Real Estate & Construction Blog

Real Estate

Commercial Real Estate Appraisal and Valuation in the Time of Covid-19: What Is the New Normal?

Updated 9/8/2020 This post is co-written by Gary Van Cleve, Mitchell Simonson and Josh Folland This unprecedented time of pandemic has brought social interaction to an abrupt halt with cautious open-up just beginning. Americans have had to learn to live, work, educate their children, recreate, shop and otherwise transact business—all while social-distancing, self-isolating and not being physically present. Despite these radical changes, the business of America carries on, somehow, someway, including commercial real estate appraisal work. How has COVID-19 affected the appraisal process and the values of the various markets and submarkets of commercial real estate? What changes will there be, if any, to the appraisal and valuation process because all aspects of our society are being forced to carry on their daily activities differently while trying to protect ourselves from a sometimes debilitating, sometimes deadly, always mercurial virus with no known cure? Early indications present some sobering numbers with respect to commercial real estate transactions. For instance, 11-county Twin Cities commercial real estate sales for the first quarter of 2020 had a volume of 504 units with a total value of $1.718 billion. Second-quarter 2020 sales nose-dived to 229 units with a total value of $943 million. Retail properties fell off a cliff in Minnesota between the first and second quarters of 2020. In the 11-county Twin Cities area, 174 retail properties closed in the first quarter and only 45 retail property sales closed in the second quarter. While we certainly do not pretend to have all the answers, we see some patterns and trends amid all the uncertainty. COVID does not seem to be affecting all property types and all property locations equally. In fact, it appears at this point that the impact of the virus seems to be both property-type dependent and location dependent. Places where the virus has not hit quite as hard do not appear to have suffered as much in terms of real estate transactional volume and pricing impacts. With respect to property types, quite clearly restaurant, retail and hotel properties have been hard hit. The Trepp CMBS Delinquency Rate declined in August to 9.02% after peaking at 10.32% in June. For reference, the all-time high was 10.34% in July 2012. Notably, the lodging (22.96%) and retail (14.88%) sectors are being hit the hardest, while industrial, multifamily and office delinquency rates have hovered around historical levels. Office properties present interesting issues and raise interesting questions. Will office workers return to work full-force at some point? Will some employers decide that their organizations work just as efficiently (or more efficiently) and more cheaply by keeping some, many, or all their employees working from home post-pandemic? Will some employers decide they need moreoffice space for their organizations in order to implement social distancing and to keep their workers safe? A Cushman Wakefield national survey of law firms recently revealed that 72 percent of those firms surveyed believe that they will need somewhat less or substantially less space in the future and that 15 to 30 percent of their jobs may be eliminated. Moreover, many major national employers such as Facebook, Amazon, Capital One, Amazon and Zillow, are extending work-from-home for their employees either into the fall or for the rest of 2020. Pandemic or no pandemic, we all must live somewhere. Indeed, because of the pandemic, our homes have become more important than ever—having become the exclusive place for us to be safe while we try to live, work, “go to school” and entertain ourselves. To date, professionally-managed multi-family apartments are enjoying high levels of renter payment. According to the National Multifamily Housing Council’s Rent Payment Tracker, 92.1 percent of apartment renters paid their rent as of August 27th. This is a 1.9-percentage point decrease from the share who paid rent through August 27, 2019 and compares to 93.3 percent that had paid by July 27, 2020. This statistic is based on data covering 11.4 million professionally-managed apartment units. The Minnesota Multi-Housing Association surveyed owners of about 34,000 apartments in June with favorable reports that more than 9 of 10 renters have been meeting their rent payment obligations to date. This could well be, however, the silver lining of the cloud. Over half of renters have at-risk wages because of the pandemic and live in single family or small multi-family rentals with two to four units. It is likely that federal relief has been propping up the rental payment numbers. The $600 weekly federal enhancement to unemployment benefits will end on July 31, unless Congress acts to extend it or provides some other form of rent relief payments. One indication of buyer expectations becoming increasingly cautious in the multi-family market is that one commercial real estate broker has reported eight multifamily deals that have been sidelined recently. As buyer expectations decrease, seller prices will also have to decrease if “normalized” real estate sales volumes are ever to be reached. Property owners that have good standing with their banks and good cash flow will not see the need to meet buyers’ lower expectations. The massive unemployment we have seen has put the country in a recession; accordingly, it seems likely that price expectations of property owners will start to fall and align more closely with the lowered buyer expectations that are already being seen. About the Authors Gary Van Cleve, Shareholder, Larkin Hoffman Gary A. Van Cleve is a seasoned trial attorney and an appellate advocate handling a full range of real estate-related litigation. Gary focuses on representing property owners in: (1) condemnation actions where either the government or a utility company takes private property for a public use through its power of eminent domain, (2) land use disputes with local governments typically involving zoning or permitting issues, and (3) property tax appeals. Gary is the chair of Larkin Hoffman’s real estate litigation practice group. Mitchell Simonson, Founder, Simonson Appraisals With a wide range of commercial appraisal experience and real estate consulting, Mitchell Simonson’s 16 years of experience, knowledge, and ‘boots on the ground’ attitude are invaluable assets that have helped countless clients make smart business decisions. As owner and founder of Simonson Appraisals, he leads the firm in delivering credible valuation services for financial institutions and attorneys specializing in the areas of condemnation, property tax appeal and estate planning. Josh Folland, Senior Managing Director, Valbridge Property Advisors Valbridge provides independent valuation and powerful insights to help clients make the best business and investment decisions. We specialize in appraisals, market studies and litigation support on all types of real property. Valbridge provides independent valuation services – we are not owned by a brokerage firm or investment company. With more than 675 employees in over 70 locations, clients across the U.S. benefit from our collective strength.

