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Commercial property owner scores $1.3 million victory in case with Ohio city

By Peg Ritenour, OAR Vice President of Legal Services/Administration

In an appropriations case decided this week, the Tenth Appellate District in Ohio ruled that visibility and access are key components in valuing commercial property and that property owners must be compensated when these are lost or diminished as a result of a taking of part of the property. In doing so, the court upheld a $1.3 million jury verdict in favor of the property owner. The Ohio Association of REALTORS, through its Legal Action Program, participated in a joint amicus curiae brief supporting the property owner’s position, along with the Federation of Independent Small Businesses and the Ohio Council of Retail Merchants.

The property in question is a commercial parcel on a busy corner in Westerville, a suburb of Columbus. The parcel includes a building currently leased to a bank. As part of an overall beautification and branding plan, the City appropriated the property’s road frontage on two sides of the parcel, one of which includes a driveway providing access to bank customers. In addition, the City also obtained a landscape easement to beautify a portion of the property that ran directly across this driveway. The City’s overall improvement plan included planting mature shrubs and trees, erecting fencing and masonry pillars with the city name and logo, adding sidewalks, buffering and screening, etc.

The city was unable to reach a settlement with the property owner on compensation and the City filed suit. Following a trial, the jury awarded the property owner $182,000 for the land that was actually taken and $1,135,735  for damages to his remaining property (the “residue”). These damages were awarded for a loss of visibility from the street and the potential for the City to eliminate street access to the property. The City appealed.

On appeal the City argued that it had not interfered with the current road access to the property and its project plans did not include doing so in the future. Therefore, it argued that the jury should not have been allowed to consider loss of access as part of the damages to the residue caused by the City’s taking because no access had been eliminated. The appellate court disagreed. Because the City took a fee simple interest on that side of the property, the City had complete ownership of that strip of the parcel. As such, it could eliminate ingress and egress to the property on the current driveway at any time. The court concluded that with no guarantee that the City will not do that in the future, the jury was properly instructed that it could consider the potential loss of access to the road as a damage to the residue.

Next, the City challenged the instructions given to the jury on how to calculate the damages suffered by the owner to the residue. The trial court instructed the jury that in making this determination it should assume the property will be used by the City in the most damaging way. In this case, the evidence clearly showed that the City has the power to deny access to the property occupied by the bank whenever it sees fit. In affirming the trial court’s instruction, the court stated:

“If the City later decided a bank was not the building it wanted at the gateway to the City and later decided that beautification required a more attractive street view than an aging bank building, the City had the power to make the building unusable for commercial purposes. The only time to compensate Taylor for the losses which could flow from the City’s take was now.”

The City’s final argument was whether the property owner was entitled to compensation for the loss of visibility to the remaining parcel due to the landscape easement. In considering this issue, the court recognized that visibility from the street is an integral component to the success or a commercial business and therefore the value of the property. Because the City’s landscape easement could be used to block views to the property, resulting in the property being devalued, the court ruled that the jury’s award of damages was proper.

OAR participated in this case because of its longstanding policy of supporting private property rights. This decision upholds the fundamental right of property owners to be justly compensated when part of their property is taken and the value of the remaining parcel is diminished. Moreover, the court confirmed what REALTORS in Ohio all know: that access and visibility are crucial components to the value of commercial real estate.

Click here to read the Court’s decision. The City of Westerville has 45 days to file a notice of appeal with the Ohio Supreme Court. We’ll let you know if they do so.

Tags: legal