Eminent Domain: Some Practical Advice for Housing Authorities

By: Michael H. Rosen, Esquire
SAXON, GILMORE, CARRAWAY, GIBBONS, LASH & WILCOX, P.A.

DISCLAIMER: This is article is not intended to provide a complete analysis of the laws of eminent domain. Each case is unique and needs to be evaluated in detail based on an individual basis.

When it comes to eminent domain, Florida has a long history of protecting the property rights of its citizens. Florida's eminent domain laws are among the best in the nation when it comes to safeguarding private property rights against the government's power of eminent domain. Article X, Section 6(a) of the Florida Constitution requires that the condemning authority, i.e. the governmental entity seeking to acquire the property, pay "full compensation" for the taking of any property it condemns. In addition to paying for the land and improvements taken and any damages to the remainder property, the condemning authority is also required to pay the owner's statutory attorneys' fees and costs as well as the reasonable costs of any expert witnesses.

In addition to Florida's strong constitutional guarantees, housing authorities should be entitled to a greater level of protection than other property owners when housing authority property is sought to be taken by eminent domain. This preferential treatment is a result of the federal government's interest in the housing authority's property and the supremacy of federal law over conflicting state law. Although housing authority property is titled in the name of the housing authority and not the federal government, its ownership is subject to a "Declaration of Trust" and an "Annual Contributions Contract" with HUD. The restrictions contained in the Declaration of Trust preclude a housing authority from conveying or encumbering its property without HUD's express written approval.

PHI Notice 92-49 sets forth the requirements that a housing authority must meet before HUD will consider approving a settlement agreement between the housing authority and the condemning authority. A summary of the requirements includes the following:

• The public agency seeking PHA-owned property must be authorized to use eminent domain under state law.
  
  
• The public agency seeking PHA-owned property must display its intent to assert eminent domain authority by commencing the legal steps necessary for the taking.
  
  
• The public agency seeking PHA-owned property must provide replacement housing on at least a one-for-one basis, or the agency must pay fair market value to the housing authority. Replacement housing must be of comparable size and unit configuration as that taken, except where HUD and the housing authority agree that there is a greater need for units of another size and/or configuration. Replacement housing must also meet HUD's construction/acquisition standards.
  
  
• The public agency seeking PHA-owned property must provide replacement for all non-dwelling facilities taken.
  
  
• The public agency seeking PHA-owned property must provide fair market value compensation for any vacant property taken as well as for any damage to the remaining portion of the development as a result of the taking.
  
  
• The public agency seeking PHA-owned property must provide for relocation costs associated with the taking. Any relocation associated with a federally assisted development is subject to the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (LIRA).
  
  
• HUD approval of the taking of PHA-owned property under eminent domain is also subject to any environmental and/or historical preservation considerations that may be relevant.

Evaluating the Condemning Authority's Offer

The condemning authority is required to make its initial offer by certified mail before an eminent domain lawsuit can be filed. The condemning authority has to wait a minimum of 30 days to give the parties an opportunity to reach a settlement. The offer is based on the fair market value as determined by the condemning authority's real estate appraiser. If the take area contains improvements, the appraiser hired by the condemning authority will assign a value to the improvements based on their contributory value in the marketplace.

Problems typically occur because the condemning authority's offer generally isn't high enough to replace the improvements, since its appraisal is based on fair market value of the improvements as opposed to replacement cost as defined by HUD. For example, if the improvements within the take area include apartments, a playground or a community center, the reduction in value attributable to depreciation considered as part of a fair market value determination is likely to yield only a fraction of the amount needed to rebuild replacement housing or to reestablish the amenities. Replacement costs are based on the TDC (total development costs) as defined by HUD. From a practical standpoint, the housing authority has to be able to use the money it receives to replace the housing units and other amenities it lost.

A condemning authority is understandably resistant to paying more than the fair market value of the property because the condemning authority is unfamiliar with HUD's requirements and not accustomed to being told it should pay the replacement value of buildings that are oftentimes decades old.

Dos and Don'ts of Eminent Domain

• DO hire an attorney who has experience with both housing authority law and eminent domain as soon as you learn the housing authority's property is slated for condemnation. The attorneys' fees and any experts' fees will be paid by the condemning authority.
  
  
• DO make sure your board and executive director are aware of the impending condemnation since there needs to be sufficient time to evaluate the budgetary and planning issues associated with the acquisition.
  
  
• DO review HUD's eminent domain requirements and the required application for HUD approval.
  
  
• DON'T assume the initial offer will be enough money to replace any improvements.
  
  
• DON'T limit your options to money since the condemning authority may be able to exchange comparable property.
  
  
• DON'T remove any improvements from the take area or make, any substantial changes to the property before you have a settlement or have discussed the matter with your attorney.