June 19, 2020

Eminent Domain

How Will COVID-19 Affect Real Estate Values?

Those of us in the real estate practice—and particularly in areas concerning real estate valuation such as eminent domain and property tax appeals—are obviously quite concerned about the impact of the COVID-19 pandemic on our clients’ property values as we all proceed through these very uncertain times. I think about two upcoming quick-take hearings that I have for clients in late March and early April. The quick take hearing is the critical time during an eminent domain proceeding when the court grants the government title to and possession of the real property needed for whatever public project necessitated the taking. The date of this transfer of title and possession—the so-called “take date”—is the date on which the property will be valued for purposes of determining the damages that the property owner is owed as “just compensation” for the taking. Will the unfortunate timing of my clients’ quick take dates in the midst of this pandemic affect their ability to recover just compensation? It’s anybody’s guess at this point. Josh Folland and his group of appraisers at Valbridge Property Advisors have interviewed Twin Cities real estate professionals to try to assess the potential impacts of the pandemic at this early stage. I’m pleased to pass on Valbridge’s newsletter and report for your information. If you have thoughts (or experiences) of your own, we’d love to hear from you. Stay safe and stay well. Valbridge notes that market sentiment is likely to change as the impacts of the virus become more clear. They will continue to survey the market and will publish updates to this report.

March 20, 2020

Eminent Domain

Relocation Reimbursement: Actual Moving Expense or Business Re-establishment?

