By Michael S. Hopkins and Christian G. Spesia
Inherent in condemnation cases is the need to prove the fair market value of the property being taken. This is usually accomplished in the reports of licensed real estate appraisers through the use of “comparable sales,” or rather the sale of properties that are similar enough the property being condemned to show a reliable measure of value. It makes senses. If you want to know what an apple is worth, compare it to the sale of another apple of similar size, ripeness, and variety. Apple to apple, so to speak. But what if a defendant’s appraiser scares up a comparable sale that is grossly disproportionate to what local land values are, making it the equivalent of valuing an apple at the price of an orchard?
Among the first things plaintiff’s attorney should do is look to see if the “comparable sale” has the earmarks of a “special value” transaction.
In condemnation cases, the rule is that an owner of property condemned for public use is entitled to just compensation for the taking. Just compensation should reflect the fair market value of the parcel taken at its highest and best use. Department of Transp. v. Birger, 155 Ill. App. 3d 130, 134 (5th Dist. 1987).
Fair market value is defined as “the amount of money which a willing buyer under ordinary circumstances would pay to a willing owner in a voluntary sale, neither being under any obligation to buy or sell.” Id. Additionally, fair market value is determined by looking at comparable sales, which are “sales of land based on similarities in locality, character, time, proximity, market conditions, improvements, and modes of payment.” Id.
A sale that is made when the buyer places a special value on the parcel purchased, such as in cases there the buyer requires a specific parcel for business purposes, is not comparable. As explained by the court in Birger,
[E]vidence of assemblage sales and other “special value” property (such as property specifically bought to be used for expansion of an adjoining business) is not usually admissible. Such sales may not reflect the true values of the land because the buyer may be forced to pay a premium to acquire that specific property to complete his holding. Id. at 135.
In Department of Transp. v. Bryant, 63 Ill. App. 3d 483 (3d Dist. 1978), the Third District ruled that an earlier offer to purchase property that was being condemned should not have been admitted because the offer was made on behalf of an adjacent property/business owner who wanted the property for a parking lot. As the Third District explained,
Where the buyer of property purchases property because of its unique or special value to him. . . the buyer is not considered to be the hypothetical buyer described in the formula establishing fair cash market value. He is not a buyer under no compulsion to purchase, but on the contrary is quite different from all other buyers or prospective buyers. Department of Transp. on behalf of People v. Bryant, 63 Ill. App. 3d 483, 486 (3d Dist. 1978).
Illustrative of this is Trustee of Schools v. Chicago City Bank and Trust Company, 126 Ill.App.2d 302 (1st Dist. 1970). In Trustee of Schools, the landowner sought to introduce as a comparable sale the sale of a gas station purchased by an adjoining landowner. Id. at 307.
[T]he property had been purchased by an adjoining property owner for the purpose of enlarging his laundry and making a parking lot. Although petitioner only indirectly refers to the “special value” placed upon the property by the adjoining owner, we believe that such special value prevents the sale from being a similar sale as contemplated by the rules. If the filling station buildings are deemed of no value because of the special purpose and the special value placed on the premises by the adjoining owner, such sale can have no tendency to prove the value of the subject premises. If the cash consideration or selling price of otherwise similar property is not the fair cash market value of said property, the selling price can have no relevance to the issues to be determined by the jury. Id. (citations omitted).
Also illustrative is Department of Transportation v. Prombo, 63 Ill.App.3d 407 (3d Dist. 1978). In Prombo, the Third District disallowed the last of four parcels a bank acquired for purposes of building a parking lot as a comparable sale. Id. at 412. In that case, the bank purchased the first three lots for between $6.79 and $7.61 a square foot. But to acquire the final parcel, it was required to pay $15.90 per square foot. As the court explained,
It is apparent that the bank, having acquired three of the four properties, placed a “special value” on this property and was forced to pay a premium. This sale is not comparable and should not have been admitted into evidence. Id.
As illustrated above, the sales of property upon which the buyer places a special value (i.e. where the property has a unique value to the buyer), are not considered comparable for valuation in an eminent domain case. They are not fair market value transactions and should be barred by the trial court as evidence of value.