Art Linkletter had a very popular television show called “Kids Say the Darndest Things.” We would like to appropriate the title and modify it to say “Condemnors Say the Darndest Things.”
We admit, although we have been at this for a number of years, sometimes we are still surprised at the arguments made by Condemnor’s counsel in an effort to keep just compensation awards low.
Recently, Counsel for a Condemnor argued that the Court could not consider the reasonable probability of rezoning for the subject property because it disregards the lease that was in effect which restricts the owner from seeking such rezoning.
This argument indicates a complete failure to understand what is probably the most fundamental and basic rule in eminent domain. When real property is acquired by condemnation, it is valued on the date of acquisition free and clear of all leases, mortgages and liens at its highest and best use regardless of the property’s actual use. Matter of City of New York (Mott Haven Houses), 33 Misc2d 808, aff’d 16 AD2d 637, aff’d 13 NY2d 959 (1963); Great Atlantic & Pacific Tea Co. v. State of New York, 22 NY2d 75, 84 (1968).
This is the concept of highest and best use.
The rule that real property is valued at its highest and best use free and clear of leases, mortgages or other encumbrances regardless of actual use on condemnation is so fundamental that just about every eminent domain decision begins with the above statement.
In 1931, the Court of Appeals wrote in Matter of City of New York (Allen Street), “the City pays for what it takes and nothing else. By such taking it extinguishes all existing rights and interests in the property taken.” 256 NY 236 (1931). The Court stated, “even if the lease by the landlord to the tenant in this case had not contained a clause expressly providing that ‘the term of the lease shall cease’ when possession of the property is taken by the city, nevertheless, by virtue of the fiat of the sovereign, the lease would ‘cease and determine and be absolutely discharged’ upon vesting of title which, indeed, preceded the actual taking of possession.” 256 NY 236 at 242. Also see Matter of Willcox, 165 App Div 197 (2d Dept 2014). It is not a new principle. See Edmands v City of Boston, 108 Mass 535 (1871). As the Court of Appeals noted in the Allen Street case, citing Edmands, “No leasehold can survive the appropriation of the land itself, and where the City takes annexations to leased real property, it takes them, not because they are owned by either landlord or tenant or appurtenant to some interest in the property, but because they are part of the real property. Matter of City of New York (Allen Street), supra, 256 NY 236, 242 (1931).
There is no question that the law is well-established that in an eminent domain case the property is valued free and clear of all leases, mortgages, or encumbrances. Property is never limited by its use the day before the taking. This has been so for over 100 years. In Re Simons, 130 App. Div. 350 (3d Dept 1909), aff’d, 195 NY 573 (1909), aff’d Sub Nom McGovern v New York, 229 US 363 (1913).
An owner whose property is acquired by condemnation is never limited to the use which he made of his property but is entitled to receive its market value “based on the most advantageous use.” United States v. Miller, 317 US 369, 375 (1943).
Case law that highest and best use is to be the measure of damages regardless of actual use is fundamental, usually expressed as follows: “irrespective of whether he is so using it.” Keator v. State of New York, 23 NY2d 337, 339 (1968). “. . . even though the owner may not have been using the property to its fullest potential when it was taken by the public authority.” Matter of Islip (Mascioli), 49 NY2d 354, 360 (1980).
The reasonable probability of rezoning is a relevant factor that must be considered in determining the market value of property taken in condemnation. Matter of Town of Islip (Mascioli), 49 NY2d 354 (1980); Matter of County of Suffolk (Firester), 37 NY2d 649 (1975) and Chemical Corp. v Town of East Hampton, 298 AD2d 419, 420 (2d Dept 2002).