Project Influence Rule in Eminent Domain

Project Influence Rule(PIR) Explained

Early in the eminent domain process, the condemning authority will make an offer for just compensation to the owner of the property targeted for acquisition. In many situations, other property owners on the project have already received offers for just compensation and accepted them. Often, the owner of the targeted property knows about those other offers and compares them to the offer just received for the targeted property. Those other offers seem more generous than the offer for the targeted property, and the targeted owner wants to use them to increase his offer for just compensation. Can the targeted owner do this?

Legally, the answer is “no”. The reason is the Project Influence Rule (“PIR”). The PIR says that offers and awards for just compensation cannot be influenced by the project that is causing the taking. In the example, the targeted owner wants to rely on other settlements from the project to support the case for a higher just compensation amount. Since the settlements were the result of the project, they cannot be considered in determining the just compensation for the targeted property. PIR has other applications as well. Some help the targeted owner, while others do not. In the video below, Dan Biersdorf will explain more.

Frequently, a long time will pass from the date a project is announced until work on the project actually begins. Typically, formal condemnations will not occur until fairly soon before the project begins. From a condemning authority perspective, this is preferable. It gives the condemning authority the maximum amount of time to attempt acquisitions of needed properties through purchase rather than initiating more expensive formal eminent domain proceedings.

Thriving Commercial Area Example

Now let’s consider another example. When the project is announced, assume the area around the targeted property is a thriving commercial area. For whatever reason, assume that the targeted property does not receive an offer until very late in the pre-project timeline. (This happens often.) Prior to the offer for the targeted property, the condemning authority has acquired most of the properties nearby and razed them, since they must be demolished for the project. This effectively creates a ghost town around the targeted property. Customers have vanished and the value of the targeted property has plummeted. Can the condemning authority base its offer on the value of the targeted property when the offer is made?

The answer here is “no”. The reason is once again the PIR. The PIR says that offers and awards for just compensation must ignore the project. That means we assume the project was never conceived, never planned, nor ever built. This is one of the fictions of eminent domain. This means that we pretend the project will never happen, and the targeted property is valued assuming its existence in the thriving commercial community that surrounded the targeted property at the time the project was announced.

Project Enhancing the Area Example

Another example of the PIR application involves the misconception about the amount for an award of just compensation when a road project will enhance the area around the targeted property. Assume the targeted property is agricultural and is on a road where a new bypass will take the targeted property for a new interchange. The property around the new interchange will become very valuable commercial property. The owner of the targeted property is angry because the offer for the targeted property was based on the agricultural use that existed and not the valuable use it would have with the new interchange. Does the owner have a valid complaint? No. The PIR says we must pretend the project never would occur. If the targeted land is being used for agriculture at the time of the offer and that is its highest and best use. Without the project, the targeted property would continue its agricultural use. This means that the offer is probably close to the correct value.

Numerous legal rules and valuation concepts exists within the project influence rule, including but not limited to the following: