Eminent Domain Law Guide for MassachusettsUnder Massachusetts eminent domain law, the government and a few other entities have the right to take away private property for the purpose of enhancing public interest or addressing a specific necessity.
The procedure is quite similar to the one that will occur in many other states. For a start, the government will have to contact the owner and potentially settle before the condemnation procedure is triggered. An appraisal will also be needed to determine the compensation that a private property owner will be entitled to after the expropriation.
Massachusetts has one primary statute providing for all aspects of eminent domain procedures. Chapter 79 of the General Laws of Massachusetts highlights the officials authorized to exercise the eminent domain power, the appraisal specifics, as well as the provisions for taking different kinds of land (land that’s already in public use, agricultural plots, residential property, commercial real estate, specialized real estate, etc.)
Under the state regulations, the officials and entities authorized to exercise eminent domain include the following:
- The Massachusetts governor
- County commissioners
- Prudential committee (taking on behalf of the district)
- A private corporation that’s been entitled to carrying out a public project
Steps in the Massachusetts Eminent Domain ProcessThe condemnation of property in Massachusetts starts when the entity responsible for the execution of the decision provides reasons for the upcoming exercise of eminent domain power. A property or a portion of it can be condemned only when a project pertaining to the public interest will have to be carried out.
The government doesn’t have the right to dictate the price that would be paid for the real estate. Rather, an appraiser will have to come up with a valuation based on the highest and best use of the property. If dissatisfied with this valuation, an owner will have the right to challenge it.
In essence, the eminent domain process will have to go through the following steps, as outlined in Chapter 79:
- A public hearing will first have to be held concerning the execution of a public interest project and the need to take private land for the purpose
- The impacted property owners will then be contacted by one of the entities mentioned above in relationship to the upcoming taking
- An appraisal of the property will also have to be completed
- If the acquisition also involves a relocation, a calculation about relocation benefits will also have to be made
- The entity responsible for the acquisition of the property will make an offer to the current owner on the basis of the highest and best use of the property
- Upon the successful completion of these steps, the owner will be notified of the completion of the eminent domain process through a Notice of Taking (received after the recording of an Order of Taking) issued by the Registry of Deeds or the Registry District of the Land Court in the respective county
- A payment of the compensation will be made to the property owner within 60 days of the recording of the Order of Taking
- If an owner is not satisfied with the envisioned compensation, they may conduct their own independent appraisal (as long as it is carried out by a licensed real estate appraiser)
- The independent appraisal has to be submitted to the Right of Way Bureau for assessment
- If the bureau determines that the additional appraisal provides new information that could potentially increase the amount of the compensation, the sum will be changed
- Owners cannot request a review of the compensation after it has been paid out
The Rights of Massachusetts Property Owners in Eminent Domain CasesMassachusetts property owners have various rights in relationship with the eminent domain process. They can inquire to make sure that the condemnation is indeed needed to address the public interest. In addition, they can challenge the appraisal that a compensation calculation is based upon.
Over the years, there have been multiple examples of eminent domain abuse and questionable decisions throughout the US.
One of the most prominent eminent domain abuse cases that led to a massive backlash is Kelo v. City of New London. Through the court hearing, the local officials were given the right to condemn private property and turn it over to the private executor of the project. It was highly questionable whether the specific project was to be carried out for public use, but this isn’t the only problem in Kelo v. City of New London.
The developer bailed out of the project in 2009, leaving the condemned plots without any work done. No part of the massive project that was supposed to feature condos, a health club, and even a hotel was carried out.
Because of these shocking aspects of Kelo v. City of New London, many states adopted new statutes aimed at protecting the rights of property owners. Massachusetts, unfortunately, isn’t one of these states.
Castle Coalition reports of incidents of eminent domain abuse occurring in the state. One of the latest cases took place in Weymouth. A property owner there has raised concerns about local politicians making use of the eminent domain process in an attempt to redevelop the neighborhood.
The property owner in question had plans to carry out a project at the spot, overhauling the buildings and getting new tenants.
So far, the town council has postponed a decision about exercising the eminent domain power because such a move would be way too expensive. The property owner, Nick Delegas, had his newest 2017 hearing about the development he had in mind postponed.