Property owners forced to move their business locations through condemnation for the Metropolitan Council’s Southwest Light Rail Transit project are generally entitled to compensation on two fronts—first, they are entitled to just compensation for the taking of their real property; second, they are entitled to relocation benefits for the costs and expenses of moving their business operations to new business premises. Navigating the weird amalgam of federal statutes, federal regulations and state statutes governing “relocation reimbursement” can be confusing and frustrating for these business owners. Consider a business client of ours requiring both warehouse and office space that relocates after condemnation to a building once occupied by a manufacturing business. The city insists that the new and different use required by the business—warehousing as opposed to manufacturing—requires installation of a new water line to accommodate sprinkler system modifications for the former manufacturing space that will now become warehouse space. The cost? $90,000. Can the business owner receive relocation reimbursement from Metropolitan Council for this necessary modification to carry on the business in the new location? It may depend on whether that cost is considered an “actual moving expense” or a “business reestablishment expense.” Why does it make a difference? Because the law caps “business reestablishment expenses” at $50,000—not a difficult lift to reach for an established, successful small business possessing a large inventory that is forced to relocate. But there is no monetary limit on “actual moving expenses,” other than that the expense must be “reasonable.” In the example of the sprinkler modifications, the regulations are less than clear. On the one hand, the relocation regulations state that, “modifications necessary to adapt utilities at the replacement site, to the personal property …” can be reimbursable as an actual reasonable moving and related expense. Application of this rule would exclude the water utility expense from the $50,000 cap. On the other hand, the relocation regulations also state that, “[r]epairs or improvements to the replacement real property as required by Federal, State, or local law, code or ordinance …” may qualify as a reestablishment expense. Application of this rule would subject the expense to Minnesota’s $50,000 cap on reestablishment expenses. The Metropolitan Council rejected the business owner’s $90,000 expense for reimbursement, concluding that it was a reestablishment expense subject to the $50,000 cap, which the owner had already exhausted through reimbursement of other expenses. Where does that leave the business owner? The allowable recourse to the Metropolitan Council’s final determination is appeal to an Administrative Law Judge. The process ultimately could wind up in the Minnesota Court of Appeals if the administrative hearing process leads to an unsatisfactory outcome.

October 30, 2019

Eminent Domain

Public Project, but Private Property Owner Pain

In case you missed it, WCCO ran a story the other night about a small business owner who has been displaced through condemnation of her property by the massive, two-billion dollar Southwest Light Rail project. The business owner said she was promised by the project’s sponsor, the Metropolitan Council, that she would be “made whole.” Her land and building were taken through the legal process of eminent domain and she continues to seek compensation from the Met Council for the loss of her business property and for the costs of relocating her business. She said that after three years with no final resolution, she has been forced to take out loans to keep her business afloat and that she is still seeking several hundred thousand dollars in moving expense reimbursement from the Met Council. This is a familiar story and a familiar dilemma. The Takings Clauses in both the United States and Minnesota Constitutions require that property owners receive “just compensation” when their property is taken for a public purpose. This is an express recognition that when the government plans and executes a public project for the greater good, the burdens of the project are likely imposed more heavily on some members of the public than on others. As the Minnesota Supreme Court has put it, “The purpose of the Takings Clause is to ensure that the government does not require some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Fair application of the Takings Clause ensures that the burdens of a public project are equalized between the general public that benefits from the project and individual property owners who must sacrifice property interests to make way for the project. The greater public benefits from rail transit. In turn, those who have been forced to give up their property for the project are constitutionally entitled to be paid for what has been taken from them. The payments to these property owners who have suffered loss come from taxpayer money. This ensures that the burden of the project is “borne by the public as a whole” and that the burden is not unfairly borne by the unfortunate property owners who must move their businesses or homes. What struck me in the television news report was a comment by a Met Council official who pointed out that the agency needed to be responsible with taxpayer money (undoubtedly true) and that there is a $50,000 limit on relocation reimbursement to a business property owner. The latter comment is not entirely accurate. There is indeed a $50,000 limit on “reestablishment expenses,” which are expenses incurred by the business owner in relocating and reestablishing the business at a replacement site. But there is no monetary limit to “relocation expenses” that can be shown to be both “reasonable” and “necessary.” The broad category of relocation expenses includes everything from professional services (planning and executing the move, installing equipment and property at the relocation site), to disconnecting, dismantling, removing, reassembling and reinstalling machinery and equipment, to reestablishing utility connections at the replacement site; such expenses also include modifications needed to personal property to adapt it to the replacement site. The business owner in the television news story said she was still attempting to recover $400,000 in moving-related expenses. The attorney representing the business owner said that Met Council was adopting an unduly narrow interpretation of the law governing relocation reimbursement. The Met Council official ultimately expressed that the greater good was being served because “this is a very good project” and “very valuable for the community.” That’s not the point. The constitution and the law provide that regardless of the merits of the public project, any private property owner who loses real property and who is forced to relocate a business mustbe paid both just compensation for the real property loss and reimbursed for reasonable and necessary relocation expenses. Otherwise, these property owners are being forced to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. Click herefor the full WCCO story.

