SANDBAGGING, A PRACTICE THAT MUST STOP

My column for the August 28, 2018 issue of the New York Law Journal, “The New York State Legislature Should Revise the EDPL” contains many suggestions for revisions of the law.  One suggested change addresses the practice employed by condemning authorities commonly known as “sandbagging.”

Eminent Domain Procedure Law § 304 addresses the concept of advance payment.  As the statute states, the condemnee may elect to accept such offer as an advance payment and such election shall in no way prejudice the right of a condemnee to claim additional compensation.  EDPL § 304(A) (3), (4).

But what happens on occasion, particularly in the Court of Claims, is that if the offer is rejected as full compensation, the condemnor will file a lower appraisal.

This practice has been termed “sandbagging.”  It is a form of punishment.  The Federalist Society Review published a paper in its November 10, 2016 issue of the Federal Society Review, Vol. 17, Issue 3.  The article set forth the following:  A government that lowers its appraisal of the property in question once a formal proceeding is commenced only increases the stakes for landowners who refuse an initial offer and decide to test their changes in court.  In fact, knowledgeable practitioners in the area of condemnation have suggested that the purpose of sandbagging is “to coerce the [land]owner into accepting the pre-litigation offer on pain of running the risk of a verdict below that offer.”

It is extremely frustrating to observe this bad faith conduct by government.  The State of New York does this consistently even after paying an advance payment based on the higher other appraisal.  We submit that this conduct is in violation of the law.  Uniform Relocation Act of 1970, 42 USCA Section 61 provides that the primary purpose of the subchapter is to establish fair and equitable treatment of persons displaced in a federally assisted project.  The statute prohibits any action coercive in nature in order to compel agreement on the price to be paid for the property.  42 USCA Section 4651.  A substantially lower appraisal exposes the former owner to jeopardy of the entry of a judgment against it in favor of the condemnor with interest.  EDPL 304(h).  Think about it, most money paid on an advance payment goes to the mortgagee.  If a deficiency judgment is entered, a condemnee not only lost his property, but now owes the State money.  It almost happened in Matter of State of New York (KKS Props, LLC), 119 AD3d 1033 (3d Dept 2014), but the Third Department corrected the injustice.

Condemnors, especially the Attorney General, do not want judges to know the amount of the advance payment.  They will argue that the other higher appraisal was prepared for settlement and is immune from discovery.  But this is not true.  The higher appraisal was adopted when it was used to make a payment. The higher appraisal was also used to apply for federal funds and a copy of the report is kept in the files of the agency in case of an audit.  The high appraisal was prepared because it was required by statute.

A few New York cases support the right to have the higher appraisal offered into evidence.  Cronk v State of New York, 100 Misc2d 680 (Ct. Cls. 1979), is the leading authority that the other report is an admission.  Nunes v State of New York, 91 AD2d 1135 (3d Dept 1983) is another.

We are not talking about higher appraisals by the same appraiser.  In that situation, all prior appraisals may be used for impeachment purposes.  CMRC v State of New York, 270 AD2d 27 (1st Dept. 2000).

New York should adopt a section in the EDPL which provides that a pre-vesting offer may never be lowered as the value of the property taken.  It should be the minimum amount of compensation.

Posted in Advance Payments, Appraisal, Sandbagging
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