Massachusetts is one of the only six states in the US that have failed to carry out any kind of legislative reform following Kelo v. City of New London. Various bills have been proposed through the years, but they haven’t met the needed approval. In fact, some of the proposed changes have seen fervent opposition.
Municipalities can pass their own legislative documents for the purpose of protecting the rights of property owners, but uniform provisions will not be available until a thorough reform takes place.
How is Just Compensation Determined in Massachusetts Eminent Domain Cases?An award of damages cannot be made in Massachusetts prior to the conclusion of a property appraisal. An appraiser will be responsible for examining every single aspect of the property for the purpose of calculating a just compensation.
Whenever the property has a building or another facility on it, a Real and Personal Property Report will have to be submitted alongside the appraisal. The aim of the report is to list both real and personal property. The term real property refers to property that is permanently affixed to the location. Personal property pertains to movable possessions like business equipment and machines.
Real property will be taken into consideration when the appraisal is being made, and it will contribute to the calculation of the award.
Eminent Domain Compensation Calculation MethodologiesThe methodology chosen for the valuation of property that’s up for condemnation will depend on the specifics of the plot. Is it a residential property? Is it an industrial property that comes with machinery and fixtures? An approach that can be applied effortlessly to more common types of real estate isn’t going to yield an accurate estimate in specialized cases.
The American Bar Association has put together a thorough document that provides more information about the different options for calculating compensations and the situations in which each one can be applied:
- The cost approach: this methodology is based on calculating the cost of finding a substitute property for the one that’s being condemned. The calculation is based on the fair market value of the property. In this instance, fair market value is defined as the most probable price that real estate will bring to its owner when a free market buyer-seller interaction takes place. Such an approach can be quite effective for the evaluation of a property that has new improvements. It’s typically not employed for plots that generate an income because a cost comparison doesn’t deliver an accurate estimate of the benefits that the owner will be missing as a result of the condemnation.
- The income capitalization approach: as the name may suggest, this methodology will typically be applied to properties that generate income for the owner (commercial or industrial). In this instance, the value of the property is calculated when expected benefits are taken into consideration. Very often, the methodology will be used alongside the sales comparison approach to figure out how the income generation potential has an upward effect on the amount of the compensation.
- The sales comparison approach: this one is sometimes called the market approach because the appraiser will look for similar properties that have been sold recently on the open market. The sales comparison approach relies on the average market price to produce an accurate estimate of what the respective plot is worth. Usually, this approach is most effective for residential property because appraisers can find similar houses and buildings on the market.
Other Factors Affecting the Property ValuationWhile making the valuation will sometimes be a straightforward process, there are instances in which the plot and the ownership are a bit more complex. In such scenarios, the professional appraiser will have to look beyond the standard methodologies and examine all of the factors that could have a positive or a negative impact on the price.
- Calculation of residential relocation benefits: a person who is the owner and who also lives in a residential dwelling that’s up for condemnation may be entitled to relocation benefits. A replacement housing payment could also be provided based on the circumstances. Some relocation could also be provided to residential property owners in need of such.
- Business and non-profit relocation benefits: business entities that have to relocate after eminent domain power is exercised on their property could also be entitled to the payment of relocation benefits.
- Is it a partial taking: in certain situations, only a part of the property will be taken for the execution of the public project. Whenever this happens, the appraiser will be responsible for determining the compensation on the basis of the cost of the part of the land, as well as the manner in which it affects the remaining property (reducing access, the taking away of valuable buildings, etc.).
Thus, the job of an appraiser is far from easy. Accessibility, zoning considerations, the size of the property, the income that it generates, unique characteristics and fixtures, the level of development and the current use (as well as a potential future use that would have been possible in the absence of the taking) will all have to be examined.
Issues in Massachusetts Industrial Condemnation CasesThe calculation of just compensation for an industrial property is far from an easy task. Industrial property is defined as a class of commercial property that is used for industrial purposes. Factories with warehouses, laboratories, and logistical premises can all be a part of an industrial property. Needless to say, there will be a lot of equipment, as well as permanent fixtures.
When doing the valuation of industrial properties, appraisers will have to take into consideration both the real estate specifics and the income generation potential of the plot.
How Industrial Compensation is ValuedVarious factors can have an impact on the price of industrial property. Just like in the case of other real estate, the location and the size of the property will affect its fair market value. Nearness to major transport routes, public infrastructure in the vicinities and the availability of industrial land for additional developments in the future will typically impact the price.
