MUST A HIGHEST AND BEST USE BE FINANCIALLY FEASIBLE?

It is the general rule that “just compensation” is the fair market value of the property at the date of the taking, Matter of Board of Water Supply of City of New York, 277 NY 452 (1938); County of Erie v Fridenberg, 221 NY 389 (1917), and the fair market value is the price for which the property would sell if there was a willing buyer who was under no compulsion to buy and a willing seller who was under no compulsion to sell.  Keator v State of New York, 23 NY2d 337, 339 (1968).

It is also a bedrock principle of eminent domain that “[t]he measure of damages in a condemnation case must reflect the fair market value of the property in its highest and best use on the date of the taking regardless of whether the property is being put to such use at the time.”  Matter of 730 Equity Corp. v New York State Urban Dev. Corp., 142 AD3d 1087, 1088 (2d Dept 2016).

The determination of highest and best use must be based upon evidence of a use which reasonably could or would be made of the property in the near future.  Matter of City of New York (Broadway Cary Corp.), 34 NY2d 535, 536 (1974).  However, it is not essential to demonstrate that the property has been used as its projected highest and best use, or that there had been an ante litem plan for such use.  Keator v State of New York, 23 NY2d 337, 339 (1968).  But, the proposed use cannot be a speculative or hypothetical arrangement in the mind of the claimant.  Matter of City of New York (Shore Front High School), 25 NY2d 146, 149 (1969).

So, in the Broadway Cary case, the court held that the claimant’s evidence that the property, which was zoned for manufacturing, related only to the physical feasibility of building a community shopping center.  The proof lacked evidence of the economic feasibility of the proposed venture and, therefore, was not accepted.

Is it necessary to show economic feasibility?  The answer is, it depends.  Most instances where the proposed highest and best use is put to the economic feasibility requirement involve some factor dependent on securing government approval like a zoning change.  Remember, it is absolutely appropriate to show a reasonable probability that the zoning of the land may be changed.  Matter of Town of Islip (Mascioli), 49 NY2d 354 (1980).

The proof of a different highest and best use is not simply dependent of economic feasibility, it is dependent on the facts of the case.  An example is Matter of City of New York (Jomar Real Estate Corp.), 94 AD2d 724, aff’d 61 NY2d 843 (1984).  In Jomar, the lower court valued the property as industrial.  The Appellate Division, Second Department, modified, holding that prior to the taking the owners began to improve its property towards the goal of constructing a neighborhood shopping center.  The land was graded and leveled.  An abutting street was paved and sewers were installed.  The claimant prepared and attempted to file plans for the shopping center which were refused because of the impending condemnation.

The Court found that the shopping center use was not merely speculative, it would have come to fruition had the cloud of condemnation not fallen upon claimant.

In a recent case, a condemnor argued that a non-profit facility had to show that it was financially feasible to develop the land.  This is frivolous.

There is no requirement for a non-profit facility to show that it is financially feasible.  How could there be?  Seminaries, churches, and colleges are not generally in business to make money.  They are non-profit eleemosynary dependent on charity.

So, the answer to the question is that it depends on the facts of the case.

Posted in Financial Feasibility, Highest and Best Use
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