CONTROLLING ENVIRONMENTAL CONTAMIANTION REMEDIATION COSTS IN EMINENT DOMAIN ACQUISITIONS Paul M. Rickelman – September 23, 2011
Evidentiary Issues Valuing and Acquiring Environmentally Contaminated Properties (IICLE Eminent Domain Update June 12, 2009) – Lenny D. Asaro • Contamination Evidence inadmissible. • 2007 ED Act suggests broader admissibility; no appellate interpretation.
Evidentiary Issues 735 ILCS 30/10-5-50 § 10-5-50. Admissibility of evidence. Evidence is admissible as to: (1) any benefit to the landowner that will result from the public improvement for which the eminent domain proceedings were instituted; (2) any unsafe, unsanitary, substandard, or other illegal condition, use, or occupancy of the property, including any violation of any environmental law or regulation; (3) the effect of such condition on income from or the fair market value of the property; and (4) the reasonable cost of causing the property to be placed in a legal condition, use, or occupancy, including compliance with environmental laws and regulations. Such evidence is admissible notwithstanding the absence of any official action taken to require the correction or abatement of the illegal condition, use, or occupancy.
Fair Market Value The fair cash market value of property in a proceeding in eminent domain shall be the amount of money that a purchaser, willing, but not obligated, to buy the property, would pay to an owner willing, but not obliged, to sell in a voluntary sale.
Property Analysis / Risk Management • Analyze Property’s History Understand costs • Perform Testing • Understand Costs • Owner responsibility? • Change in use? • Good candidate for acquisition?
Owner Contact • Advise owner of acquisition • Request inspection • Phase I / Phase II • Cost estimates for remediation • Review engineer’s analyses and provide to valuation experts
Environmental Laws & Regulations • CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) • Illinois Environmental Protection Act • Illinois generally borrows key provisions from earlier USA CERCLA Act. • “Hazardous” • “Potentially Responsible Parties” • Owner’s, operators, generators
Offer & Attempt to Agree • Acquisition strategy • Right of Entry • Condemnation prerequisite • Contract development • Purchase price (“good faith”) • Remediation costs • Contingencies and disclosures
Discovery in Eminent Domain • Inspections and testing • Most reliable information
Highest and Best Use • Use which would give the property its highest cash market value on insert date complaint was filed.
Controlling Costs in Condemnation Proceeding • Valuation theories • Settlement • Remediation escrows • in limine motions • Jury Verdict • Appeal strategy
Appellate Review • Direction and clarity from reviewing court needed.
Conclusion • There are many tools to discover and control contamination costs when acquiring property by eminent domain. • Ultimately, property is acquired “as-is” so it is crucial to understand what the property “is” from the outset so that the costs can be controlled and the issues be properly navigated.