We place significant emphasis on educating property owners in recognizing damages in eminent domain cases. Why? Because damages determine the amount of just compensation a property owner receives, and they are frequently overlooked by appraisers.
The concept of valuing excess land in eminent domain cases rarely occurs, but when it does, it is a notion commonly ignored by appraisers. What do we mean by excess land? Take for example a large tract of commercial property with all improvements and parking situated on the far west side of the parcel. The east side of the parcel contains a sizable amount of vacant land that abuts the main highway. In this scenario, we place added value on the excess land if development potential exists through a ground lease or through parceling it off. In our experience, we have found that government hired appraisers typically overlook the concept of excess land. They find comparable properties in terms of size and location but fail to recognize the relative worth of the excess land.
It’s important to understand that not all excess land adds value to a parcel. Take for example a 1.5 acre commercial lot with the improvements and parking situated in the middle of the parcel. While excess land certainly exists, this land cannot be further developed because it surrounds all sides of the improvements. As another example, improvements and parking are on the front side of the parcel with immediate access to the main road. The excess land is located on the back side of the parcel with access to a side road receiving minimal traffic. Access and visibility are not ideal for this excess land and consequently doesn’t add a lot of value to the parcel. The main point to consider when determining the relative worth of excess land is its location in relationship to the improvements and access.
The most common method of calculating the value of excess land is on a price per square foot basis, assuming it can be parceled off. If city or county zoning ordinances don’t allow for this, the land could alternatively be valued based upon a ground lease. Price per square foot is a preferred method because sufficient data usually exists to accurately determine this value. When calculating value based upon a ground lease, finding sufficient and actual transaction data can be difficult, and further analysis would be required to determine the value of the excess land, unless the property owner has received a proposal from an interested party.