November 19, 2010
When a government acquires real property by eminent domain, the rules that establish how much the landowner is to be compensated are fairly well settled. However, when the land is already owned by the government and the only issue is the value of a third party's easement on the land, then matters can get complicated.
In City of Steamboat Springs v. Johnson, No. 09CA2520, 2010 WL 3035202 (Colo. App. Aug. 5, 2010) (not yet released for publication), the property at issue was a "greenbelt," a parcel of land on which nearby developers had promised not to build. The greenbelt was open to the public, but the express right to prevent its use for any nongreenbelt purposes was held by the owners of the ten lots that made up the adjoining subdivision.
Planning to build a highway in the undeveloped zone, the City of Steamboat Springs acquired title to the greenbelt property. Title alone, however, was not enough as long as the subdivision owners' easement remained outstanding. The City managed to acquire nine of the ten parcels in the subdivision, but one parcel, Lot 4, remained in private hands. Lot 4 was the site of the excavation business of Charles Johnson, and as long as Johnson retained the greenbelt easement, he would have the right to block the highway.
So the City began the condemnation of the easement owned by Johnson. When the trial court reached the question of valuation, it erroneously set its key reference point as the value of the land underlying the greenbelt itself. The court found that the entire encumbered greenbelt was worth $124,500, with the condemned portion valued at $36,000. While this basis for valuation might have been favorable to Johnson in theory, the trial court then reasoned that because Lot 4 made up only 3% of the subdivision, Johnson was entitled to no more than a similar fraction of the greenbelt's value, or about $1,200.
The state court of appeals overturned the very basis of the trial court's decision regarding the proper way to find the value of the easement. Since the easement was appurtenant to Lot 4, stated the court of appeals, it was Lot 4 that was being diminished by the condemnation. After all, the easement was not an easement in gross, a free-floating right held by Johnson as an individual; rather, it was a right held by Johnson (and any successor-in-interest) as the owner of Lot 4. Johnson's property interest in the greenbelt—his easement—was limited to what he acquired when he purchased Lot 4. Therefore, the appropriate measure of value for condemnation purposes was the difference in the value of Lot 4 before and after the loss of the easement in the greenbelt.