What is Inverse Condemnation?
Inverse condemnation is when a government seizes private property, but does not provide the property owner with the proper compensation required by the 5th Amendment of the Constitution. In situations where improper seizure occurs, the property owner must sue in order to obtain their due compensation.
Inverse condemnation lawsuits in California derive from both the U.S. and California constitutions, as well as California statutory law. The Fifth Amendment of the U.S. Constitution – and its California counterpart – require the government to pay private individuals just compensation for taking their private property to be used for a public purpose. But what constitutes “just compensation?” This blog discusses how relief is determined in an inverse condemnation lawsuit.
Compensatory Damages
Many civil lawsuits involve “prayers” – or requests – for damages to compensate plaintiffs for their losses. Whether the case is based in personal injury, contract, or property law, courts order defendants to pay the plaintiff a certain sum of money to essentially replace what they lost.
In personal injury cases, plaintiffs are compensated for medical expenses, lost earnings, and the pain and suffering they experienced due to bodily injury. In contracts, plaintiffs are paid for the value of the goods or services the defendant failed to deliver or perform.
In inverse condemnation lawsuits, plaintiffs receive compensation for being deprived of the economic benefits of their private property. This typically involves the determining fair value of their property during the time the private owner could not use it.
Valuing Taken Property
Traditionally, property in inverse condemnation cases was valued at the date the alleged taking occurred. For example, if the government imposed a zoning regulation that prohibited a condominium developer from constructing condos in a particular area, their damages would be calculated based on the date the regulation took effect.
However, the California Supreme Court held that the date for valuing the taken property starts at the trial date. This is because the government’s actions in eminent domain cases begin on the trial date.
Methods of Valuing Property
Using a property’s fair market value for measuring damages is an intuitive way of valuing taken property. If the government or its agents damaged property, the decrease in its fair market value serves as the basis for calculating damages.
Other methods of valuing property in inverse condemnation cases include:
- The Cost to Cure. The costs of restoring the property are relevant to determining reduced fair market value due to physical damage.
- The Cost for Mitigating Damage. Property owners have a duty to mitigate expenses and costs regarding taken or damaged property. These mitigation expenses may be compensated in an inverse condemnation case.
- Depriving Access to Property. Sometimes a taken can occur when the government impairs physical access to the property. For example, when the plaintiff sells the property during the time the government impaired access to it, the reduced purchase price can serve as the basis for compensation.
- Delay Prior to Condemnation. If the government or other public entity unreasonably delays its condemnation action, the property owner can recover lost rental income, cost of repairs, lost profits on sale, loss of use, and the costs of incurring additional operating expenses.
- Lost Goodwill. When businesses are bound to a physical location, the government’s taking could injure the business’s goodwill. Goodwill can be determined as the difference between the sum of the company’s assets – including capital goods and equipment and brand value – and what the business would sell for on the market.
Although the value of the property is determined at the date of trial, plaintiffs are entitled to interest starting from the date of the taking. In some cases, the plaintiff can also recover certain litigation expenses and attorney’s fees.
Other Remedies for Inverse Condemnation in California
In most cases, monetary damages are the exclusive remedy for inverse condemnation cases. However, plaintiffs can get a court order to halt a public entity from acting to take property when it’s clear that no compensation is offered.
In some cases, a plaintiff can ask courts to rule that a particular regulation is invalid. This can be accomplished through a request for administrative mandamus, where the court narrowly holds a zoning regulation to be invalid with respect to its specific application to the plaintiff. Alternatively, a regulation can be stricken as completely unconstitutional through a request for declaratory relief.
Comprehensive Eminent Domain Representation in California
Eminent domain and inverse condemnation cases can be challenging. As you can see, the issue of damages alone can demand a lot of research and resources. At Allen, Semelsberger & Kaelin LLP, our California eminent domain lawyers have the sophisticated understanding to help ensure you receive just compensation for your taken, damaged, or destroyed property.
Contact Allen, Semelsberger & Kaelin LLP online or call our office at (888) 998-2031 for more information about whether you qualify for a legal remedy.