, a Circuit Court judge denied a property owners association’s attempt to introduce an appraisal based on the theory that the property should be valued without regard to the fact that it could only be used as common area due to easement and covenant restrictions. The judge’s ruling resulted in the landowner having no appraiser available to testify at trial. As an aside, it is worth noting that, despite the judge’s ruling, the property owners association was awarded the just compensation it requested.

The third bill, SB 109, relates to the use of commissioners in condemnation cases. Virginia allows landowners in condemnation cases to choose whether to have commissioners, a jury, or a judge decide how much just compensation should be awarded. Commissioners are chosen based on a list provided by the landowner and the condemnor, whereas a jury pool is randomly selected from the landowners in the jurisdiction. Using commissioners in a condemnation case may be beneficial to the landowner if the public views the property positively or if the landowner has a positive reputation in the community, since the landowner can effectively select one-half of the potential pool of commissioners from among people he or she knows personally. While it is rare that a jury cannot be seated in a condemnation case, it can be difficult in some cases to ensure a sufficient number of commissioners appear for the trial. SB 109 seeks to make it more likely commissioners will appear at the trial by requiring the court summon them to appear at least 30 days prior to the trial, as opposed to just seven days prior to the trial under the prior version of the statute.

The General Assembly adopted a fourth eminent domain bill, SB 543, that was ultimately vetoed by Governor McAuliffe on the last day of the session, leaving no time for the General Assembly to override the veto. This bill would have allowed for the recovery of costs (including reasonable attorney, appraisal, and engineering fees) in inverse condemnation cases involving damage to property—i.e., cases in which land is damaged by a public use but without following the necessary condemnation procedures. Currently, Virginia Code Section 25.1-420 provides that these costs and fees are reimbursable in inverse condemnation cases involving a taking of property for public use, but it remains unclear whether reimbursement is available in an inverse condemnation case where only damage to property has occurred. This legislation was intended to match the language in Article I, Section 11, of the Constitution of Virginia, that provides just compensation is owed when property is either “damaged or taken” for public use. The Governor sought changes that would have limited the amount of fees and costs, which changes the Governor thought “would have eliminated the incentive for nuisance lawsuits by unscrupulous attorneys seeking to enrich themselves at taxpayers’ expense in those cases where any actual damage was de minimis.”

Contrary to the Governor’s assertion in his veto explanation, found in its entirety here, the award of attorneys’ fees and costs in inverse condemnation cases are intended to penalize a condemning authority for taking land without following the necessary condemnation procedures, thus forcing a landowner to hire an attorney to protect his or her constitutional rights. Sometimes a taking of land in an inverse condemnation setting has little value, but that does not excuse a condemning authority from following the necessary condemnation procedures. And if the authority chooses to continue to deny the landowner’s right to compensation by fighting the inverse condemnation action, this author believes it is only fair for the landowner to recover any attorneys’ fees and expert fees incurred in pursuing the action. Hopefully, this legislation will be revisited during the next session of the General Assembly and the minor amendment to Section 25.1-420 will ultimately become law.

With so many public projects underway that require the use of eminent domain, it is important that Virginia maintain strong protections for property owners. It is encouraging that this past session of the General Assembly resulted in legislation that helps fulfill the constitutional mandate of just compensation when land is taken for public use.

If you require assistance in an eminent domain matter, please do not hesitate to email Michael J. Coughlin or call 703.680.4664.

On June 25, the Virginia General Assembly passed a statute spurred by the U.S. Supreme Court decision in Koontz v. St. James River Water Management District, a case arising out of Florida. The statute provides a remedy for a violation of federal constitutional law for a locality’s imposition of an “unconstitutional condition” in the form of a mandatory dedication of real property or an exaction of money. These conditions can be a “taking” under the Fifth and Fourteenth Amendments.

An unconstitutional condition is one that mandates the surrender of property in connection with land use approvals when forced dedication of property bears no legitimate connection to a proper public purpose or, if such a connection exists, the dedication demanded is not “roughly proportional” to the need generated by a given development. For example, it would be unconstitutional for a locality to require dedication of right-of-way for a four-lane divided highway in connection with a special use permit for a kennel. This has neither the necessary relationship between the demand and the exaction, nor is it “roughly proportional” to impact.

Koontz went even further than existing law, for it is now clear that the denial of a permit on the grounds that the landowner refused to consent to an unconstitutional condition, or the exaction of money, may constitute a taking. Florida had claimed that if a permit is denied there is no condition imposed, and no taking can have occurred. The Supreme Court observed that a land developer is uniquely vulnerable to governmental overreach in pursuit of approvals, and that the exercise of one’s development rights cannot be conditioned upon surrender of a constitutional right.

Florida had in place a statutory remedy for such takings, and although Virginia has long had a provision for “inverse condemnation” claims, it had no specific Koontz remedy. The bill was thus crafted to provide a state law remedy for situations the U.S. Supreme Court would find constitutionally defective as uncompensated takings.

The bill is brief but powerful. If a locality imposes an unconstitutional condition on essentially any kind of land use permit, the landowner can take legal action within the 30 or 60 days currently applicable to appeals of zoning actions, and site and subdivision plans. The same holds true if the locality denies the permit for failure to consent to such a condition. If the landowner demonstrates that a condition is unconstitutional, it can be compensated for the taking and obtain a court order mandating approval of a permit without the unconstitutional condition. Moreover, and of potentially great significance, if notice of objection to the condition has been given by the landowner, and if the court finds that the unconstitutional condition was a “factor” in the grant or denial of a permit before governmental action, then the court must assume that it was the controlling factor. The locality must then prove that its proposed condition or its denial of a permit was valid by “clear and convincing evidence.” In these circumstances, the dreaded “fairly debatable” standard will not apply.