September 25, 2019

Eminent Domain

Condemnation in Reverse: Inverse Condemnation Can Be a Powerful Remedy for Property Owners

Inverse condemnation is a potentially powerful kind of litigation ju jitsumove that property owners can use in certain situations to call the government to account when it damages their property by an official act or omission. Most everyone has some familiarity with eminent domain, also known as condemnation or a governmental taking. Where private property has been taken or damaged for some public project or purpose, the government is required by the Constitution to pay the owner for the loss in the property’s value. Sometimes the government takes an action that may damage private property and doesn’t see that it has taken anything that triggers the property owner’s right to compensation. This is where inverse condemnation comes in, acting as a kind of condemnation proceeding in reverse. When the government fails or refuses to commence an eminent domain proceeding, many states, including Minnesota, allow a property owner to bring a lawsuit asking the court to order the government to bring a condemnation proceeding to determine damages to an owner’s property. Attorneys’ fees are often awardable to the property owner in inverse condemnation actions and mandatory in Minnesota if the property owner wins. Some recent creative examples of the use of inverse condemnation to force an eminent domain proceeding include those for damages caused by the California wildfires that destroyed thousands of homes and the Flint, Michigan water crisis. In Flint, a supposedly cheaper new water supply for the city not only endangered human health, but also caused damage to properties when the corrosive water destroyed plumbing and stigmatized the properties as having contaminated water. Follow this link if you are interested in learning more about how inverse condemnation might apply to a situation that you may be facing as a property owner.

July 2, 2019

Legislative and Judicial Updates

Will Property Owners Finally Be Allowed Immediate Entry Into Federal Court on Regulatory Taking Claims?

