TACIR Releases Eminent Domain Report

Wednesday, March 13, 2013 | 9:07am

NASHVILLE, TN – Today, the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) released its report Eminent Domain in Tennessee, a study of two bills referred to TACIR by the General Assembly last year: Senate Bill 1566 (Ketron) [House Bill 1576 (Carr)] and House Bill 2877 (Gotto) [Senate Bill 2745 (Johnson)].  The government cannot take your land without paying for it, but they can force you to sell; this action is called condemnation.  The power to condemn is referred to as eminent domain.

In 2006, the Tennessee General Assembly enacted Public Chapter 863, which made significant changes to the state’s eminent domain law, including clarifying the definition of public use.  These reforms, partly made in response to the US Supreme Court’s ruling in Kelo v. City of New London, greatly improved protections for property owners in Tennessee.  But concerns remain about the time and expense of determining property value; the authority of housing development agencies, which are arms of the local government, to condemn property; and the ability of former property owners to repurchase condemned property that is not used by the government and later sold.

Senate Bill 1566 would have allowed a property owner to require the local government to submit to binding arbitration in order to determine the price of property to be taken by condemnation.  If it had passed, local governments would not have been able to object to the use of binding arbitration.  Like litigation, arbitration is a process for dispute resolution whereby a neutral third party renders a decision after a hearing at which both parties have an opportunity to be heard.  With binding arbitration, the parties are legally obligated to comply with the arbitrator’s decision.  While binding arbitration generally reduces the time required to resolve a dispute, it has many of the disadvantages of litigation.  Binding arbitration is less time consuming than litigation, mainly because the decision cannot be appealed simply because the parties do not like the result, but it is potentially as expensive because the parties still hire lawyers, appraisers, and other experts when arbitrating disputes.

One concern raised by local governments about Senate Bill 1566 involved the issue of being forced into a dispute resolution process that can be appealed in only very limited circumstances.  The only other state with a similar provision is Oregon, which allows a condemnee to force a condemner into binding arbitration only when the value placed on the property by the parties is $20,000 or less.  The fact that there is only one state that authorizes a property owner to force a condemner into binding arbitration, and only then in cases that involve small claims, suggests that this is not a desirable method for resolving eminent domain disputes.  In its report, the Commission points out that since Tennessee already offers a number of alternatives to litigation for resolving valuation disputes, property owners should not have the power to force local governments into binding arbitration.

One alternative to settling disputes that is already widely used in Tennessee is mediation, which is essentially a form of assisted negotiation.  Less time consuming and less costly than other methods of resolving disputes, mediation is an informal process through which a neutral third party, the mediator, helps the parties reach agreement.  The report says that mediation should always be considered before arbitration.  Mediation is generally much quicker and much less costly than either litigation or arbitration.  Moreover, the determination of value is left to the parties.  If successful, mediation would make the overall process less costly and time consuming and would allow the parties to decide the price for themselves.

The other bill referred to TACIR for study, House Bill 2877, would have eliminated the power of housing agencies to condemn property, and would instead require local elected bodies to institute condemnation proceedings on behalf of them.  In practice, local governments already have oversight of housing authorities’ use of eminent domain through approval of the redevelopment plans under which the authorities operate.  Under Tennessee’s redevelopment law, however, a governing body may delegate authority to approve redevelopment plans to another agency, including a housing authority, which then could both approve a redevelopment plan and use it as a basis for condemnation.  The Commission found no local government that has delegated this authority.

Still, removing language that allows the delegation of authority to approve a redevelopment plan to housing authorities would ensure that such agencies could not approve the plan themselves, thus using it as a basis for condemnation, without the oversight of the local governing body.  It would not preclude housing authorities from condemning property to carry out plans that are approved by the local governing body. It would simply ensure that housing authorities could not be given the authority to approve the redevelopment plans that would give them the authority to condemn property.  It would guarantee that the local governing body continues to have oversight of these projects.

TACIR also studied a related bill not referred to the Commission for study, Senate Bill 548 (McNally), House Bill 952 (Dunn).  This bill would have given a right of first refusal to property owners whose property was condemned by a local government or a state agency.  Currently, a right of first refusal exists only in the case of condemnations by the Tennessee Department of Transportation (TDOT).  A right of first refusal gives the condemnee the right to repurchase condemned property if the condemner decides to sell it.  The provisions of Senate Bill 548 would have required the property to be offered to the former property owner or his heirs or assigns, if sold within ten years, at the price paid by the condemner.

Many stakeholders interviewed for the report supported the idea of giving property owners a right of first refusal in all condemnation cases.  Nine other states already provide a similar right.  However, local government officials, in particular, expressed concern about the burden of finding the former owner, and especially his heirs or assigns some ten years later, and about having to accept the original price paid rather than fair market value.  Accordingly, the Commission recommended adoption of the TDOT model, including limiting the right of first refusal to ten years from the date of condemnation, limiting it to the former property owner only, and setting the price based on appraisals of fair market value.

Finally, several interviewees said that condemnation doesn’t happen very often, so efforts should be made to better inform property owners about their rights, including the right to receive just compensation for their condemned property.  This could be accomplished by requiring condemners to include a statement of rights along with the condemnation notice before initiating condemnation proceedings.  One option found in other states is an ombudsman, similar to the Office of Open Records Counsel within the Tennessee Comptroller’s Office, to assist individuals with their condemnation questions. 

The full report is available on TACIR’s web site at www.tn.gov/tacir/pubs_by_date.html.  For more information, contact Leah Eldridge at 615-253-4241 or Leah.Eldridge@tn.gov.                                                             

The Tennessee Advisory Commission on Intergovernmental Relations (TACIR) serves as a forum for the discussion and resolution of intergovernmental problems and provides high quality research support to state and local government officials to improve the overall quality of government in Tennessee and to improve the effectiveness of the intergovernmental system to better serve the citizens of Tennessee.

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Advisory Commission on Intergovernmental Relations