Oftentimes in condemnation, a retail store owner or convenience store owner will need to relocate their business. Even minor changes of geography can have a major impact on sales. The government often claims that this decline in sales is due to the business owner and refuses to provide compensation for this loss, thus overlooking a direct damage that should be factored into the calculation of just compensation.
We recently handled a Minnesota eminent domain case where the subject property was a commercial building that housed a restaurant and a Quick Lube. The Quick Lube Parcel was the only Jiffy Lube the proprietors had ever owned prior to condemnation. The property was condemned for a highway project and after condemnation, the owners built another Quick Lube facility which they managed in exactly the same way as the former Quick Lube Parcel. They had the same manager and substantially the same staff at the second location. In fact, during the six-month work stoppage between the condemnation and the opening of the second facility, the proprietors paid all the employees during that six months in an effort to retain those employees for employment at the second facility.
Even though managed in the same manner with the same owner, manager, and employees, the second location was a flop. The performance on the second facility was so bad that the owners went broke operating it. The second facility simply did not generate the same level of traffic as the Subject Property. Eventually, the bank took back the building at the second location.
The DOT refused to acknowledge that the decrease in sales showed the superior location and value of our client’s former store. We argued that the difference in sales was evidence that the real estate itself was valuable for the particular business model operating thereon, and was evidence of the superior attributes of the parcel taken. The owners ultimately prevailed in introducing this evidence, which increased their compensation. The key to introducing this evidence is showing that there is no difference in the business operation between locations. The location of the Jiffy Lube might change, but their business model, superior service, management and staff remained the same. The court’s decision on this case can be found here.
It’s important to note that not all decreases in sales, however, will result in compensation. In Sienkiewicz v. Com., Dept. of Transp., the Pennsylvania Department of Transportation redesigned and reconstructed a major intersection. Richard Sienkiewicz, an owner of a convenience store at the intersection, experienced such a decline in sales that he eventually had to close. Sienkiewicz attempted to claim that he was entitled to compensation for the interference to his business caused by the construction. The Pennsylvania Supreme Court ruled that Sienkiewicz was not entitled to such compensation because he did not establish that the interference arbitrary or unreasonable.
If you are confronted with a similar situation, make sure you speak to a knowledgeable professional who can help guide you through this process.