For more than 30 years, a property owner who claimed that a regulatory action by the government amounted to a compensable taking under the Fifth Amendment to the U.S. Constitution has been required to litigate the issue in state court first, before being allowed to gain entry to federal court. The 1985 case of Williamson County Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 105 S.Ct. 3108 established a peculiar form of “ripeness” that required property owners first to exhaust their administrative remedies, and then exhaust their state court remedies before they would be permitted to sue out a federal takings claim in federal court. In other words, the federal courts would not consider a regulatory takings claim to be “ripe” for hearing in federal court unless and until the property owner had first jumped through both administrative and state court exhaustion hoops. Williamson County ’s ripeness doctrine has created confusion for courts and frustration and delays for litigants since it was handed down. The U.S. Supreme Court now seems to be interested in reconsidering Williamson County, signaled by its granting review of a Pennsylvania case that squarely raises the issue of whether property owner Rose Mary Knick may go directly to federal court to litigate her unconstitutional taking claim arising from local officials seeking to enter onto her 90-acre farm to search for ancient burial sites. Fifteen years ago, a Minnesota litigant’s unsuccessful attempt to entice the Supreme Court to reconsider Williamson County illustrates the dilemma to litigants caused by the case’s ripeness doctrine. Rochester real estate developer Franklin P. Kottschade obtained approval from the City of Rochester in 2000 to develop townhomes on about 16 acres of his 220-acre development site in south Rochester. The city approved the townhomes, but attached numerous conditions to its approval, which resulted in the project becoming economically unfeasible for Mr. Kottschade. A court decision by the Minnesota Court of Appeals described the effect of the city’s conditions on the development: “The city’s imposition of the conditions reduced the buildable area to 4.93 acres, and resulted in a site that could accommodate only 26 of the proposed 104 townhome units[1].” In a nod to Williamson County’s administrative exhaustion requirement, Mr. Kottschade asked the city for a variance from the conditions that it had just imposed. Unsurprisingly, the city denied the variance request. In an about-face from Williamson County, however, Mr. Kottschade did not follow the state court exhaustion requirement by suing out his regulatory takings claim in state court; instead, he sued directly in federal court for a regulatory taking. Both the U.S. District Court and the U.S. Court of Appeals for the Eighth Circuit dismissed the case based on the controlling authority of Williamson County. The Eighth Circuit pointed out, however, the dilemma that litigants like Mr. Kottschade face because of Williamson County: The plaintiff [Mr. Kottschade] points out, and justly so, that if he is required to seek a post-deprivation remedy in a state-court inverse condemnation action, he may end up being altogether denied a federal forum for what is undoubtedly a federal right. Such a federal forum, he urges, is guaranteed by 42 U.S.C. § 1983 [the federal civil rights statute] … and a plaintiff has a right to bring a § 1983 claim in a federal trial court, at his option. If plaintiff must go to the state courts, he would presumably need to show, in order to prevail … that a taking had occurred, and that just compensation had not been paid. If the state courts hold for the plaintiff, then all is well, from his point of view, and there would be no need for recourse to a federal forum. But if they hold against him, for example, on the ground that no taking has occurred, doctrines of former adjudication may be a bar to a new action under § 1983 in a federal trial court[2]. What the Eighth Circuit is pointing out is that a property owner may fall victim to two different doctrines of federal adjudication. If the property owner follows Williamson County and sues in state court first – and loses – then when the property owner attempts to seek relief in federal court, another federal doctrine may further thwart federal court consideration of the claim on the merits, under the theory that the claim has already been decided. Rose Mary Knick may resolve this dilemma. It is being briefed now, but is unlikely to be decided until the Supreme Court’s next session, which will begin in October. Stay tuned. [1] Kottschade v. City of Rochester, 760 N.W.2d 342, 345 (Minn. App. 2009) [2] Kottschade v. City of Rochester, 319 F.3d 1038, 1041 (8th Cir.), cert. denied, 540 U.S. 825 (2003)

May 16, 2018

Wisconsin

Wisconsin’s Act 67 Could be a Game-Changer For Conditional Use Permit Applicants

Well, it seems that the State of Wisconsin has gone from one extreme to another in the area of codifying conditional use permit (CUP) law. Where before there was nothing, last fall the Wisconsin State Legislature adopted amendments to county, city, town and village land use statutes that set out standards to guide and limit discretion of local zoning bodies in granting and denying CUPs. The legislation was a direct outgrowth of a very unsatisfying Wisconsin Supreme Court decision (AllEnergy Corp. v. Trempealeau County), where it took 88 pages and three separate opinions for the court to uphold a CUP denial by a county board of supervisors; the CUP was sought to carry out a frac sanding mining and processing operation. The new Wisconsin law codifies matters pertaining to CUPs that are largely recognized in Minnesota, but only in various court decisions and not in state statute. Here is a link to a recent article I wrote summarizing the new Wisconsin law on CUPs.

