06/07/2017 by Attorney Norman W. Shearin
Typically, the principles and techniques applied in appraising the land taken in an easement acquisition are the same as those applied in other condemnation appraisals. J.D. Eaton, MAI, SRA, Real Estate Valuation in Litigation (1995). Under the before and after rule, the appraiser simply values the property before and after the easement acquisition. The measure of damages is the loss of salable utility to both the area encumbered by the easement and the unencumbered portion of the larger parcel. Id.
However, the condemned property’s loss of fair market value is not the proper measure in temporary easement acquisitions. When a taking is temporary, the measure of compensation is the value of the property for the period that it is to be held by the condemnor, or the diminution in the value of the property by reason of the owner’s loss of its use and occupancy during the possession by the condemnor. The most common measure of damages is the rental value of the easement area for the period of occupancy by the condemnor. Id. at 357-58.
Damages that result from temporary easements are usually based on economic rent of the affected area for the term of the temporary easement. Id. If rental information is not available, the appraiser must estimate an appropriate rate of return on the land for the term of the easement. Id. at 359. In no case may the appraiser determine that the landowner is not owed just compensation simply because there is not a market for the easement area. Id. at 357.
One such example is a temporary construction easement. In most condemnations where a temporary construction easement has been taken, there is not a robust market for the easement area. And, yet, the condemnor must still pay the landowner just compensation for the easement taken. Therefore, these types of easements are typically valued at a percentage of the overall rental value of the area affected.
As the example above illustrates, appraisers must sometimes value temporary takings where there is no rental market for the taking area. This is especially common in condemnations where easements may be taken only to accommodate a temporary project, resulting in easement takes of unusual size and shape and of limited utility. Appraisers may not, however, abandon the valuation process and assign no value to the temporary easement take area just because there is not an actual rental market for it. Where there is not a market for an easement area the appraiser must “estimate” a rate of return on the temporary easement area. Many appraisers use 10% as a rate of a return on a temporary construction easement.
If the temporary easement will affect the value of the remaining unencumbered land, this fact must also be considered in estimating the value of the property after the taking. The location of an easement in relation to improvements on the affected parcel is also an important consideration.