REAL ESTATE LAW UPDATE
November, 2002

A GOVERNMENT BODY MUST OFFER TO PURCHASE
YOUR PROPERTY BEFORE SUING YOU
TO TAKE THE PROPERTY FOR PUBLIC USE

By Nathan B. Hannah

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Recent and little-noticed changes in the Arizona statutes have injected new conditions on the power of government bodies to take private property for public use upon payment of just compensation, commonly known as condemnation. These new conditions don't limit the circumstances under which a government body can take your property for public use, but they do make the government body take some additional steps, steps that appear designed to make the process more certain for owners and tenants of the property.

There has been significant publicity recently about situations where citizens have questioned government bodies' use of the power of condemnation for purposes other than construction of public facilities like government buildings or roads. Should it be permissible for a government body to take a private property so that it can then sell the property to another private party? You may be surprised to learn that such action has long been permissible under the right circumstances. I'm not going to touch the political hot potato of whether that is what the law should be. The subjects of how the law came to be that way, and what exactly is a public use that justifies the exercise of the power of condemnation, are the topics of a number of legal treatises. I'm going to stick to the nuts and bolts of what the government body has to do to make the condemnation occur.

The formal process of condemnation has traditionally begun, from the property owner's point of view, when the government body files a lawsuit seeking condemnation of a particular parcel of property. That procedural starting point has now been changed by the Arizona Legislature. The Legislature has now imposed the requirement that twenty days prior to filing the lawsuit for condemnation, the government body must deliver to the property owner a written offer to purchase the property. The offer to purchase must be for an amount that the government body has estimated to be just compensation for the property. The offer must be accompanied by one or more appraisals of the property that support the amount of the proposed compensation.

The new requirements also give tenants additional notice of the condemnation. If the property is subject to a lease that has been recorded with the county recorder, the tenant under that lease must also receive the government body's written offer to purchase and appraisal(s) of the property. If the property is subject to more than one lease that has been recorded with the county recorder, or if there are no recorded leases, the government body must give notice of the offer and the appraisal(s) to any "party having a plain and obvious commercial ownership or operational interest in substantial improvements on the property by posting the notice in plain sight at the property...." This appears to mean that if the occupant of a commercial property is someone other than the owner but there is no recorded lease, the government body has to post the terms of the offer to purchase and the appraisal(s) at the property. The new requirements also give a tenant the right to obtain copies of the offer and appraisal(s) from the government body upon request.

One more significant new provision adopted by the Arizona Legislature is a statutory definition of just compensation, or "value," for the property:

the most probable price estimated in terms of cash in United States dollars or comparable market financial arrangements that the property would bring if exposed for sale in the open market, with reasonable time allowed in which to find a purchaser, buying with knowledge of all the uses and purposes to which it was adapted and for which it was capable.

I'm not sure why the Legislature thought it was necessary to adopt this statutory definition, but it does appear to give the property owner an added measure of certainty about the process.

These new requirements do not radically change the process, but they do give property owners and occupants the right to specific notice from the government body prior to the government body filing a lawsuit to condemn the property. They also require the government body to formally offer to purchase the property (although this often occurred anyway). Perhaps with these additional steps, the process of condemnation will be less mysterious, and therefore less intimidating, to property owners and tenants.

MORE LEGAL WRANGLING OVER TREES
As a postscript to my item last month about the "tree (and shrub) police" in Santa Cruz, California, I recently saw a news item describing a situation in the town of Sonora, California (about 150 miles northeast of Santa Cruz), where removal of a single tree became the subject of a lawsuit. Sonora apparently has no law like Santa Cruz's Heritage Tree Ordinance, or the tree would still be standing today.

According to the recent news item, an arborist told the owner of the property on which the tree stood that the tree's root structure was weakened, which could cause the tree to fall. The property owner, which happened to be the local school district, decided to remove the 85-foot-tall tree because of possible liability if the tree fell and caused injury. A local citizen filed a lawsuit to stop the removal of the tree, contending that the removal would violate state environmental laws. The county judge disagreed, and the tree was removed, much to the consternation of some of the residents. This obviously would not have been the result in Santa Cruz.

The other question this item raises, of course, is whether the property owner really needed to remove the tree because of possible liability if the tree were to fall on someone. Perhaps they could have posted a warning on the property ("WARNING: THIS TREE COULD FALL AT ANY TIME") or had all visitors to the property sign a release ("I understand that a tree on the property may fall on me without warning"). Most people already know, of course, that some trees may fall without warning and cause injury. They call them "widowmakers."

 

This communication is designed to bring legal developments of interest to the attention of our clients and others. It should not be relied upon as a substitute for specific legal advice in a particular matter. For further information on any of the subjects discussed, or for legal advice in connection with any particular matter, please contact us.