May 2, 2018

Legislative and Judicial Updates

2017 Tax Reform Bill Would Eliminate Federal Historic Tax Credit Program

One of the current tax code provisions that would be eliminated under the House-proposed tax reform bill is the popular federal Historic Tax Credit program (HTC). The HTC dates back to the Reagan Administration and currently provides a federal tax credit in the amount of 20 percent of qualified rehabilitation expenditures for any certified historic structure. Certified historic structures are those that are either listed in the National Register of Historic Places, or located in a registered historic district and certified as being of historic significance to the district. The tax credit, which can be taken over a five-year period following completion of the rehabilitation of the structure, has spurred a lot of “main street” revitalizations and funded everything from asbestos abatement to insulation replacement. The obvious purpose of the program is to encourage redevelopment of historic and abandoned buildings. According to the National Trust for Historic Preservation, since the inception of the HTC program in 1981, it has been used to renovate more than 40,000 structures and channeled $117 billion into private investment to rehabilitate these structures. The apparent purpose of eliminating the HTC program would be to increase tax revenue needed to offset tax cuts provided in the tax reform bill. Ironically, an economic impact report by the National Park Service and Rutgers University concluded that for every dollar of tax credits given under the program, $1.20 in construction activity, business taxes, income taxes and property taxes was created. The HTC program generated 86,000 jobs in 2015 alone. Id. Loss of the HTC program would eliminate what has grown to be an important incentive for promoting public-private investment in revitalizing downtowns, neighborhoods across the country. In a further irony, President Trump used the HTC program to develop the Old Post Office in Washington, D.C. into the Trump International Hotel, which earned the developer $40 million in tax credits. Minnesota also offers a 20 percent credit that largely follows the federal HTC, but must be taken against Minnesota state taxes. The Minnesota program would appear to be affected if the federal HTC goes away because in order to claim the Minnesota credit, the taxpayer must be allowed the federal credit. While the tax reform bill is a long way from becoming law, provisions in the 400-page document will impact many programs in ways that are still coming to light, including the federal HTC program.

November 8, 2017

Legislative and Judicial Updates

Cities Cannot Require Payment of Fees for Future Road Improvements

Forgive developer Martin Harstad if he thought he was in Potterville and not Woodbury when the city told him he had to pay nearly $1.4 million in “road assessments” as a condition of approval for his “Bailey Park” residential development. Harstad sued Woodbury to challenge its authority to demand the road assessments and won in both the trial court, and now the Minnesota Court of Appeals in a published decision released September 18. For now, it’s a wonderful life for Harstad, other developers and for property owners who have been troubled for years over whether Minnesota cities have the power to condition development approvals on the payment of (frequently hefty) fees for future road improvements to accommodate new growth and development. Here, the court of appeals struck down what amounted to an impact fee assessed by Woodbury, but sidestepped the longstanding question of whether impact fees are legal in Minnesota. As is the case for other developers, Harstad was already paying significant amounts for transportation infrastructure that would be needed within the Bailey Park development. Woodbury attempted to rationalize its road assessment policy by declaring that new development must not only “pay its own way,” but also pay “all associated costs” for “public infrastructure.” This meant, according to the city, that if a proposed development is perceived as contributing to the need for unspecified, offsite road improvements at unspecified locations outside the development, at unspecified points in the future, then road assessments under the city’s formula must be imposed and collected now as a condition of approval for the development. The court of appeals said that Woodbury can only exercise powers conferred by the state legislature and that Woodbury overstepped its powers here. The court said of the statute on which the city pinned its hopes for upholding the assessment (Minn. Stat. Sec. 462.358, subd. 2a): “In fact, subd. 2a does not authorize collection of any type of assessment. Rather subd. 2a authorizes city planning.” While Woodbury called its fees “major road assessments,” these types of charges have a variety of names, including “transportation improvement district fees,” “trip charges” and “transportation fees.” The name may vary, but the purpose is the same: cities are seeking to capture revenues for anticipated future upgrades to area roads to accommodate growth from new development. Regardless of a particular city’s label, the commonly-recognized name for this revenue-raising practice is “impact fee.” Impact fees were defined by the Minnesota Supreme Court in Country Joe, Inc. v. City of Eagan,560 N.W.2d 681, 685 (Minn. 1997), as fees: (a) in the form of a predetermined money payment; (b) assessed as a condition to the issuance of a permit or plat approval; (c) justified as within local government powers to regulate new growth and development and to provide for adequate infrastructure; (d) levied to fund large-scale, off-site public facilities and services necessary to serve new development; and (e) in an amount proportionate to the need for the public facilities generated by new development. Country Joedid not clearly decide, however, whether impact fees were illegal in Minnesota. The court in Harstad did not address whether Woodbury’s road assessment was an impact fee, or whether impact fees are legally authorized in Minnesota. [This blogger made the case that such fees are not legally authorized in Minnesota in a March 2009 article in Hennepin Lawyer entitled“Road Improvements: When Are Special Assessments Legitimate?” The court of appeals in Harstad also did not address whether Woodbury’s road assessment was an illegal tax. Country Joeheld that the City of Eagan’s “Road unit connection charge” was an illegal tax under state law that limits municipal taxing powers. The court of appeals in Harstad did not address the illegal tax issue because it was raised only by amicus parties and not by either of the parties to the litigation. The City of Woodbury has until October 18 to decide whether to petition the Minnesota Supreme Court for review.

