Expropriation and Condemnation: The Larger Parcel T

1 Features Expropriation and condemnation : The Larger Parcel by Tony Sevelka, MAI abstract A non-marketable partial taking has no independent highest and best use so its T he concept of the Larger Parcel in appraisal theory has its roots in expro- priation and condemnation , but in recent years its application has been ex- value by necessity is a function of the value of the Larger Parcel . This research panded to address valuation issues in other areas of Sometimes it is a diffi- paper explores the concept cult concept to grasp, but it is essential in dealing with the value of a partial of the Larger Parcel in its taking and an assessment of potential injurious affection or severance damages.

2 Application to the valua- It has implications in establishing highest and best use, which is the foundation tion of non-marketable for every opinion of market value. In terms of Parcel size and utility, the Larger partial takings in condem- Parcel drives the selection of comparable sales and the comparative analysis of the direct comparison approach (sales comparison approach). nation and Expropriation Only the small segment of the appraisal profession that is regularly involved proceedings. The paper in Expropriation and condemnation is likely to be familiar with the concept of also briefly discusses the Larger Parcel . Relatively little appraisal literature is available on the topic, valuation applications of and case law dealing with the Larger Parcel emanates primarily from the United the Larger Parcel in other States.

3 Areas, with numerous cases This paper provides a discussion of the purpose of defining the Larger Parcel presented and analyzed in as it relates to Expropriation and condemnation appraisals, and the underlying foundational requirements established by the courts in defining the Larger par- the context of the cel. These are foundational requirements of the three unities 1. In NRC Corporation v. Amoco Oil Co., No. 98-2162 (7th Cir. 03/09/2000) 205 1007, the plaintiff suc- (ownership, contiguity and ceeded in expanding a damage claim to the Larger Parcel for the market impact of environmental contamina- tion from the area covered by the lease to Amoco, relying on an indemnification clause that held Amoco use) that typically define liable for any damages to NRC arising from the operation of the service station.

4 The service station lease, which initially covered a patch at the corner of the 35-acre NRC Parcel at the northwest corner of the Larger Parcel , and the 96th and Meridian Street in Hamilton County, Indiana, was twice reduced in size through condemnation proceedings, first to acres and then to acres. Gasoline spills had contaminated the acres valuation implications. leased, but there was no evidence that the contamination had spread beyond the leased area. The highest and best use of the leased land was as part of a two-acre Parcel on the corner encompassing the acres leased. It provides the only legal and physical to a corner location there off of Meridian and 9th [T]he contamination of the leased Parcel affected the surrounding acres because no one would lease that space without the road access and visibility provided by the corner-location leased Parcel .

5 Thus, when Amoco rendered the leased Parcel temporarily unusable, it also eliminated NRC's opportunity to lease or sell the surrounding acres. According to the appraiser, the Amoco site in is only important to the appraisal it's an integral part of a two-acre site that would be demanded in the market place. Amoco damaged NRC by reducing its opportunities to sell or lease not only the leased Parcel but also the immediately contiguous land [as a unified Larger Parcel ]. The concept of the Larger Parcel was also applied in Ravida v. Ravida, (1995) No. 4164, a dispute involving a claim for equalization of the parties' net family properties. Expropriation and condemnation : the Larger Parcel 75.

6 Unity of ownership ing compensation in Expropriation and condemna- Unity of contiguity2 tion proceedings. Also presented is a summary of a Unity of use (highest and best use) Canadian case (Ravida v. Ravida) involving a claim for the equalization of the parties' net family prop- Both Canadian and American courts on occa- erty, which included the disputed value of develop- sion have ruled that the three unities of ownership, ment lands in the state of Florida to which was ap- contiguity, and use (highest and best use) need not be plied the concept of the Larger Parcel . simultaneously present as of the date of Sometimes the Larger Parcel can be defined as Definitions comprising less than the extent of the boundaries of Under the Uniform Appraisal Standards for Federal legal ownership or extending beyond the legal Land Acquisitions in the United States, boundaries of ownership through beneficial owner- ship.

7 Ownership (possession) can be held in fee Appraisers must bear in mind that the determination simple, a lesser estate, a combination thereof or un- of the Larger Parcel is required in every appraisal as- der a partnership agreement for a common purpose. signment; irrespective of whether the agency has des- Title and corporate searches are important in estab- ignated an acquisition a total acquisition or a partial lishing ownership and identifying the Larger Parcel . acquisition. This is so because, from a practical stand- point, whether an acquisition is a total or partial ac- In the context of highest and best use, factors to be quisition cannot be determined until such time as the considered in defining the Larger Parcel should in- appraiser has made a determination of the highest and clude land use controls, regulatory requirements, de- best use, and the Larger parcel6.

8 Velopment agreements, lease agreements, comple- mentary land uses, land use patterns, economic link- In Canada there is no corresponding appraisal ages, and supply and demand. requirement at either the federal7 or provincial level Some examples of properties that would likely to identify the Larger Parcel . The Dictionary of Real qualify as a Larger Parcel while not simultaneously Estate Appraisal 8 provides the following definitions meeting the three unities of contiguity, ownership, of the Larger Parcel : and use (highest and best use), are In condemnation , that tract or tracts of land that are Contiguous legal lots, each held under separate and under the beneficial control of a single individual or unrelated ownership, but subject to a joint devel- entity and have the same, or an integrated, highest opment agreement or long-term ground and best use.

9 Elements for consideration by the ap- Noncontiguous legal lots, held under common praiser in making a determination in this regard are ownership, involving complementary land uses contiguity, or proximity, as it bears on the highest and economic and best use of the property, unity of ownership, and unity of highest and best use. Two contiguous farms, one owned in fee simple In condemnation , the portion of a property that and the other held under lease, but both oper- has unity of ownership, contiguity, and unity of use, ated as an integrated economic unit. the three conditions that establish the Larger Parcel In this paper, a number of Canadian and Ameri- for the consideration of severance damages in most can cases are summarized to illustrate the practical states.

10 In federal and some state cases, however, con- application of the Larger Parcel concept in determin- tiguity is sometimes subordinated to unitary use. 2. Contiguity [e]xists where tracks of land [lots] touch or adjoin in a reasonably substantial physical sense, but a line of demarcation between reason- ableness or unreasonableness of a contiguity must be determined on the facts of each case. Belmont Fire Protection Dist. v. Village of Downers Grove, 92 682, 48 Ill. Dec. 261, 264, 416 292, 295. Black's Law Dictionary, 6th ed. (1891 1991), 320. 3. Three contiguous legal lots consecutively labeled A, B, and C, depending on the interrelationship of ownership and of use or probable use, taking into account the test of highest and best use, could result in a Larger Parcel consisting of (<A), (A), (B), (C), (A & B), (A, B & C), (A & C), or (B & C).