Games Condemnors Play: When Appraisers Lose Credibility

 

In his book, “Expert Witness in the Legal System: A Scientist’s Search for Justice,” Morris S. Zedek wrote that in 2001, the Committee on Criminal Advocacy of the Association of the Bar of the City of New York surveyed judges about the prevalence of perjury in the New York metropolitan area. In regard to expert witnesses, of the thirty judges who responded, 50 percent said they encountered occasional perjury.

This is not surprising to a trial lawyer. In condemnation cases, most reputable appraisers do not commit perjury. They may tend to direct the valuation by more subtle ways. Key valuation factors include the selection of the highest and best use of the property, selection of comparable sales, or what capitalization rate should be applied. All of these critical elements of valuation should be supported by data contained within the report, but the selection of these yard sticks is often a matter of the appraiser’s opinion. The correctness of this opinion is subject to cross-examination.

The problem is that appraisers are often not independent experts. Rather they are controlled and directed by the party who has retained them. In many condemnations we have observed the wholesale transfer of control from small municipalities to developers. Every aspect of the eminent domain process is controlled by the project developer.

In some instances, the appraisers who valued the property for a pre-vesting offer and advance payment are replaced with a more obsequious appraiser who reduce the valuation.

The fine tuning of the appraisal is managed by counsel. Normally, this is accomplished by reviewing drafts and “suggesting” changes to the report.

On cross-examination, any prior appraisal, draft or otherwise, may be used to impeach the expert that wrote same. See Rikon, “The Perils of Prior Appraisal,” Probate and Property, May 2008, pp. 54-56.

So anything delivered to the attorney in an earlier version of a final report can be used. Importantly, the appraiser must maintain the prior report if it different from the final appraisal. An appraiser must prepare a work file for each appraisal. The work file must contain true copies of any written reports documented on any type of media transmitted to the client, summaries of any oral report and all other data, information and documentation necessary to support the appraiser’s opinions and conclusions. The appraiser must maintain this file for at least five years, or for two years after all judicial proceedings have ended. USPAP, Ethics Rule, Record Keeping, V-9 (2010-2011).

An unfortunate occurrence has been the destruction by the appraiser of work files and other reports. Courts do not appreciate the intentional destruction of records. Most condemnation judges want a fair presentation and have little patience for dirty tricks.

In several recent cases, trial courts have noted the improper conduct and made negative inferences on the appraiser who fails to comply with USPAP record keeping requirements. See Matter of Ramapo Extension (Split Rock), 120 AD3d 703 (2d Dept 2014); Matter of Village of Haverstraw (AAA Electricians, Inc.), 114 AD3d 955 (2d Dept 2014), app. den __ NY3d ___ (2014) and Matter of Village of Port Chester (Bologna), 95 AD3d 895 (2d Dept 2012) app. den. __NY3d__ (2012).

But despite these decisions, improper conduct continues. Recently we tried a case and on cross-examination, the condemnor’s appraiser denied making any draft appraisal. His file was subpoenaed, which contained a prior version of his appraisal which was subsequently introduced into evidence. He had a unique explanation, claiming it was not a draft appraisal because he didn’t label it as a “Draft” on the front page. Rather, he said it was a “summary report.” I am not making this up. Although the witness agreed he sent the “summary report” to the attorney for comment, it was not, in his mind, a prior appraisal. He explained on re-direct, “A draft appraisal is something that would be sent to somebody for its total review, for the total content. In this case, it was a summary report in which none of the content was change; and only the terminology, “summary” to “self-contained” plus some typographical errors were changed. It was in no way intended to be a draft.”

Posted in Appraisers, Eminent Domain, Highest and Best Use, New York, Recent cases, Trial Preparation

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