As important as this statute may prove to be in reining in governmental overreach, it is also important to recognize that it does not make all proffered dedications of property or exactions of money unconstitutional. It will remain a question of fact.

The statute, which went into effect July 1, 2014, adds the following section to the Code of Virginia:

§ 15.2-2208.1. Damages for unconstitutional grant or denial by locality of certain permits and approvals.

A. Notwithstanding any other provision of law, general or special, any applicant aggrieved by the grant or denial by a locality of any approval or permit, however described or delineated, including a special exception, special use permit, conditional use permit, rezoning, site plan, plan of development, and subdivision plan, where such grant included, or denial was based upon, an unconstitutional condition pursuant to the United States Constitution or the Constitution of Virginia, shall be entitled to an award of compensatory damages and to an order remanding the matter to the locality with a direction to grant or issue such permits or approvals without the unconstitutional condition and may be entitled to reasonable attorney fees and court costs.

B. In any proceeding, once an unconstitutional condition has been proven by the aggrieved applicant to have been a factor in the grant or denial of the approval or permit, the court shall presume, absent clear and convincing evidence to the contrary, that such applicant’s acceptance of or refusal to accept the unconstitutional condition was the controlling basis for such impermissible grant or denial provided only that the applicant objected to the condition in writing prior to such grant or denial.

C. Any action brought pursuant to this section shall be filed with the circuit court having jurisdiction of the land affected or the greater part thereof, and the court shall hear and determine the case as soon as practical, provided that such action is filed within the time limit set forth in subsection C or D of § 15.2-2259, subsection D or E of § 15.2-2260, or subsection F of § 15.2-2285, as may be applicable.

During its past session, the General Assembly passed Senate Bill No. 240, which authorized a ballot question on November 6th on whether Virginia should amend its Constitution to further restrict the exercise of eminent domain. The full text of the bill, including the constitutional amendment and ballot question can be found at http://leg1.state.va.us/cgi-bin/legp504.exe?121+ful+SB240. The voters of Virginia approved the amendment by margin of 3 to 1 on November 6th.

Here is the new addition to Article I, Section 11:

That the General Assembly shall pass no law whereby private property, the right to which is fundamental, shall be damaged or taken except for public use. No private property shall be damaged or taken for public use without just compensation to the owner thereof. No more private property may be taken than necessary to achieve the stated public use. Just compensation shall be no less than the value of the property taken, lost profits and lost access, and damages to the residue caused by the taking. The terms “lost profits” and “lost access” are to be defined by the General Assembly. A public service company, public service corporation, or railroad exercises the power of eminent domain for public use when such exercise is for the authorized provision of utility, common carrier, or railroad services. In all other cases, a taking or damaging of private property is not for public use if the primary use is for private gain, private benefit, private enterprise, increasing jobs, increasing tax revenue, or economic development, except for the elimination of a public nuisance existing on the property. The condemnor bears the burden of proving that the use is public, without a presumption that it is.

Generally, Virginia’s localities and the Virginia Department of Transportation were opposed to the amendment, while the largest advocate group for the amendment is the Virginia Farm Bureau. Localities and VDOT fear that the amendment will increase the cost of acquiring land in large part because the amendment would permit landowners to recover damages for lost profits, which currently are not recoverable under existing law if they are remote and speculative. Meanwhile, the General Assembly has defined in a companion bill how lost profits are recoverable, and has also limited the recovery for “lost access” to “a material impairment of direct access to property.” This companion Senate Bill No. 437 can be found at http://leg1.state.va.us/cgi-bin/legp504.exe?121+ful+CHAP0719.

The General Assembly was very busy with eminent domain matters this last session, because they also adopted an amendment to Va. Code Ann. Sec. 1-219.1, which currently sets limits on the exercise of eminent domain, but now attempts to also exempt takings for sewer lines, roads, stormwater facilities and other facilities from the test set out in the constitutional amendment for determining whether a taking is for a public use. The text of House Bill No. 975 can be found at http://leg1.state.va.us/cgi-bin/legp504.exe?121+ful+CHAP0626.

What does all of this mean for property owners facing the threat of eminent domain? First, you can now recover lost business profits if you own the land where the business is located or, as a tenant have exclusive possession of substantially all of the land taken. The lost profits recoverable are limited to “three years from the date of valuation that is suffered as a result of the taking… ” Second, compensation is available for loss of direct access caused by a taking, but that is already available under existing law. The amendment will enshrine this element of damages in the constitution, and should clarify what type of access changes lead to damages that are constitutionally recoverable.

Third, property owners will have a greater ability to challenge whether the amount of land taken is “necessary to achieve the stated public use.” Landowners will also be able to have a court decide whether a taking is truly for a public use, with the burden on the condemning authority to establish that the use is public, as opposed to being for “private gain, private benefit, private enterprise, increasing jobs, increasing tax revenue, or economic development.” But, the General Assembly’s amendment to Va. Code Ann. Sec. 1-219.1 attempts to narrow the circumstances where public use challenges can be made.

VDOT is commencing right-of-way acquisition throughout Northern Virginia for several major projects. With this passage of the amendment, we should find out quickly how profitable “lost profit” claims will be. In future editions of Virginia’s Land Sense, our condemnation lawyers will keep you apprised of major VDOT and local projects that will lead to the exercise of eminent domain.