In some instances, appraisers will take a look at similar industrial plots to establish the baseline. Depending on the specifics of the industrial property, however, this approach may be problematic. Many facilities are unique, especially if they operate in a niche industry. In such instances, it will be incredibly difficult to discover a viable market equivalent.
The condition of the industrial premises and even the construction method (determining for how fast an industrial building will age) will also impact the valuation of industrial plots.
Apart from all of these external factors, professional appraisers will also need to examine various internal ones. The most prominent internal factors that affect the price of industrial real estate include the following:
- The shape of the plot (is it regular, will it remain regular after a portion of the property is condemned?)
- Topography of the plot
- Zoning considerations
- Development and building codes
- Age and condition of the premises
- Electrical supply
- Light availability (natural vs. artificial)
An income capitalization approach will be required to get a better idea about this aspect of the industrial property. Very often, it will be used on top of the cost approach, painting a much more comprehensive picture than each individual methodology. Our experienced attorney can help you take a look at the information you’ve received to figure out whether a comprehensive valuation has been carried out and if the suggested compensation is an adequate representation of the industrial property and its income-generation potential.
Legal, Practical, and Financial Issues in Massachusetts Eminent Domain Cases Involving Commercial PropertyThe government in Massachusetts has the right to condemn both residential and commercial properties for public projects. Just like residential property owners, the owners of commercial plots will be provided with compensation that’s based on a thorough assessment by an appraiser.
Just compensation can be very difficult to determine in the case of a commercial property. For example, a change of location can have a serious impact on the business and its revenue-generating potential. In such situations and if the appraiser doesn’t come close to the property value perceived by the owner, the owner will have the right to challenge the compensation amount. Partnering up with an experienced lawyer like our attorneys will be of paramount importance in such instances. Generally, the government tries to limit the amount provided to private property owners in the eminent domain process. The fact that commercial property value calculation is an ambiguous process can facilitate the justification of such a low amount.
How the Compensation for Commercial Plots is Calculated in MassachusettsThe process is similar to the valuation of industrial properties. The appraiser will have to start by determining the fair market value of the property. Comparison to other similar plots on the market will often be unreasonable. For a start, the location of a business property has a very big impact on its value. In addition, a specialized commercial venue may have no equivalent on the market.
Evidence of income generation by the property, as well as evidence of replication/relocation costs, will be required to make the valuation adequate enough.
So, let’s take a look at the property valuation approaches and the manner in which these could potentially be applied to commercial plots that are up for condemnation:
- Comparable sales: as already mentioned, discovering properties that are adequately comparable may be a very difficult task. This is the main reason why a court will typically require a demonstration of adequate comparability between two properties, in order to consider the compensation calculation a valid one. Keep in mind that something as simple as a zoning difference can make two properties that will otherwise be comparable completely incomparable.
- Income analysis: obviously, this is a must for a commercial plot. When there are no comparable sales on the market, the income capitalization method may be employed to figure out the value of revenue produced by the property. It’s highly likely for an appraiser to request access to business documents and financial data in order to conclude the income analysis. Expenses made by the owner for the maintenance of the property should be taken out of the income figure, resulting in a completely adequate valuation. There are problems with this approach, just like there are problems with comparable sales. For a start, the capitalization level could be very difficult to determine. Numerous factors exist that could have an impact on it, and an appraiser isn’t going to always have information about these criteria. This is a problem because a very small variation in the capitalization rate could have a profound effect on the final income calculation.
- Cost analysis: this is the final possibility, and it involves an assessment of the amount that the owner will have to spend on replicating the commercial property at another location. This approach will be the one that appraisers will choose whenever serious improvements have been made to the commercial property that’s about to be condemned. A calculation is made on the basis of the reconstruction cost minus depreciation. Thus, brand new property improvements will yield a higher compensation than specialized fixtures that were set up some time ago. One very important thing to keep in mind is that the cost of improvements will be considered to the extent that these improvements affect the fair market value of the property.
Other ConsiderationsQuite often, the access and the visibility of the property are not taken into account during the eminent domain process. The owner could incur serious losses stemming from the relocation of the business. The same applies to the partial taking of the plot that may result in a completely inaccessible or difficult to see business premises.
