Urban Redevelopment Law: Expert Strategy for Eminent Domain Defense

The Fifth Amendment's Takings Clause provides that private property shall not be taken for public use without just compensation, and the Supreme Court's 2005 decision in Kelo v. City of New London held that economic development of a depressed area qualifies as a public use for takings clause purposes even when the property is transferred to private developers, and the Kelo decision prompted a legislative reaction in which more than forty states enacted new laws strengthening private property protections by restricting the government's ability to condemn property for private economic development. Land-use-and-zoning and real-property-tax-assessment counsel can evaluate whether the government's exercise of eminent domain satisfies the public use or public purpose requirement of the applicable constitutional provisions, assess whether the project is primarily for public benefit or primarily for private economic development, and advise on the most effective legal theory for challenging the government's authority to condemn the property.

The just compensation that the government is constitutionally required to pay for condemned property is measured by the fair market value of the property at the time of the taking, defined as the price that a willing buyer would pay and a willing seller would accept in an arm's length transaction, but many states have enacted statutes or adopted constitutional provisions that require the government to pay additional compensation for the loss of business goodwill, the cost of finding a replacement business location, and other items not automatically included in the fair market value standard. Real-estate-litigation and real-estate-civil-lawsuit counsel can advise on the specific methodology the government's appraiser is likely to use in determining just compensation, assess whether the government's initial offer reflects the full fair market value including loss of business goodwill, severance damages, and cost to cure, and develop the independent appraisal and expert testimony strategy for maximizing the owner's compensation award.

The blight designation is the statutory trigger that authorizes the government to exercise its redevelopment powers, including eminent domain, in a targeted area, and most state redevelopment statutes define blight in terms of specific physical, economic, and social conditions that must be present, and the property owner who challenges a blight designation can hire independent experts in real estate, urban planning, and economics to evaluate whether the area actually meets the specific statutory criteria and to document the ways in which the municipality's blight findings are unsupported by the available data. Land-use-and-real-estate and civil-rights-litigation counsel can advise on the specific legal standards applicable to a challenge to a blight designation, assess whether the municipality's blight findings are supported by the specific factual determinations required by the applicable state redevelopment statute, and develop the legal strategy for challenging the designation through administrative appeal, judicial review, or constitutional challenge.

The table below identifies the four principal categories of urban redevelopment disputes, the core legal issue in each category, the primary legal defense strategy for each category, and the law firm's targeted response for each dispute type.

Preliminary-injunction and injunctive-relief counsel can advise on the specific legal standards applicable to a property owner's challenge to a condemnation proceeding, assess whether the condemnation satisfies the applicable state's procedural requirements for the exercise of eminent domain, and develop the legal strategy for challenging the public purpose finding, the necessity of the taking, and the adequacy of the compensation offered.

Tax increment financing is a mechanism through which a municipality finances the upfront costs of a redevelopment project by issuing bonds secured by the anticipated future increase in property tax revenues that the redevelopment project is expected to generate, and the TIF district is established by designating a specific geographic area in which all future increases in property tax revenues above the current base are diverted to the TIF fund to repay the redevelopment bonds, and the legal requirements for TIF district formation typically include requirements for public hearings, fiscal impact analyses, and annual financial reporting to ensure transparency and accountability. Real-estate-development and municipal-law counsel can advise on the specific legal requirements applicable to a TIF district's formation, governance, and reporting obligations under the applicable state redevelopment law, assess whether the TIF district's financial plan and bond issuance comply with all applicable legal requirements, and develop the compliance strategy for satisfying the TIF district's ongoing legal obligations.

A community benefits agreement is a legally binding contract between a real estate developer and a coalition of community organizations that specifies the specific public benefits the developer agrees to provide in exchange for the community organizations' support for the project, and the benefits typically include commitments regarding local hiring preferences, affordable housing set-asides, community facility space, environmental mitigation measures, and ongoing community liaison obligations, and the CBA can be recorded as a covenant running with the land to ensure that the obligations are binding on the developer's successors. Civil-litigation-evidence and real-estate-dispute-resolution counsel can advise on the specific legal requirements for an enforceable community benefits agreement, assess whether the proposed agreement satisfies the legal standards for consideration, definiteness, and enforceability against successive owners and developers, and develop the community benefits agreement that most effectively protects the legal interests of the affected community.

The Uniform Relocation Assistance and Real Property Acquisition Policies Act requires all agencies that receive federal financial assistance to provide specific relocation payments and advisory services to all persons, businesses, farms, and nonprofit organizations that are displaced as a direct result of a federally funded acquisition, rehabilitation, or demolition program, and the specific payments available include replacement housing payments for displaced homeowners and tenants, moving cost payments, and business reestablishment payments for displaced businesses. Plaintiffs-rights and civil-damages-lawsuit counsel can advise on the specific rights and benefits available to displaced residents and business owners under the Uniform Relocation Assistance and Real Property Acquisition Policies Act, assess whether the displacing agency has complied with all applicable URA procedural and substantive requirements, and develop the strategy for maximizing the displacee's total relocation benefit package.

Inverse condemnation is the legal remedy available to a property owner whose property has been effectively taken or substantially damaged by government action even though the government has not instituted a formal condemnation proceeding, and the most common categories of inverse condemnation claims include claims arising from government-induced flooding, claims arising from infrastructure construction that disrupts access to nearby private property, and claims arising from regulatory restrictions that eliminate all economically productive use of private property under the Lucas v. South Carolina Coastal Council regulatory takings doctrine. Real-estate-laws and awarding-damages counsel can advise on the specific legal standards applicable to an inverse condemnation claim arising from government action that has diminished the value or use of private property without a formal condemnation proceeding, assess whether the available evidence establishes that the government's action has resulted in a compensable taking, and develop the inverse condemnation claim strategy for recovering just compensation.