Monthly Archives: February 2018

Lowball Watch — California

This one’s a doozy. We are informed that a federal jury in California has just brought in a whopping verdict for the taking of 1000 acres of iron ore bearing land with a mining permit. The subject land is out in the Mojave Desert near Twenty Nine Palms. The feds’ evidence of value was $5.6 million. The owners’ evidence was $38.6 million, and the jury verdict was $30,283,750, delivered after only three hours of deliberation.

The smiling owners’ counsel id Ed Burg of Manatt, Phelps and Phillips.

More details to come as we get them.

Whatever Happened to Taking “Underwater” Mortgages?

A funny thing about the press and media. Sometimes they pick up an idea and go on about it, assuring us that it is important and bids fair to influence public events in a profound way. But then poof! After a period of pontificating about it, the news item sort of vanishes from the printed page never to be heard about again.

For example, whatever happened to the bright idea of taking mortgages on “underwater” homes by eminent domain, restructuring the debt secured by those mortgages, and then selling the subject homes for a new, lower price that would still put a buck in the pockets of the city hall promoters of this goofy idea. But in spite of a flurry of articles by out-of-it professors and their press followers, it didn’t happen. The problem with this wacky scheme was that a condemnor acquiring property by eminent domain has to pay fair market value, which would leave no room for making a profit — someone would have to subsidize such a scheme and no one was willing to do so.

So, to the best of our knowledge, it didn’t happen.

California Choo-Choo Meets Condemnation Blight

On top of its other problems, the infamous California “bullet train” project has run into another, familiar problem which comes in two varieties. First, once word gets out what land is to be taken for a project, its inhabitants become short-term occupants, and this motivates them to neglect maintenance, and start moving out ahead of being evicted, making conditions worse. In some cases the government encourages this process hoping to pick up the subject land at bargain prices. The second variant of this problem is what happens after land in the path of a project is acquired but the project construction is delayed. This gives rise to what one observer called “linear ghettos” — long strips of land projected as the coming right-of-way become effectively abandoned, with structures located there becoming fair game for squatters, vandals and scavengers. The result then becomes what’s called “condemnation blight.” Back in the 1960s, particularly in the Midwest cities would give this destructive process a helping hand by withholding or delaying trash pickup or even in some cases, police protection.

This went on until the U.S. District Court in Detroit put a stop to it Foster v. City of Detroit, 254 F.Supp. 655 (1965), aff’d. 405 F.2d 138 (1968), with other courts following suit. In California, the leading case on this subject is Klopping v. City of Whittier 8 Cal.3d 39 (1972). Check it out.

Now, along comes the Los Angeles Times with a report that what in the past was a problem associated with urban redevelopment is now occurring across the state along the strip of land designated as the “bullet train” right of way.
Quoth the Times:

The problem that vacant properties create when the government takes private land is not new, but the massive scope of the bullet train project has birthed a problem unprecedented in recent California history: The current construction program is creating a corridor 100 feet or more wide through the Central Valley. Many of the land takes are stuck in protracted litigation, creating a patchwork of property ownership and leaving lots vacant for a long time.

Ralph Vartabedian, Vacant Lots, Empty Homes and Dying Orchards on Bullet Train Route Attract Squatters, Vandals, and Thieves, L.A. Times, Feb. 4, 2018.

Note however that this article’s assertion that delays are caused by “protracted litigation” is inaccurate. In eminent domain law possession of the subject property can, and often is taken immediately, while the determination of compensation is tried later.

Finally, if your interest in condemnation blight runs deeper than the news, we suggest our law journal article on that subject — Condemnation Blight: Just How Just Is Just Compensation? 48 Notre Dame Law Review* 765 (1973). An oldie but goodie that one. That article received the Shattuck Prize from the American Institute of Real Estate Appraisers (now the Appraisal institute).

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* The Notre Dame Law Review was then called the Notre Dame Lawyer.