July 9th, 2013

Condemnation as a Cure for the Foreclosure Crisis: Why it doesn’t work in Florida.

As we enter yet another year of the foreclosure crisis, more and more people are turning to creative approaches to a global cure for the breakdown in the system. Most recently, a group of investors have suggested that eminent domain be used in the states hardest hit by the mortgage foreclosure crisis (read as Florida, California and Nevada) to help alleviate the foreclosure crisis. Here’s a good overview from Felix Salmon at Reuters and another from NBC News.

Like many cure-all ideas, the concept has some initial appeal: government takes over distressed properties while letting the banks holding the mortgages off of the hook for potential losses and at the same time allowing families to remain in their homes under leases to the government.

Unfortunately, the devil is in the details. First, the states-rights arguments would all but preclude the federal government from being able to administer such a program. Imagine the court cases which would arise from the Federal Department of Housing and Urban Development condemning lands piecemeal within various counties, cities and towns.  Even with some sort of specific program created by the Congress, the impacts and issues would be significant. Would the federal government be paying the property taxes on these properties? Could the cities and counties file liens for unmowed lawns and green swimming pools?

This leaves state and local governments as the only viable alternative. In Florida, in order to use condemnation, a government must be able to show a valid public purpose and a relationship between that purpose and the proposed action. Here in Florida, the legislature passed Florida Statutes 73.014 (“Taking property to eliminate nuisance, slum, or blight conditions prohibited”) in 2006 in the wake of the Kelo v. New London fallout (see our article below for a quick recap of  this now infamous court case). That statute mandates:

(1) Notwithstanding any other provision of law . . . any [ ] entity to which the power of eminent domain is delegated may not exercise the power of eminent domain to take private property for the purpose of abating or eliminating a public nuisance . . . eliminating a public nuisance is not a valid public purpose or use for which private property may be taken by eminent domain and does not satisfy the public purpose requirement of s. 6(a), Art. X of the State Constitution. . . .

 (2) Notwithstanding any other provision of law,  . . . any [ ] entity to which the power of eminent domain is delegated may not exercise the power of eminent domain to take private property for the purpose of preventing or eliminating slum or blight conditions . . . taking private property for the purpose of preventing or eliminating slum or blight conditions is not a valid public purpose or use for which private property may be taken by eminent domain and does not satisfy the public purpose requirement of s. 6(a), Art. X of the State Constitution

So what public purpose would be put forth other than elimination of blight? There may be arguments related to the stabilization of real estate markets or helping homeowners stay in their houses, but that all rings of euphemisms for blight prevention.

Second, what would such a program look like? From the proposals put forward so far, it would entail a condemning authority (some have proposed either a governmental entity or a privately capitalized pseudo-governmental entity) condemning the properties from the owners and paying the banks the ‘fair market value’ of the property is while allowing the owners to remain in the homes.

The Florida Constitution entitles a property owner to have his or her attorneys’ fees, expert fees and costs paid by the condemning authority as part of the full compensation to which they are entitled.  Beyond that, the owner is entitled to full compensation, which sometimes means fair market value, but can (and often does) include additional amounts appropriate “to make the owner whole.”

What this means is that a program such as the one proposed would cost multiples of what these investors or the local governments envision – and appropriately so. If the government is involuntarily seizing citizens homes and assets, isn’t it appropriate that it be done in a careful manner with multiple checks to ensure everyone is treated fairly?

The second proposed option which is being discussed is condemnation of the mortgages themselves.  This would be unprecedented in Florida, and posibly the country.  Florida Courts have held that mortgage holders do not have property rights in the property they encumber (unlike easement holders) and are therefore not entitled to any eminent domain proceeds during a condemnation, absent provisions in the mortgage. Where there are provisions in a mortgage, the mortgage holder may be entitled to receive the property owners’ just compensation to be applied against the outstanding balance of the loan. However, these are contractual rights, not property rights.  Can they be condemned? Who knows. And how does one go about finding the fair market value of a mortgage on a given date?

Here’s a quick example of the problem. A property owner has a piece of property worth $250,000 with a $400,000 mortgage on it. What is the value of the mortgage? The condemning authority’s position would likely be that the mortgage value is capped at $250,000. The mortgage holder would say no less than $400,000.

