Inverse Condemnation: When Can Market Value Depreciation Become An Actual “Taking?

Two Types of Governmental Taking

Eminent Domain, or Condemnation

In Washington State, like other American jurisdictions, there are two general types of government acquisition or “taking” of a private owner’s property. The first is the government’s exercise of its eminent domain power to force the sale of the property – or sometimes an interest in the property – for public use. This process is often referred to as “condemnation.” While the government has the power to take the interest in the property, it must pay “just compensation” for it.

Inverse Condemnation

The second type of governmental “taking” is often subtle. Generally known as “inverse condemnation,” it occurs when the government takes property without following eminent domain procedures and without paying just compensation. Occasionally, inverse condemnation occurs when a government regulation so burdens one’s property that the property owner cannot derive any economical use from it. When a landowner contends that property has been inappropriately taken by the government, the landowner has the right to file an inverse condemnation claim against the government to recover just compensation for the value of the property taken.

Public Projects Often Take Years

Large public projects, such as the construction of a freeway, can take years. Plans related to the project are widely publicized. Often, public hearings are held to discuss the project and hear from the public as to its feasibility. Even when the plan is approved, the conclusion of the project may be years away.

Can a decision by the government to take one’s property at some distant date constitute an actual current taking? That was the issue decided in an important recent case in the Court of Appeals of Washington [see Tapio Inv. Co. v. State ex rel. Department of Transp., 2016 Wash. App. LEXIS 2598 (Oct. 27, 2016)]

Major Freeway Project in Spokane

Tapio Investment Company (Tapio) filed an inverse condemnation lawsuit against the Department of Transportation for an alleged taking of Tapio’s office park during the construction of a major freeway project in Spokane. The approved route for the freeway included a portion of the office park, which is situated partially within a planned interchange. Construction of the interchange will be one of the last steps in the decades-long construction process. The Department will not actually need Tapio’s property for many years.

Tapio contended that while the Department had not physically or legally interfered with the use of its property, publicity about the freeway project and the Department’s acquisition of nearby properties had hampered Tapio’s leasing activity and diminished the market value of the office park to an extent that it constituted a taking. The trial court disagreed and Tapio appealed.

Appeals Court Decision

The appellate court affirmed, holding that because there had been no physical invasion of Tapio’s land, nor had any regulation been passed restricting Tapio’s use of its property, there had been no taking. The court acknowledged that while a landowner could maintain an action for inverse condemnation when the landowner had sustained any measurable loss of market value as a result of interference, physical or regulatory, with the use and enjoyment of its property, a mere loss of market value alone – even a loss of value attributable to government action – was not itself evidence that the government has interfered in a way that amounted to a constitutional taking.

The court made additional points:

• Legal acts that do not interfere, physically or by regulating the use of private property, are not takings.
• The fact that a portion of one’s property is expected to be condemned in the future does not constitute a present taking of the property.
• The undisputed evidence was that the overall plan had not yet been filed with the Spokane County Auditor and as a matter of state law, it had not yet restricted property owners in any way.

Eminent Domain and Inverse Condemnation Involve Complex Issues of Fact and Law

Eminent domain and inverse condemnation involve complex legal and factual issues. In any struggle with a governmental entity, success can often be achieved only when you have retained experienced, aggressive legal counsel – the kind of legal counsel that you will find at Bolan Law Group. We have years of combined experience handling a full range of real estate law, including condemnations and eminent domain proceedings. Our depth of knowledge allows us to provide our clients with superior representation. We work collaboratively – sharing strategies, ideas, and experience. Our team of attorneys and staff is big enough to handle your matter, yet we are small enough to provide you with the most personal legal service possible. We pride ourselves on designing the simplest, most effective solution for your legal issue. For assistance with any sort of real estate issue, contact us on the web, or call our office at (253) 470-2356.