Resolving Eminent Domain Issues for Orlando Commercial Property Owners

Orlando businesses continue to enjoy a variety of benefits at both the state and local levels, such as the STRIVE Orlando Program and state tax incentives. But there’s also been an increase in eminent domain cases, some of which may have jeopardized Orlando businesses’ ability to continue operating despite these financial advantages. To better prepare for this risk, it helps to understand how the eminent domain process works and why it’s rising in the Orlando area. 

Why Eminent Domain Cases Are Increasing in Orlando

Orlando property owners are facing an increase in eminent domain cases as the city (and Florida as a whole) experiences rapid growth. Florida ranks among the fastest-growing states in the nation, and Orlando leads major metros in job and population growth.

As more people move to Orlando and the surrounding areas, such as Kissimmee and Sanford, demand for infrastructure increases, including more roads, expanded utilities, increased stormwater management projects, more schools, and even rail service, with the continued expansion of the Brightline intercity rail route between Orlando and Miami.

Steps in the Orlando Condemnation Process

The exact process can vary significantly depending on the property at issue and the differences of opinion about the property that the Florida government seeks to acquire through eminent domain. That said, the following is a rough overview of the eminent domain condemnation process in Orlando and across Florida.

Step 1: Early Notice

The government agency (or a private entity acting on its behalf, such as a utility company) will send a notice to the property owner identifying the property it intends to acquire through eminent domain. In some cases, the government agency will hold public meetings to discuss plans to acquire certain properties and solicit public input.

Step 2: The Initial Offer

The government will send at least one good-faith offer to the property owner. To support its offer, the government will first complete a property appraisal and use it to substantiate its initial offer.

Step 3: Negotiations

The property owner can consider the offer and either accept it or submit a counteroffer. If submitting a counteroffer, the property owner should include supporting documentation, such as a copy of their own property appraisal.

The property owner can also choose to reject the offer and assert the position that their property shouldn’t be taken via eminent domain. In this or any other situation where there’s a disagreement about the property condemnation, a hearing is scheduled to resolve the matter.

Step 4: Eminent Domain Hearing

There are two ways this hearing can occur, and the particular path taken depends on whether the government wants to initiate a quick-take or slow-take action. Either way, the government is the plaintiff and the property owner is the defendant; the case proceeds to court.

In a quick-take action, the government asks the court to grant it possession of the property as soon as possible, arguing that time is of the essence and the property is needed for a valid and public purpose. The government must also deposit the original offer amount with the court before the court can transfer ownership of the property to the government. 

If the court agrees with the government, the property owner must transfer the property to the government, but may receive the deposited funds. The property owner also retains the right to ask for additional compensation. If the government disagrees with the property owner’s request, a jury trial will decide how much the property owner should receive.

In a slow-take action, a jury trial is held to determine the full compensation the property owner should receive before the transfer of ownership to the government. After the jury determines the value, the government may either pay the amount and take the property or decline to pay and no longer seek to take the property.

Additional Notes About Eminent Domain Hearings

First, most eminent domain cases settle before trial, often during pre-trial mediation. 

Second, if the jury awards the property owner more money than initially offered by the government, the government must not only pay this difference, but also pay for the property owner’s legal costs, including attorney’s fees, court fees, and litigation expenses (such as compensation for expert witnesses).

Third, most eminent domain cases that go to trial involve disputes over how much the government must pay the property owner. It’s possible for a property owner to fight against the taking itself, but it’s usually an uphill battle, with property owners usually limited to the following defenses:

• The government failed to follow the required procedural steps to acquire the property.
• The property isn’t needed for a legitimate public purpose; or
• Taking the property isn’t necessary to accomplish the government’s objectives. 

Understanding Your Rights

Article X, Section 6 of the Florida Constitution, requires Florida property owners to receive full compensation for a taking by the government, which is more generous than what’s provided for by the Fifth Amendment of the U.S. Constitution

This means that commercial property owners in Orlando may receive more compensation from the government in an eminent domain case than property owners in other states. As a result, if the government takes property from an Orlando business, they can potentially expect the following compensation:

• Fair market value for the property taken.
• Severance damages; and
• Business damages

Commercial Property Fair Market Valuation Factors

When deciding how much the government should pay for real property, a court will apply the “willing buyer-willing seller” test and consider any factors that a typical buyer and seller would consider when deciding how much to offer (or accept). Some of these factors include:

• Property size and unique features
• Zoning restrictions, if any
• Property location and proximity to key infrastructure
• Real estate trends for the area
• Easements or other restrictive covenants that apply to the property
• Economic potential of the property

The services of a real estate appraiser will be needed to justify the property owner’s or government’s position about a property’s value. When appraising real estate, most appraisers use one of the following three approaches:

1. Comparable sales approach: The appraiser examines recent sales and values of properties that are comparable to the one being appraised.
2. Income approach: The appraiser focuses on the income the property could generate for its owner.
3. Cost approach: The appraiser determines value by calculating the cost to rebuild structures on the affected property (less depreciation and obsolescence), plus the fair market value of the condemned land.

Recoverable Severance Damages

In addition to receiving the fair market value of the condemned property, the property owner is also entitled to severance damages in cases where the government is only taking a portion of the property. Severance damages exist to compensate a property owner for the loss in value of the property they still own. 

For example, if a business property loses access to a key piece of infrastructure, such as a major highway or busy road, severance damages are intended to compensate the owner for the loss in value resulting from the negative change to the property.

Recoverable Business Damages

Business damages are where Orlando commercial property owners have a significant advantage over those in other states. Under Florida law, if an eligible business suffers lost income, relocation costs, loss of business goodwill, or similar damages, it may be entitled to recover these business damages. 

Eligibility to Receive Business Damages in Orlando

To receive business damages in an eminent domain case, the business must meet the following requirements:

• Suffered a partial taking;
• Have operated a business for at least five years;
• Suffered direct damages as a result of the taking; and
• The taking must be for a right-of-way purpose and carried out by a government entity, such as the Florida Department of Transportation.

How to Challenge Government Eminent Domain Offers

If the government needs a piece of property for a valid public purpose and follows all required steps and procedures for condemning the property, the only realistic way to challenge the government in an eminent domain action is to argue that the government isn’t providing enough money to qualify as “full compensation” under the Florida Constitution.

If there’s a disagreement about how much the government should pay to take the property, the first opportunity to challenge the government’s valuation arises when the initial offer is made. Another opportunity will arise if these negotiations break down and the government files an eminent domain lawsuit against the property owner.

During litigation, settlement negotiations may continue. In most cases, the parties agree to a number before the case gets to trial. This can occur informally, such as through telephone or email negotiations or during pre-trial mediation.

If settlement talks fail, the case will go to trial, where a 12-member jury will decide how much the government should pay to acquire the property in question. 

Whether the case is going to trial, entering mediation, or still in the initial-offer-and-counter-offer stage of the condemnation process, the property owner will need to present evidence supporting its position. Real estate appraisers and their reports can help establish the fair market value of the land, but property owners will need additional evidence to support their position, especially when proving severance and business damages. Evidence may include:

• Expert witness testimony as to how the taking will reduce a business’s revenue.
• Sales data showing projected lost profits.
• Invoices, estimates, receipts, and other documents showing the costs incurred for moving or making changes to the business to compensate for the taking.
• Applicable leases and business agreements that are affected by the taking.
• Tax returns and other financial statements to establish an income and revenue baseline for the business and/or the commercial property before the taking.

Negotiation & Litigation Strategies

Whether you’re trying to stop the taking or get the full compensation you’re entitled to receive under the law, here are some tips and strategies that can help during eminent domain litigation.

Document Everything

Whenever you state anything to the government, whether it’s a reason they don’t need your property or why they should offer more for your property, the more documentation you have, the better. Take pictures and present receipts for renovations, changes, or improvements you recently made that add value to your commercial property. Identify any unique property characteristics that add value, but aren’t readily known to the average real estate appraiser. If applicable, conduct environmental studies or assessments that could indicate reasons your property is worth more than the government thinks.

Act Promptly

The sooner you start negotiating with the government, the better. It’s a lot easier to convince the government to change its plans before the government has made any major financial or legal commitments that are difficult to back out of.

Do Your Own Research

When the government submits its first offer, you should be able to get a copy of the appraisal used to support that offer. Review the government’s appraisal, and then hire your own appraiser to conduct their own appraisal. Don’t be surprised if your appraiser comes up with a valuation that is notably higher than the government’s appraisal.

Be Creative

Don’t be afraid to think outside the box. This might include proposing a change to the government’s plans that you’re willing to pay for. However, paying for this adjustment might end up saving your business more money in the long run or preventing the taking altogether. 

Alternatively, look into the possibility of having the government delay its purchase of your property. The government might be willing to rearrange its schedule in return for not having to pay your business extra money. With this extra time, you can make other arrangements, such as finding a better location for your business.

Hire a Professional for Help

Taking on the government isn’t easy. It’s even more challenging to do so in court in a complex legal matter. If you want to challenge the government, it helps to have an eminent-domain real estate attorney on your side.

How Jimerson Birr Supports Orlando Property Owners

If you’re a commercial property owner in Orlando facing an eminent domain action or have received a notice of intent to acquire your property, contact us to speak with Jimerson Birr’s eminent domain attorneys about protecting your constitutional right to full compensation.