Relocation Benefits and Eminent Domain: How do they Fit Together?

by Nossaman LLP
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One issue that eminent domain attorneys face routinely involves helping businesses obtain the relocation benefits to which they are entitled under the law, while at the same time pursuing a claim for lost business goodwill.  To us, there is a clear difference between the two, as we are indoctrinated early in our careers into understanding that the two types of relief, while seemingly closely related, are instead largely unrelated in the eyes of the law. 

But to a typical business owner facing a forced relocation due to a government acquisition, the issues can appear thorny and complex.  And, let's face it, pretty arbitrary.  Stepping back, I can understand why owners feel that way.  After all, they are concerned with relocating, preserving their business, and minimizing losses along the way.  What does it possibly matter whether the business lost money due to the cost of relocating equipment or due to increased rent at the new location? 

But under the law, the difference is important, and it dictates how -- and if -- the business owner can recover.  A short blog post is not the place to go into detail on how all of this works, but I do want to hit a couple of key points for people to keep in mind. 

First, relocation expenses are almost always handled outside any eminent domain action.  The owner will typically work with a representative of the condemning agency to document the relocation expenses that the law deems recoverable, and the owner will submit a claim to the agency.  If everything appears satisfactory to the agency, the owner will receive a check. 

Second, if there is a dispute over what relocation expenses are recoverable and what are not, the owner typically must first go through some type of administrative appeal process in an effort to convince the agency to change its mind.  At this point, it is often crucial to have an eminent domain attorney helping you, because some of the rules are hyper-technical and (sadly) a bit nonsensical. 

If the administrative appeal does not solve the problem, the owner is free to sue, but even then, the lawsuit would be separate from any condemnation action.

Third, in the condemnation action, owners used to routinely capitalize relocation costs that the agency deemed non-compensable, folding those costs into a "loss of business goodwill" claim.  But California law has changed, and this tactic is largely no longer possible.  (For more on that, see our post on Los Angeles Unified School District v. Casasola.)

Fourth, goodwill claims come with their own set of technical, procedural requirements, and it is pretty easy to make what seems like a harmless mistake, only to discover that it destroys the entire goodwill claim.  (While representing an agency, I once had an owner admit on the witness stand that he didn't really try to relocate the business.  The owner wasn't too concerned about the testimony until he learned that that one answer precluded any recovery for lost business goodwill.)

Because of this, business owners facing a condemnation action should consider hiring a qualified eminent domain attorney early in the process.  This can be crucial if the owner is to avoid making one of those simple -- but fatal -- mistakes (which can occur even before a condemnation lawsuit is filed).

So there you have it.  Just enough about relocation and business goodwill that you are likely more confused now than you were when you started reading.  But look on the bright side.  Unlike me, you probably don't have to deal with these issues every day.  (And if you really are confused about how all this works, feel free to send me an email or give me a call; hopefully I can clear things up or, better yet, refer to you one of my more talented colleagues.)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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