Michael Rikon authored a column in the April 26, 2016, edition of the New York Law Journal titled, “Reasonable Probability of Rezoning as Component of Highest and Best Use.”
In his article, Mr. Rikon begins by explaining what the valuation concept of highest and best use is according to case law, the Appraisal Institute, and The Uniform Standards of Professional Appraisal Practice. “Certainly, many owners do not manage their property in a way that provides the most productive highest and best use.” But, once the property is condemned, it is valued at “the highest price obtainable in the market and that price must reflect the most profitable use of the property, in its highest and best use.”
Next, Mr. Rikon discusses that if a reasonable probability of rezoning exists, it can impact the highest and best use of the property, potentially increasing the property’s value.
“In a condemnation case, the standard employed is that of a prudent real estate investor. A claimant is never limited to what the owner has done to its property. Rather, the law allows a condemnee to have its property valued on the basis of what could be reasonably accomplished by a prudent knowledgeable real estate investor.”
“Thus, if the claimant can demonstrate a reasonable probability that a challenge to the zoning regulations could succeed in court, it is appropriate to grant some increment above the normal value of the property.”
Last, Mr. Rikon highlights that this reasonable probability has other applications, including assemblages. “The fact that the most profitable use of a parcel can be made only in combination with other lands does not necessarily exclude that use from consideration if the possibility of combination is reasonably sufficient to affect market value. Thus, a claimant is entitled to the fair market value of its property for its highest and best available use even though that use is in connection with adjoining properties, provided there is a reasonable probability that the condemned property would be combined with other tracts in the reasonably near future.”
The full article is available on the New York Law Journal website: