In UDOT v. Target Corp. et al., 2020 UT 10, the Utah Supreme Court recently clarified the standard by which a property owner is entitled to severance damages in connection with condemnation under Utah Code Ann. § 78B-6-511(1)(b).
The case arose from a UDOT highway construction project in which it condemned a small portion of Target’s property to reconstruct an interchange. Though only a sliver of the new interchange was actually built on the taken property, the new raised interchange interfered with the property’s visibility from the highway and it took away a convenient right-out exit from Target’s property that provided easy access to the north-bound onramp. At trial, the jury awarded Target $2.3 million in severance damages.
Under the severance damages statute, the owner of a partially condemned property is entitled to severance damages caused "by reason of its severance from the portion sought to be condemned and the construction of the improvement in the manner proposed by the [condemning authority]." Courts applying this standard were required to interpret the meaning of "improvement" and what it means for an improvement to be constructed "in the manner proposed" by the condemning authority. This resulted in confusing case law. For example, courts had previously tied their analysis to the construction of "structures" or "projects," rather than improvements. They also had sent mixed signals about the effect of the original property line on the availability of severance damages, with some cases suggesting that a property owner may be limited to severance damages stemming only from actions taken on the original property, with other cases indicating that severance damages are available if they flow from actions taken outside of the original property line so long as the severance is deemed "essential to the projects as a whole."
Beginning with the interpretation of improvement, the Utah Supreme Court found an improvement encompasses a broad range of beneficial alterations to land such that any aspect of an improvement is included in the damages analysis "so long as they materially advance the purpose of the condemning authority." The Court also rejected the "essential to the project as a whole" test because it is contrary to the plain language of the statute. In doing so, the Court found that land owners are entitled to severance damages "by a proposed improvement to the condition of land that (1) is to be completed at or near the time of the taking and (2) serves the same purpose for which the severed property was taken – i.e., damages caused by the construction of the improvement in the manner proposed."
In sum, the Utah Supreme Court clarified how property owners will be compensated for their partially-condemned land beyond the actual value of the condemned land. By rejecting the "essential to the project as a whole" test, claimants will only have to show that the damages were caused by the construction of the improvement—which includes any alteration to the land that materially advances the purpose of the condemning authority—completed at or near the time of the taking. Thus, property owners should be aware that this clarified standard will likely increase the damages available to them in connection with condemnation of their property.