The Biased Decision Makers

In some states the law provides that before you can try your eminent domain case in court you have to go through a proceeding before a non-judicial body of commissioners who determine just compensation for the taking. Then if either party is displeased with that decision, it can appeal to a trial court, demanding a real trial before a judge and jury. In Georgia, this preliminary round takes place in the form of an arbitration before a Special Master appointed by the court.

We often wondered if this procedure was doing much good, or whether it only prolonged and complicated the condemnation proceeding. We now have a partial answer from Georgia in the form of an article bluntly entitled Special Master Bias in Eminent Domain Cases, by S. Alan Aycock and Roy T. Black, respectively a real estate consultant and a professor of business at Emory University. It appears in Volume 33, No. 2, 2008, of the journal Real Estate Isues, at p. 53.

Aycock and Black conclude that on the average, the condemnor’s appraisal comes in at $32,722, the Special Master’s award at $51,304, and the final judicial award to the owner at $177,758. By our calculator, that means that on the average the final award is over five times the condemnor’s appraisal on which the offer is presumably based, and over three times the Special Masterr’s award. Wow!

The cause of it? Aycok and Black think it has to do with what they call the “moral hazard” of special masters being influenced unduly by the fact that they are appointed by Georgia condemnors, or at least with great influence by the condemnor in the selection process.

Aycock and Black thus join other investigators in Utah, Minnesota and California, who have reached similar conclusions with regard to the difference between condemnors’ pre-litigation offers and the outcomes after trial. The locales may vary, but the story appears to be the same: undercompensation is rampant.

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