What Is A Claim?

A notice of claim is a simple instrument. In a condemnation by a local government, only a notice of appearance demanding additional compensation is required. The State form tends to be slightly more complex. However, its function is simply to put the State on notice that the property owner intends to seek additional compensation. See EDPL §503(B) and §504.

However, claims for fixtures must be specific — detailing the actual fixtures for which damages are claimed. See EDPL §503(C).

Different statutes of limitations will apply depending on whether the State or the local government takes title. For a State taking, the time in which to file a claim against the State is three years from the date of receipt of the Notice of Appropriation. This, however, is not simple as it appears since the State’s failure to serve the Notice of Appropriation in accordance with the EDPL may not actually toll the statute of limitations. If notice has not been given appropriately, claims can be filed after the three year period subsequent to the vesting of title. See EDPL §502(A) and §503(A).

In respect to the vesting of title by local governments, the date in which a claim must be filed is set by the Supreme Court vesting order and may extend anywhere from six months to three years. EDPL §503(B). Failure to file within that period of time can be excused for a good cause shown. Obviously, it is not recommended that a claimant wait until the last moment to file a claim. It is almost always in the property owner’s best interest to file a claim immediately so as to prevent any question of the timeliness of the claim. In fact, although in a State condemnation the claimant has three years to file, interest can be suspended if the claim is not filed within six (6) months after the Notice of Appropriation. See EDPL §514.

The method by which government actually takes title (i.e., vests title) to the property differs depending on whether the condemning authority is the State (or one of its agencies) or a local government. A specific distinction is made by the EDPL between State appropriations and appropriations made by local government such as county, town, city, or village. The different procedures applicable to a taking by the State in contrast to a taking by a local government are generally set forth in EDPL §402.

A) The State
EDPL §402(A) provides that the State appropriates property by filing a map in the Office of the Clerk of the County in which the property is located and with the “condemning agency” (usually the Department of Transportation). The State takes property simply by the filing of a map. Although the EDPL imposes a number of pre-vesting procedures upon the State and, as a general practice, the State will contact the property owner well before the taking and will hold informational hearings, it is obvious that actual vesting of title may often take place without the property owner being aware of the actual loss of title or the specific date that title is taken. Often, as noted below, it is not until the actual notice of appropriation that the property owner becomes aware of the taking.

(B) Local Governments
In contrast to the State, local governments or condemning authorities follow a more traditional procedure. Public hearings must be held to establish the “public purpose” or necessity for the taking. At the public hearings, comments will be invited from the affected property owners as well as the general public. Usually, there is little question that the purpose of the taking is in the public interest and a finding of public purpose will be issued. This can be challenged, but is rarely successful. See EDPL Article 2. Counsel for the local government will then file a notice of pendency and make a formal application before the Supreme Court in the county in which the property is located. This application is very similar to a plenary action or, for that matter, a special proceeding requiring service upon the property owner with at least twenty days notice in addition to newspaper notice. In most circumstances, there is no opposition to the formal notice to vest title and the application is unopposed. Upon the Court’s signing of the actual vesting order and its entry with the county clerk, title is deemed vested in the condemnor.

Except in the rarest of circumstances, the claimant cannot collect for the loss of business value, or going concern value, or loss of profits. Damages are strictly limited to the value lost in the real estate, fixtures and equipment. [The legal philosophy underlying this concept is that you cannot recover “business” damages since the condemnor is not “taking” business — just real estate — and the government is obligated to pay only for what it takes — not what the property owner may be losing (i.e., lost profits, etc.).] Leases which speak in terms of the tenant retaining a claim for “business” or “going concern” value have no valuation significance in the process of determining just compensation.

The damages can be both “direct” and “indirect.” Direct damages are the value of the property physically taken. Indirect damages, which are also known as “severance” or “consequential” damages, are the loss in value to the remaining property by reason of the taking of a portion of the property (e.g., loss of frontage or access) or by reason of the use to which the condemned parcel is being put by the government (e.g., a landfill or an incinerator). [There is a technical difference between “severance” and “consequential” damages. Severance damages represent the loss in value (i.e., diminution) in the utility or potential of the remainder land by reason of the taking. Consequential damages are the damages caused to the remainder land resulting from the use of the land taken by the government. For example, if the government takes part of your property to erect an incinerator or toxic waste facility, the resulting damages are consequential.]

The standard of just compensation for the taking of property (as well as determining the indirect damages — see below) is valuation at the “highest and best use” of the property. Thus, even if property is being underutilized, the claimant is entitled to the value as if it was being used to its full reasonable potential. This does not mean, however, that the potential highest and best use can be speculative or hypothetical. It must be realistic based on the zoning (or potential re-zoning — see below) or the character and history of development of the surrounding area.

Often, this can result in a zoning issue. For example, undeveloped residentially zoned property in a valuable commercial zone may still be valued at its commercial value provided the claimant can show a high probability of re-zoning. The burden, however, is on the claimant to prove this probability and proof must be clear and convincing of the probability that such zoning change or approvals would have been granted.