August 2, 2017
Taking access rights to commercial or special use properties can be devastating to the business operated on site as well as the remaining value of the real estate. However, just because a condemning agency takes access to property, doesn’t necessarily mean that it will or is required to pay for it. The determination of when/if access rights are compensable in a particular taking can be complex. Often times removal/relocation of access to property can result in the business shutting down and the remaining value of the real estate being reduced to pennies on the dollar compared with what the owner previously thought or expected the property to be worth.
Changes to access rights can have a devastating impact to property values or the ability of a business to continue operations. If access is severely altered, the previous use for the property may be deemed no longer viable. The businesses that tend to suffer the most from these types of problems are local businesses rather than national or corporate entities. Local businesses often don’t have the resources to make major capital investments to maintain the viability of the business like other major corporations do. They also don’t have the vast expert resources that some larger companies benefit from to try to solve these problems.
Below are some examples of the impact that access can have to the viability of local businesses and the value of the real estate where they are located.
ALTERING OR TAKING ACCESS
Martinsville Golf Club
There is a recent article where the owner of the Martinsville Golf Club describes what he anticipates to be the end of an era of the golf club due to the State’s anticipated taking. As part of the I-69 Section 6 project, the State plans on taking the golf club’s direct access to State Road 37 and replacing it with a driveway along a new frontage road. The frontage road will lead to small county road that eventually laps around and takes you to the highway. The State will also be taking at least half of the golf club’s driving range.
The owner’s opinion (seemingly very accurate) is that the taking of the driving range and the golf club’s direct access to State Road 37 will almost certainly put the golf club out of business. The golf course business can be tough enough – just add to that the challenge of operating a golf club that has no driving range. Then, instead of the golf course having a driveway directly off a highway, players will now have to drive along several miles of old country roads from a super highway to access the course. It appears almost certain that the property will no longer operate as a golf club after the State’s taking.
However, the State isn’t necessarily concerned with the ongoing viability of any business operated on real estate that it takes or damages. Condemning agencies are only concerned with whether they provided a new driveway or access that is the same shape and size as what existed before their taking. So in the case of the Martinsville Golf Club, it is pretty safe to say that the I-69 project will be putting it out of business very soon. The question then shifts to the amount of compensation owed for such a damage – and it’s worth noting that Indiana doesn’t pay for lost profits to businesses in condemnation cases.
Altering access for a particular purpose
Another common scenario in condemnations is when access that is used or needed for a particular purpose is taken. Consider a furniture store. To operate a furniture store, the owner needs to have commercial drives with minimum widths and turn radii, both to enter onto the property but also to operate at or near the warehouse entrances that are usable for large trucks and even semis.
If a condemning agency takes an existing driveway that is capable of use by semi-trucks and other large vehicles, it needs to replace the driveway in like kind. However, sometimes that is prohibited by virtue of the amount of real estate available. Other times, the condemning agency may take a portion of the parking lot area where the trucks make deliveries and need to be able to maneuver and turn around. If the taking prevents the ability of vehicles to operate in order to make deliveries, then the furniture store building may no longer be usable for the continued operation as a furniture store.
Although there may be ways that condemning agencies can resolve these issues, sometimes they cannot or will not. Thus, when a taking alters access to a property resulting in the inability to continue to use that property for its particular use, property owners can be faced with very serious problems – first of which is whether they will be able to continue to operate their business.
A taking resulting in changing the nature or planned use of property
Another instance (similar to the above example about the inability to operate vehicles on a site) is when a business designs the use and layout of the property in a particular fashion for specific reasons and a condemning agency modifies that design. This situation can also result in serious damage to the continued operation of the business but may not, depending on the facts of the case, be compensable.
Consider an outdoor mulch and stone retail facility. These types of facilities are often designed with many things in mind, including the location of one particular product (say the dyed mulch) in relation to another particular product (say the crushed stone). Imagine for this example that the property owner located the mulch so that any water drainage from it did not reach the stone, so that certain dyes or soil products don’t mix. Now assume that a condemning agency takes the portion of the real estate where the mulch is stored. The result is that the only area to relocate the mulch storage is an area where water drainage through the mulch now flows directly into the stone.
For the business owner, this is a major problem. However, from the condemning agency’s perspective, the solution is simple – just move the mulch to the other area and isn’t concerned about drainage or other problems that it may cause to the viability or profitability of the property owner’s business. Another solution to the problem could be addressed using relocation benefits. However, as anyone who has dealt with a difficult relocation process can tell you, the relocation agent doesn’t necessarily have your best business interest in mind.
As you can see, sometimes takings (even smaller ones) can have fatal impacts on businesses. Unfortunately, these impacts may not always be compensated by the condemning agency.
Commercial property owners can best protect their rights in land takings by hiring an experienced eminent domain attorney as soon as they learn of a project that may impact their land. A knowledgeable attorney can discuss your legal rights and options and help position you to get the most compensation possible for your land. I have been practicing eminent domain law exclusively and can offer you a free case evaluation. Contact me today to discuss your concerns related to access.