Posted on Jul 24, 2017 by Jeffrey L. Payne
South Carolina property owners and businesses have taken notice of recent actions across the state where the government is using eminent domain authority to clear the way for roads, infrastructure and other public uses.
Although a state constitutional amendment in 2006 prohibited the use of eminent domain for economic development, eminent domain is on the table for other uses and has been viewed as a bargaining tool for municipalities to accelerate the sale of coveted land.
Negotiations to acquire property for a library and museum in Myrtle Beach are continuing after the city council in February allowed the city manager to use eminent domain, if necessary, to force the sale of two downtown parcels.
In April, the Charleston City Council authorized the use of eminent domain to acquire the site of a former supermarket for a new intersection and park. One month later, the city reached an agreement with the developer to purchase the 2-1/2-acre site for $3 million.
And plans for Interstate 73, which aims to connect Myrtle Beach to North Carolina and up to Michigan, could involve more right-of-way acquisitions across South Carolina.
What recourse do property owners and businesses have?
If your business or property stands in the path of a major infrastructure project, stopping the government from using eminent domain will involve a major fight that many are not willing to take on. Businesses and property owners have a better chance of exerting influence on the valuation of their property and compensation for relocating the business.
In an eminent domain proceeding, the government may condemn all or part of a property, in which case it pays the owner for the land. Often, we see disputes arising from the value the government places on the property and the financial impact that the acquisition has on the business or property owner.
When a road is widened, the loss of setback buffering the business from the road can eliminate valuable parking spots and significantly change the configuration of the property. A gas station, for instance, could be forced to shut down if it is unable to reconfigure its gas pumps to fit the remaining area.
Often, the government will offer an amount that is proportional to the amount taken. If a property is deemed to be worth $100,000 and 10 percent of the area is taken, the owner may get an offer of $10,000. However, the property may not be nearly as desirable without prime frontage. The initial value of the whole property must be compared with the value of what’s left. In a process that sometimes is called the “before and after” rule, the property’s resale value may be found to be significantly reduced.
How is a property’s value determined?
Different approaches may be used to determine a property’s value. If there is rental income from the property, the value of the income flow from that lease and the remainder of the lease term must be considered. In a market-based approach, recent sales are compared to the property being appraised. A cost-based approach considers current construction costs and depreciation and then adds in the value of the land.
If your business or house is forced to move, relocation expenses are handled separately from compensation for condemnation of the property. An owner also may get special damages for the remainder of the property.
The government's valuation may not be an accurate reflection of the property's worth. Property owners and businesses facing eminent domain proceedings need an expert in this area who knows how to counter the government’s valuation and determine a favorable value of the property.
If you think the government’s offer isn’t fair, start with an independent appraisal. An experienced eminent domain lawyer will know what arguments are more likely to be successful. As with all legal matters, there are deadlines and procedures to follow, and a lawyer can provide counsel on a recommended course of action to protect your interests.