A company’s viability may be at risk whenever a relocation stemming from the eminent domain will be required. While in some states business damages compensations are comprehensive, this isn’t the provision in Massachusetts.
Business owners, especially the ones finding themselves in a challenging situation like the partial taking of the plot will definitely need to consult our experienced eminent domain attorneys. Massachusetts legislature doesn’t provide for the thorough protection of the rights of the property owner. As a result, commercial plot owners will very often find themselves challenging the valuation. The provision of additional remedies will be heavily dependent on the manner in which the objection is made. A lawyer will know which aspect of the valuation is faulty, how to target it and what the rights of the owners are under Massachusetts law.
The situation will become even challenging whenever there are multiple owners, in the case of zoning right challenges and if a partial taking prevents an eventual expansion of the business in the future. A commercial owner that has commercial leases at the time of the eminent domain process initialization will need a lawyer who’s capable of partnering up with the tenants for the purpose of defending their rights, as well as those of the owner.
Homeowners and the Power of Massachusetts Eminent DomainIn theory, the provision of just compensation whenever residential properties are involved should be the simplest task for professional appraisers. There are typically comparable properties on the market, making it quite easy to figure out what the fair market value of the respective real estate is.
In real life, the situation isn’t that simple. Homeowners often make massive investments in improving their property. This is the main reason why they may be dissatisfied and prone to challenge the compensation offer that they receive.
Eminent Domain Abuse and Disputing Proposed Takings in MassachusettsSince no reform has occurred in Massachusetts eminent domain laws over the years, there have been a couple of controversial cases that property owners have disputed vehemently. One of the recent cases is from 2016, and it comes from the city of Somerville.
In 2012, Somerville began experiencing rapid growth and expansion. As a result of this development, the city planned a special public project to be carried out in the Union Square district. The aim of the project was to extend a subway route for which the acquisition of 279 properties was required.
A lawsuit was filed as a result by some of the property owners because they claimed that only two of the 279 plots would be required for the execution of the project. To address the lawsuit, the Somerville Redevelopment Authority hired Foley Hoag - a prominent, high-level legal agency.
According to the Institute for Justice, the mayor of Somerville is using the extension of the subway route to justify the unconstitutional taking of private property. A representative for the institute claimed that the eminent domain process is benefiting private real estate developers rather than the public interest.
Residential property owners in Carver Massachusetts are also fighting against an eminent domain decision. A few years ago, the town revealed a massive plan for the construction of a brand-new distribution center. A number of homes would have to be condemned for the purpose.
As a result of the decision, local residents are concerned that a large portion of rural Carver will be transformed into an urban center. The properties featuring small town houses right now could potentially be turned over to private developers for the purpose of warehouse construction.
It’s true that the private developer is attempting to turn the old part of town into a valuable commercial asset. Such a project, however, is quite questionable when it comes to the public use aspect of eminent domain decisions.
Residential Property Valuation in MassachusettsOne thing is certain, even when the taking of residential property is not justified, the eminent domain authority will still have to provide just compensation. The compensation amount can be determined in a couple of distinctive ways.
The fair market value should be determined for the highest and best use of the plot. This isn’t necessarily the current use of the residential property, which can make the work of the appraiser a bit more challenging.
Having this background information in mind, an appraiser will typically start with the market value approach. The methodology is the one that makes the most sense for residential properties because there will usually be a sufficient number of comparable properties on the market.
A few of the prominent factors taken into consideration when making the comparison and drawing a conclusion about the price include the location of the property, its size, the year of construction, the number of bedrooms and bathrooms, utility services available, condition and maintenance of the home, as well as upgrades that have been made by the owner.
Many residential property owners carry out projects to increase the comfort and the value of the plot. Some of the improvements that will affect the price of the real estate include building an additional room, a garden shed, a garage or a swimming pool. The addition of energy-efficiency improvements will also count towards the projects that can increase the compensation.
A final very specific scenario that will have to be considered is a partial residential property taking.
Very often, an authority will not need to condemn an entire property. In such instances, property owners are paid severance damages. The value of the property as a whole will first be examined. Then the appraiser will have to establish the value of the remaining plot. Subtracting the two figures from each other will produce the amount of the compensation.