September 21, 2017

Eminent Domain

New Rights Available to Property Owners in Path of Transit Projects

Property owners in the path of light rail and bus rapid transit projects are now eligible to receive the full protection of the state’s eminent domain laws, thanks to legislation passed in 2017 by the State Legislature. Before passage of this legislation, the Metropolitan Council (Met Council) had been taking the position that it was a public service corporation. This status would have exempted the Met Council from extending to property owners certain compensation rights normally available under Minnesota law when private property is taken for public projects. Because of this new legislation, the following property owner rights are now available to those whose property is taken – in whole or in part – by the Met Council for a light rail or bus rapid transit project: • Attorney fees under Minn. Stat. § 117.031, which provides that the court may award attorney and expert fees if just compensation recovery is at least 20 percent, but not more than 40 percent greater than the Met Council’s last written offer. The statute further provides that the court must award such fees if the just compensation recovered is more than 40 percent greater than the last written offer. • The Met Council must provide property owners with a written offer, along with a copy of an appraisal. The council must also make a good faith attempt at negotiating with the property owners and reimburse them for appraisals up to $1,500 for single and two-family residences and $5,000 for other types of property. • Property owners must now be advised by the Met Council of certain rights in the petition filed with the district court to commence the condemnation proceedings. These rights include their right to challenge the public use, purpose or necessity of the project for which their property is being taken and their appeal rights from any adverse determination on such a challenge. • Business property owners are now eligible to seek compensation for “loss of going concern” under Minn. Stat. § 117.186, and to seek minimum compensation under Minn. Stat. § 117.187. Minimum compensation recognizes that when a business owner must relocate, the damages, at minimum, must be sufficient to allow the owner to purchase a comparable property in the community. • The Met Council cannot require a property owner to accept as part compensation a substitute or replacement property and cannot force the owner to accept the return of property that has been acquired. • Displaced business property owners are now also eligible for relocation assistance in the form of reestablishment expenses up to a maximum reimbursement of $50,000. All displaced property owners also now have the right to challenge their eligibility for relocation assistance and to challenge the amount of such assistance through a contested case proceeding before an administrative law judge. These are significant statutory rights that the legislature adopted to ensure that property owners displaced by a public project would have the opportunity to receive “just compensation” for the taking of their property, as the state and federal constitutions require. The 2017 legislation restores these rights to property owners who find themselves in the path of transit projects carried out by the Met Council.

August 30, 2017

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Gary A. Van Cleve

Commercial Real Estate Appraisal and Valuation in the Time of Covid-19: What Is the New Normal?

How Will COVID-19 Affect Real Estate Values?

Relocation Reimbursement: Actual Moving Expense or Business Re-establishment?

Public Project, but Private Property Owner Pain

Condemnation in Reverse: Inverse Condemnation Can Be a Powerful Remedy for Property Owners

Will Property Owners Finally Be Allowed Immediate Entry Into Federal Court on Regulatory Taking Claims?

Wisconsin’s Act 67 Could be a Game-Changer For Conditional Use Permit Applicants

2017 Tax Reform Bill Would Eliminate Federal Historic Tax Credit Program

Cities Cannot Require Payment of Fees for Future Road Improvements

New Rights Available to Property Owners in Path of Transit Projects

Firm Highlights