Remediation Costs Reduce Eminent Domain Compensation

August 1, 2000 Advisory
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Public Act 00-89, An Act Concerning Fair Market Value of Brownfields,
which became effective on May 26, 2000, requires that when redevelopment
agencies (which can include local and regional school districts,
regional pollution control authorities, and a variety of community
development agencies) take property by eminent domain, the amount to be
paid to the property owner is the fair market value of the property
taking into account the property's environmental condition and any
required environmental remediation. Prior to the enactment of this law,
Connecticut case law had held that evidence of environmental
contamination and cost estimates of remediation could not be taken into
consideration in eminent domain proceedings.
The new law will benefit redevelopment agencies by decreasing the amount
to be paid to a property owner for property taken by eminent domain
where there are adverse environmental conditions at the property. In
effect, the new law passes the environmental remediation costs back to
the property owner. To soften the blow to property owners, the new law
permits the property owner to set off any remediation costs taken into
consideration in valuing the property against any pending or subsequent
suit to recover such remediation costs for the property.
The effects of the new law can be illustrated as follows:
When a redevelopment agency takes property by eminent domain, the agency
must prepare a statement describing the property and the amount of
compensation to be paid for it. If a property owner believes that the
compensation paid is too low, the property owner may appeal to the
Superior Court and the court is required to appoint a referee to review
the compensation amount and report back to the court regarding the
amount of compensation. The court makes the ultimate determination of
the amount of compensation to be paid.
Under prior law, evidence of environmental contamination or cost
estimates of environmental remediation of the property could not be
taken into consideration in determining the amount to be paid as
compensation in eminent domain proceedings. Thus, the redevelopment
agency was forced to pay the fair market value of the property without
regard to the environmental conditions at the property, to remediate the
property, and to then seek to recover the remediation costs from the
former owner.
Under the new law, the referee must consider evidence of environmental
contamination and costs of environmental remediation in determining the
value of compensation to be paid to the property owner and make a report
to the court reflecting such values. The property owner in turn is
entitled to set off such determined costs in a pending or subsequent
suit to recover such costs (possibly even if the court does not
ultimately accept the referees report). Thus, where, for example, the
referee determines that clean-up costs reduce a propertys fair market
value by $200,000, the property owner's compensation could be reduced by
that amount by the court in the eminent domain proceeding and the
property owner could then offset any liability for such costs by
$200,000 if the property owner is sued for the recovery of property
clean-up costs.