NCHRP 20-06/Topic 19-01 [Final]
Eminent Domain and Fair Market Value in a Depressed Real Estate Market
[ NCHRP 20-06 (Legal Problems Arising out of Highway Programs) ]
| Project Data
||The Thomas Law Firm|
||Larry W. Thomas, Esq.|
Since 2005, a myriad of social and economic circumstances, including, but not limited to diminished property values, foreclosures, loan values exceeding actual fair market values, natural disasters, and other casualties, have presented significant challenges in the acquisition of properties for transportation projects. Outstanding liens encumbering those properties often exceed the actual and current fair market values. According to the Wall Street Journal, in November, 2009, “the proportion of U.S. homeowners who owe more on their mortgage than the properties are worth has swelled to about 23%. Figures prepared by First American CoreLogic, a real estate information company in California, showed that at the end of the third quarter of 2011, 10.7 million, or 22.1% of all residential properties with a mortgage were in negative equity. In some areas of the United States, the proportion of homeowners with a mortgage who are in negative equity, referred to as “underwater” or “upside down” on their mortgages is greater than 40%.
The fair market value rule in these circumstances works an involuntary hardship on property owners and lienholders, leaving a forced loss on one or more parties (i.e., the property owner, condemnor, and/or lienholder). How do condemning agencies and the courts resolve the problem of just compensation in light of declining property values caused by financial calamities beyond the parties' control? What statutory remedies exist? Have the courts created judicial exceptions to the fair market rule for just compensation? Finally, do depression-era precedents or other administrative policies provide any guide to condemning agencies and the courts to resolve this problem? Research is needed to answer some of these questions.
Status: The report has been published as NCHRP Legal Research Digest No. 62, Eminent Domain and Fair Market Value in a Depressed Real Estate Market.