This would be confiscatory in some, if not all cases. Mortgage holders have a right to seek and obtain a deficiency judgment against a borrower.  This means that on top of the value of the mortgage, the courts would have to conduct evidentiary trials (in front of 12 jurors as mandated by the Florida Constitution) in which evidence of the probability of payment, the assets of the debtor and the collectability of a deficiency judgment would be necessary to show the value of the mortgage.  This would make each of these trials into a soap opera of what other assets the debtor has and what is or is not collectible.

While the discourse is very healthy in light of the ongoing foreclosure issues nationwide, eminent domain is not the silver bullet.  By its nature, Eminent Domain is a non-voluntary process, and therefore requires extensive judicial checks to make sure the power is not abused.

Feel free to contact us at the email address below to discuss your eminent domain concerns.

Constitutional Law,Florida Eminent Domain,National Eminent Domain News

May 31st, 2012

Final State Approval for Wekiva Parkway

On Tuesday, the Florida Department of Transportation gave final approval to the $1.66 billion Wekiva Parkway project. The Orlando-Orange County Expressway Authority had approved it back in February, and the FDOT had agreed in principle to assist with the funding and construction, but it was not until Secretary Anath Prasad signed his name on Tuesday that it became final. Construction will likely begin in the last quarter of this year, on portions of the project where the land is already owned by the State.

If you own property that may be impacted by the new Wekiva Parkway, or have questions about eminent domain generally, please contact GrayRobinson, P.A.’s eminent domain attorneys at (407) 843-8880 or by email, bsmith [at] gray-robinson.com.

Florida Eminent Domain

January 9th, 2012

Wekiva Parkway in the News

On Friday, the FDOT presented the Wekiva Parkway Financing Plan to the staff of MetroPlan Orlando at a specially set meeting.  The staff voted to forward the plan onto the Board of MetroPlan for consideration at its next meeting.

The board meeting for MetroPlan, which was previously set for 1/11/2012, was moved to 1/17/2012 to allow time for three MetroPlan Orlando committees to meet and consider various aspects of the Wekiva Parkway.  It is anticipated that MetroPlan Orlando will vote on the 17th whether to go forward with the Wekiva Parkway.  If approved, the FDOT and the Orange-Osceola Expressway Authority will use eminent domain to begin acquiring the properties necessary for the construction of the roadway.

The Orlando Sentinel says “It’s now or never” for the Wekiva Parkway.

If you own property that may be impacted by the new Wekiva Parkway, or have questions about eminent domain generally, please contact GrayRobinson, P.A.’s eminent domain attorneys at (407) 843-8880 or by email, bsmith [at] gray-robinson.com.

 

Florida Eminent Domain

December 21st, 2011

More Wekiva Parkway News

The Orlando Sentinel is reporting that Osceola County Commissioner Brandon Arrington is publicly questioning the Wekiva Parkway project, fearing it will cause delays to road projects near St. Cloud. 

Arrington joins Orange County Commissioner Ted Edwards who vocalized opposition to the project last week.

Meanwhile, FDOT officials maintain that the money needed to build the Parkway is available and any delays experienced by other projects is a result of reduced gas tax revenues, not a reallocation of funds to the Parkway.

MetroPlan Orlando must approve the plan to construct the Wekiva Parkway, at which point the FDOT has said construction could begin as early as next year.  Edwards and Arrington are two members of the 19-member MetroPlan Orlando and thus far, no other members have indicated any opposition.

You can read the full article here.

If you own property that may be impacted by the new Wekiva Parkway, or have questions about eminent domain generally, please contact GrayRobinson, P.A.’s eminent domain attorneys at (407) 843-8880 or by email, bsmith [at] gray-robinson.com.

Florida Eminent Domain

December 9th, 2011

Another Shocking Result

New York, which has been the site of some wild eminent domain cases of late, has outdone itself this time.

In Gyrodyne v. State of New York, the State sought 245 acres toexpand Stony Brook State University. The state offered evidence of a value in the amount of $22,450,000 for the property taken, or about $90,000 per acre.
The owner presented evidence that the value was actually $125,000,000 or about $510,000 per acre. Unlike Florida, New York does not have jury trials in eminent domain cases, and the Trial court awarded the owner’s number- namely $125,000,000 for the taking, an increase of $102,550,000 or five-and-a-half times the State’s number. Ouch.

The Appeals Court affirmed here:

http://www.nycourts.gov/reporter/3dseries/2011/2011_08562.htm

National Eminent Domain News,Recent Decisions