Lawmakers are considering a bill that would make the North Carolina Department of Transportation pay for offering unfairly low buyout prices to property owners facing condemnation.
The legislation proposes several changes that state condemnation lawyers “have been waiting and wishing desperately to have for years,” said Anne Duvoisin Fisher, a land law attorney at HensonFuerst in Boone.
One of the most significant – and potentially costly – provisions of House Bill 127 requires the DOT to pay for landowners’ legal fees and their costs for appraisals and engineering work whenever a jury award or judgment exceeds the state’s valuation of the condemned land by 25 percent or more.
Every verdict in a condemnation case last year exceeded the 25-percent threshold, according to the Fiscal Research Division, a nonpartisan arm of the General Assembly that studied the potential impact of the bill.
“Almost never does a trial end up determining less damages for the property owner than the DOT’s deposit on the property, which means they’re low-balling,” said one of the bill’s primary sponsors, Republican state Rep. Paul Stam, an Apex attorney and House speaker pro tem.
The legislative study showed that all of the bill’s provisions could cost the state more than $5 million by fiscal year 2020 – and more than $4.7 million of that estimate is attributed to attorneys’ fees.
State transportation officials contend that the fee provision would “reduce any incentive to settle by the property owner or his attorney … and [encourage attorneys to] drag cases out as long as possible, and engage in unnecessary discovery,” stated the study’s authors, Amna Cameron and William Childs.
But they noted that the provision might also persuade DOT officials to start offering more money to owners rather than coming in low and risking having to pay fees down the road.
Cameron and Childs acknowledged that the DOT has been accused of using “internal appraisal staff and contracted appraisers that may generate appraisals lower than other appraisers, or use different methodologies to produce lower damage assessments.”
“A higher initial appraisal will likely encourage more settlements, but the appraisal process is regulated to prevent discrepancies,” they added. “While the argument may be legitimate, it is anecdotal and has not been proven.”
DOT Deputy Secretary of Communications Mike Charbonneau did not respond to a message seeking comment.
Bill has ‘fatal flaw’
The bill also attempts to address concerns about the state’s Map Act by changing the amount of time in which the DOT has to respond to a landowner’s application for a building permit or plat approval from three years to six months.
The DOT uses the Map Act to file a road plan with the local register of deeds and freeze development within a protected corridor for years, sometimes decades, which causes property values to plummet before the state finally approaches owners with buyout offers.
The state Court of Appeals recently dealt a major blow to the DOT when it ruled that the agency’s use of the Map Act constituted a taking, meaning that the state has to pay owners within a reasonable amount of time.
“Perhaps the Map Act just ought to be repealed or drastically limited,” Stam said. “But I’d think that giving the government 180 days to make up its mind about whether to acquire a property or not is reasonable.”
Winston-Salem attorney Matthew Bryant, a partner at Hendrick Bryant Nerhood Sanders & Otis who is spearheading statewide litigation challenging the Map Act, said the bill doesn’t do enough.
“The fact that the map filing never expires is a fatal flaw,” he said. “It misses the point that the map doesn’t go away and there will be nothing to do for these poor souls who are stuck in this thing.”
He added, “The Legislature is missing the forest for the trees. The Legislature needs to hold the DOT accountable for getting roads planned and funded in a far more efficient way.”
Fisher said one of her clients recently applied for a building permit after the current three-year waiting period expired and was denied because he was in the path of a Map Act project.
“So from my seat in the house, whether its 180 days or three years doesn’t really address the issue,” she said. “It won’t hurt, but it won’t help.”
New damages formula
But Fisher is excited about other proposals within the bill, one of which would apply the damages formula used in private condemnation actions to partial land-takings carried out by the DOT. The same damages test already is used in full takings.
Stam, the bill’s sponsor, called the private test a “much fairer measure of damages.” He added, “All we’re doing is saying that in figuring damages we should do it the same way as if Duke [Energy] was taking the property.”
The bill also would require the DOT to compensate owners for partially cutting off access to their properties when building roads. The provision, Fisher said, “means that one of the major injuries actually caused by condemnation can now for the first time be compensated in North Carolina, a loss which devastates countless commercial enterprises under the current state of the law.”
Finally, the bill proposes that the DOT be on the hook for interest on a damages award until it is paid. Currently, the clock on interest stops ticking for the DOT whenever judgment is entered.
“The DOT could fail to pay a judgment for years without consequence,” Fisher said. “Can you imagine how your bank would react to your refusal to pay your mortgage interest after you signed the mortgage?”