“Reforms” that Are Worse than the Problem

In the March/April 2008 issue of PROBATE & PROPERTY, a publication of the Real Property, Trust and Estate Section of the American Bar Association, Christopher W. Smart, a Florida lawyer, purports to tell us what’s wrong with Kelo-style eminent domain and how to fix it. But a reading of his article, entitled Legislative and Judicial Reactions to Kelo: Eminent Domain’s Continuing Role in Redevelopment, discloses something entirely different. First, Smart tells us that because of its manifold problems and rampant abuses “America Cannot Afford Kelo Style Redevelopment.“ So far, so good. But then he concludes that  “America Can Learn to Live With Kelo-style Redevelopment.” Interesting. It reminds us of George Orwell’s novel “1984” whose protagonist embraced the art of doublethink and learned to love Big Brother.  

And how does Smart propose we learn to live with Kelo-style redevelopment? He expends one whole paragraph outlining three types of reform (at least he says it’s reform): (a) communication, (b) compensation, and (c) participation. There, that should do it, says Smart. 

But these proposals not only fail to solve the problem, they are counterproductive. Communicating “early and often” with owners of properties targeted for acquisition, says Smart, “can put a human face on what can be seen as an otherwise arbitrary and alienating system.” By “creating ombudsman positions staffed by people who understand the process and can help guide the property owner through much of the process’s frustration will be removed.” Oh really? Would that perchance mean having a city functionary call on the targeted condemnees early and often, and tell them “I’m from the government, and I’m here to help you.”? Gimme a break. 

The problem with the “early” part of Smart’s nostrum is that the delay between the announcement and implementation of a redevelopment project can take years or even decades, whereas tenants located in the targeted properties, upon hearing of the condemnation plans, split, leaving the property’s owner without the rents that are ncessary for the building’s upkeep. Thus, early announcements of contemplated government acquisition of specific areas result in condemnation blight as tenants move out, leaving behind underoccupied or vacant buildings, and as businesses depart to new locations (if they can find them) since staying put will only mean a destruction or damaging of the business when the condemnation comes, with no compensation provided by law for business losses. In short, even assuming good faith on the part of would-be condemnors, early announcements of government acquisition plans results in a decline of the targeted neighborhood, often driving the property owners within it to the wall, and causing them to lose their properties by foreclosure or tax sale. And those owners who can hang in there awaiting the planned acquisition, can find themselves in dire economic straits and thereby become fair game for bargain-seeking municipal right-of-way agents. For a discussion of these problems see Gideon Kanner, Condemnation Blight: Just How Just Is Just Compensation? 48 Notre Dame Lawyer 765, 768-770 (1973). As an Ohio court put it: “The central issue here is not the willful or intentional acts of the city, it is the natural and probable consequence of the acts or the failure to act on the part of the city. It is the cumulative result of many things, each in itself that might not have been totally harmful, but when impacted all together have the full force of destruction of the property . . .” City of Cleveland v. Hurwitz, 269 N.E.2d 562, 567 ((1969). So much for the early and often part. 

Which brings us to compensation. The Constitution provides for “just compensation” to condemnees, but as everyone connected with the process knows and as the courts have conceded, the actual compensation is not just but “harsh” and at best partial. In fact, the courts make no effort to provide true compensation, but award instead “fair market value” that may or may not be adequate to compensate the condemnees for all losses suffered by them. Not only that, but in most jurisdictions the condemnees have to use a part of their limited compensation to pay their lawyers, appraisers and other experts whose services are essential to proving even the limited compensation to which they are entitled under law. Thus, their net recovery is inherently less than even the limited compensation ostensibly awarded by the courts. 

So you’d think that serious revision of the law of compensability should be of high priority to Smart. But according to him, it’s only something that “should be considered.” Oh yeah? Have you ever seen what happens when a serious proposal is made to “consider” improvement in the law of compensation? We have. Repeatedly. What happens in such cases is that the apologists for eminent domain business as usual come alive and fight like tigers to defeat any genuine reform no matter how objectively desirable. How do they do it? Their standard ploy is to wave the proverbial bloody shirt on which they emblazon the false assertion that genuinely just compensation will bankrupt the government or at least will bring about a stoppage in the construction of public works. And it works. The California Supreme Court has actually stated that if compensation were awarded “too liberally,” i.e., for all losses actually suffered by condemnees, that would lead to “an embargo” on public works. No evidence has ever been presented in support of that absurdity.

That leaves participation, or as Smart puts it “the opportunity for an owner whose property has been taken for a redevelopment project to share in the fruits of that project, perhaps through equity participation.”  First of all, in many cases that would be absurd – it would mean requiring a lower middle-class person (like Suzette Kelo, a nurse, to take an obvious, current example) to become an investor in a risky real estate venture. Some compensation. And what happens when the project goes nowhere or fails (see the above blogs on the aftermath of Kelo and the just-announced failure of the giant Brooklyn Atlantic Yards redevelopment project to proceed in accordance with its widely announced plans)? Would the condemnees be paid then? Smart doesn’t say.  Any bets? 

Under the Constitution – which remarkably, Smart never discusses in his article – owners of property that is taken for public use are supposed to receive just compensation – not partial compensation, not “harsh” compensation, and not merely the fair market value of their land, so adroitly defined by the courts as to be less than what the market would pay in a voluntary transaction. The Supreme Court has said that the owner should be placed in the same position pecuniarily that he would have been in had his property not been taken. It’s time to implement that principle and to make it reality rather than the insincere judicial window dressing that it is at this time. If Smart is sincere about his desire to reform eminent domain, that’s what he should be striving for.

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