The value of the taken part, however, may be an inadequate measure of the damage experienced by the property owner. A change in the shape of the plot, in utilities and accessibility, will all have a negative effect on the owner and on the value of the remaining part. Some estimate on usage limitations will have to be made for the compensation figure to be adequate.
Our attorneys know what it takes to defend the rights of residential property owners, whether they experience a partial or a complete condemnation. Consulting an attorney will be even more important in complex situations like a residential property that has multiple owners, for example.
Special Purpose Eminent Domain Cases in MassachusettsMassachusetts regulations have provisions for the taking of special purpose properties. These are defined as plots and buildings that don’t fall under any of the categories already mentioned in the guide.
Section 5A of Chapter 79 of the Massachusetts General Laws refers to the condemnation of historical landmarks, archaeological sites, and ancient landmarks. Whenever certified landmarks and properties owned by historical organizations are involved, eminent domain authority cannot be exercised without leave of the general court obtained.
Things become a bit more complex when the taking pertains to land that’s already in public use, for example, a library or a school building. Under Section 5, leave of the general court will once again have to be obtained for the purpose. Consent of the city or town in which the respective facility is located may also have to be acquired.
Valuing Special Purpose PropertiesThe provision of just compensations for special purpose properties is incredibly challenging because of their unique characteristics. Comparing such plots to the ones currently available on the market will obviously be impossible or impractical.
In many instances, special purpose properties are owned by NGOs, or they don’t generate income. Whenever the case is such, provisions about future income and losses will also have to be excluded.
The reliance on a highest and best use approach may be difficult or completely impossible. Quite often, special purpose properties and buildings are created for one single use. Numerous special purpose properties will not be suitable at all for either commercial or residential use.
An appraiser may eventually take a look at the price of relocating the special purpose building to another plot. When this approach is chosen, the factors that will have to be taken into consideration include the current location of the special use property, the cost of the construction, engineering costs, relocation and fixture costs. The cost of fixture pertains to the ones that cannot be removed from the current plot and brought to the new location.
Agricultural and Farming Issues in Massachusetts Eminent Domain DisputesSection 5B outlines provisions for the taking of agricultural land in Massachusetts. According to the section, no taking of such land should be allowed without a hearing by the board. The property owner will be given the right to express their point of view during such a hearing, especially if they object to the condemnation.
In such a hearing, the owner will also be given the right to provide evidence about another property (not used for agricultural purposes and without occupied buildings) that can serve the purpose of the public use project. If the board accepts such evidence, the original agricultural plot will be exempt from the taking.
How to Determine the Market Value of Agricultural PropertiesAgricultural plots fall in the special property category because the provision of an accurate valuation may once again be a challenging task stemming from the highly specific use of the land.
For a start, the entity that has the eminent domain power will need to make sure that the primary purpose of the plot is agricultural. The principal devotion is defined as the most important one when compared to all other uses of the plot. In essence, the land should be utilized as farmland for most of the year. Next, the valuation methodology will have to be chosen.
A market value approach is far from effective. Rather, the income and the productivity of the plot will need to be examined. A certain average pertaining to the future income of the owner will have to be calculated. The fact that crops are seasonal and that many factors can have an impact on harvest will need to be somehow factored into the calculation.
Very often, agricultural plots don’t consist solely of land. There could be fixtures and buildings used for farming purposes. The relocation of such fixtures may be expensive or altogether impossible.
Thus, when the calculation is being made, an appraiser will take a look at the acreage of agricultural land and the surface area of buildings separately. These two numbers will have to be added to each other, and compensation on the basis of the projected income will also be required.
An appraiser will need to keep an open eye for a number of additional amenities that impact the value of the agricultural plot. Water and its availability, for example, happen to be very important. There will be a significant difference between land that’s irrigated and land that’s not. Wildlife and fish habitat, distance to protected federal land and scenic view are some additional amenities.
As far as methodologies go, an appraiser will have to make the decision on a per-case basis. Often, production level price extraction will be utilized. This methodology establishes a sales price based on the land’s production capabilities per single acre. A soil map may also be required to determine types and segmentation.
Because there are so many valuables, the official appraisal may be inaccurate and lower than what the owner would have expected. A legal representative will be needed to challenge the just compensation determination successfully. Finding an expert that has at least some experience in agricultural land eminent domain is one of the prerequisites for making a successful objection.