What Are Fixtures? Can I Recover For Damages To My Fixtures?

(A) – What is Considered A Fixture?
A fixture is an article in the nature of personal property which has been so annexed to the realty that it is regarded as part of the real property. For valuation purposes, a fixture is compensable. It does not need to be permanent or affixed in a manner as their removal would cause damage. In New York, the standard used by courts is extremely broad. A fixture is compensable if (i) it is intended to be used in conjunction with the property; (ii) it is affixed in a permanent manner to the property; (iii) the property would, in some way, be damaged if the fixture was removed; and most importantly (iv) even if the fixture is removable and it meets one of the above three criteria, it becomes compensable.

(B) – Can I Recover for Damages to My Fixtures?
The owner of the fixtures has a potential claim for damages. However, these claims are complicated and require solid evidentiary support and must be detailed in the claim. See EDPL §503(C). A fixture claim requires advance planning at the time of title vesting.

A claimant should make certain that photographs have been taken of any fixtures before moving out and that the fixture appraiser has completed his inventory and appraisal. A detailed inventory should be taken of what is removed. Any item which has been removed may not be claimed for as a fixture. However, the costs of removal and reinstallation may be claimed. Before moving, a claimant should have a copy of the fixture appraisal for reference purposes. The fixture claim will be affected by the removal claim and vice versa. A claim for an item as a fixture will bar payment for its removal and/or reinstallation.

How Do Leases Affect The Award?

Leases will typically contain provisions governing the rights of the landlord and tenant in the event of condemnation. For example, most leases contain provisions giving the landlord or tenant the option to cancel the lease in the event of a taking, [There is no general concept of “fairness” in the allocation. The literal terms of the lease will govern.] especially if the take is substantial as defined by the lease.

What Is Condemnation?

Condemnation is the taking of private property by the government (or government agencies) for public purposes. These purposes include construction of roads, road widening (or improvement), parks, schools, environmental preservation, job creation, housing and municipal parking lots. Many commercial property owners, especially those with property along major thoroughfares, will, at some point, be confronted with a condemnation. For example, the New York State Department of Transportation has recently conducted major road improvements and widenings along Sunrise Highway (Route 27), Jericho Turnpike (Route 25), Main Street/Northern Boulevard/Port Jefferson-Riverhead (Route 25A) and the service roads along the Long Island Expressway. Several towns and counties have likewise undertaken major road widening and drainage projects which have and will affect property owners along the right of way.

Once a government decides to take property, it is very difficult, costly and usually futile to try to prevent it. [There is a general misconception that a condemnation can be “stopped.” Taken at face value, this is an overstatement. Many condemnations can, at great expense, be “slowed down” or “delayed,” but, as a practical matter, not stopped permanently. It is extremely difficult, except in extraordinary circumstances, to prove that a taking is not for a “public purpose.” See, generally, EDPL Art. 2. Conceivably, the mere delaying of the condemnation could result in the condemnor abandoning the project, but this is really an administrative and/or political decision, more than a legal one.] The Eminent Domain Procedure Law (“EDPL”) requires that public hearings be held by the condemning authority to review the proposed taking and the public purpose underlying the taking. Almost invariably, these hearings will result in a finding that a “public necessity” exists for the taking and then authorizing the condemnation to proceed.

The EDPL provides for a specific judicial review process of this finding of public necessity. However, unless the taking is plainly not for a public purpose and thus improper – an extremely difficult showing to make – a court will not intervene. Usually, the most that can be accomplished is to delay the taking on the ground of some procedural irregularity such as improper notice or inadequate environmental studies. See EDPL §§202 and 203.

Essentially, the property owner’s remedy is to receive just compensation (i.e., the market value of the property) guaranteed by the Fifth Amendment of the Constitution for the taking of private property.

The discussion which follows is based on New York State statutes and practice. However, every state has a procedural law for condemnation proceedings (e.g., NJSA Title 20).

Obviously, the practice will vary from state to state, but there will be many similarities. For example, most states require an “advance payment” upon taking of the property (see, e.g., NJSA 20:3-18; Calif. Code of Civ. Pro. § 1255.010, PA. St. 26 P.S. § 1-407). Every state has a procedure for the filing of a claim and a method – whether it’s before a panel of commissioners or the court – to determine just compensation (compare Penn. Statute 26 P.S. § 1-502 to New York’s EDPL Article 5).

The concept of “what is compensable” also varies from state to state, but there are certain bedrock constitutional standards of just compensation that apply to every state.

Can The Government Inspect My Property?

The appraisers, engineers and/or inspectors for the condemning authority have the right to inspect property (even before the formal taking) for the purpose of gathering information upon which to base an appraisal. This inspection could even include environmental testing. The appraiser should be given access to the premises and, in fact, has a right to access the premises. Otherwise, the property owner may waive or delay its right to an advance payment. See EDPL §§302 and 404.

You should keep a record of which appraisers, engineers and/or inspectors visit the premises, the date of their visit and the time spent by them in the premises. They should contact you in advance to arrange a time that is mutually convenient and not appear without notifying you first.

Before the inspection can take place, the condemnor must give you notice, and may be required to post a bond to cover against any damages caused by the inspection. If this situation occurs, or you are uncertain, it is important that you contact your condemnation counsel immediately as this inspection could interfere significantly with the use of your property. Counsel will assure that an appropriate bond or restrictions are placed on such inspection.

When Do I Get Money? The Pre-Vesting Offer/Advance Payment

(A) – Pre-Vesting Offer
The government is obligated under the applicable statutes to make a good faith effort to negotiate prior to the vesting of title. EDPL Art. 3. Only in rare circumstances will the property owner find the offer acceptable. In most cases, the government must therefore acquire title by condemnation procedure. Even with an acceptable offer, a government will often condemn the property rather than buy it because title acquired by condemnation is the purest title — clearing any possible encumbrances.

(B) – Advance Payment/Amount
Upon the taking or shortly before, the owner of property is entitled to an advance payment equal to one-hundred percent of the condemnor’s “highest approved appraisal” of the property. All mortgages, judgments, liens and encumbrances must first be satisfied from this payment, with the balance, if any, payable to the property owner. EDPL §303.

A property owner can take the advance payment and still make a claim for further damages.

(C) – Time
The advance payment is not discretionary and should be made immediately upon or immediately before vesting of title. However, as a practical matter, payment generally takes a number of months. Since the taking authority requires extensive documentation and tax clearances to confirm that there are no pre-existing liens, etc., it can often take six months or longer before the advance payment is released. See EDPL §403. Note that interest must be paid on the advance payment from date of vesting to date of payment, but keep in mind that failure to properly prosecute the claim could result in suspension of interest.

Will I Receive Interest?

The statute governing proceedings by local municipalities provide that interest on the award shall be at the rate of six (6%) percent per annum from the date of title vesting to the date the award is ready to be paid. General Municipal Law, §3(A). The State currently pays interest at nine (9%) percent per annum (see CPLR §5004), but this interest rate may be reduced by the State depositing the advance payment with the Comptroller pursuant to EDPL §514. Under certain provisions of the EDPL, interest can be totally suspended or substantially reduced if the claimant fails to take the necessary steps to file its claim to process the award in a timely fashion. See EDPL §304 and §514.