Compensation for Condemnation of Temporary Easements

When the state condemns a temporary easement that encumbers the frontage of a vacant parcel, but uses the easement for only a fraction of the easement's total duration, how should the landowner's compensation be computed? In McCurdy v. State (NYLJ 3/21/08, p. 27, col. 3), the Court of Appeals concluded that landowner was entitled to consequential damages for harm to the interior land not encumbered by the easement, but only for the period when the state's use of the easement obstructed landowner's access to the interior of the parcel. The court's opinion, however, did not foreclose the possibility of more generous compensation in a future case.

The McCurdy Facts

In 1980, McCurdy purchased a vacant quarter-acre parcel fronting on the Montauk Highway in the Town of Islip. McCurdy operated a dental office on an adjacent parcel, which he did not own. In 1999, the state set out to reconstruct the highway, and appropriated a 71-square-foot slice of McCurdy's land. The parties do not dispute that the value of this slice was $850. At the same time, however, the state appropriated a temporary easement over a larger, 679-square-foot slice of McCurdy's land. The temporary easement was designed to facilitate grading during reconstruction of the road, and was to terminate upon completion of the highway work. The temporary easement ultimately terminated on Feb. 1, 2001, nearly two years after the condemnation had become effective.

McCurdy sought damages for taking of the temporary easement, contending that he was entitled to the rental value of his entire parcel for the full period of time the easement was in effect, regardless of how long access to the parcel was actually blocked. The state, by contrast, argued that it was obligated to award consequential damages for harm to the interior areas unencumbered by the easement only for those days when access was actually blocked. McCurdy submitted evidence that the highest and best use of the property was to develop it as a medical office building, but conceded that he had never applied to any governmental agency for a permit to develop the parcel.

On these facts, the Court of Claims awarded McCurdy the rental value of the entire parcel for the duration of the easement, and the Appellate Division affirmed, noting that the record supported the conclusion that the temporary easement rendered McCurdy's property unavailable for development for the period of the temporary easement. The Court of Appeals modified, holding that because McCurdy had not demonstrated that the temporary easement thwarted the highest and best use of his land, the award of rental value for the duration of the easement could not stand.

Conceptual Issue and Case Law

When the state condemns a temporary easement that has the potential to impede access to a landowner's parcel, the landowner suffers two forms of damage: damage that results from actual interference by activity on the easement, and damage that results from the threat of interference. The right to block access is itself a property right, which, it would seem, should generate compensation to the landowner whether or not the state exercises the right.

Nevertheless, in two cases before McCurdy, the Court of Appeals had limited landowner's compensation for diminution in value of property abutting a temporary easement, holding that compensation was not available for periods during which the state had not actually interfered with landowner's use. Thus, in Great Atlantic & Pacific Tea Co., Inc. v. State, 22 NY2d 75, the state condemned a portion of a supermarket building, and also condemned a temporary easement over an adjacent portion of the building in order to facilitate demolition of the portion the state had permanently condemned. The state did not enter the property until nine months after the date the state appropriated the easement. The court denied a claim for the loss in rental value of the property during that nine-month period, holding that because the supermarket continued in business during that period, the existence of the easement had caused no loss, and hence no entitlement to damages.

Revisiting the Issue

The court revisited the issue in Village of Highland Falls v. State of New York, 44 N.Y.2d 505, in which the state condemned a temporary easement over land used by a village for a water treatment facility. Although the state had the right to use the easement for its entire duration, the easement interrupted operation of the treatment facility for a total of three days. In evaluating the village's claim for compensation, the court acknowledged that:

A temporary easement that leaves the property owner under constant threat that his use of the property may be curtailed or stopped is likely to affect business or other financial decisions even if use is never interrupted in fact. The threat imposed by the condemnor's legal right to occupy may be almost as damaging as the actual occupation of the property. Damages caused by such uncertainty, difficult as they may be to measure, should generally be compensable.

Nevertheless, the court acknowledged the rule developed in the
A & P case, and indicated that '[w]hatever the merits of that rule if applied generally,' the rule worked no injustice in Village of Highland Falls, because the condemnee was a governmental entity that had suffered no economic harm. Rather than endorsing the A & P analysis, the court invoked stare decisis and concluded that '[a]ny conceptual or logical inconsistencies in the method of retrospective computation should await reanalysis in a case where claimant is truly prejudiced.'

The court in McCurdy did not undertake that 'reanalysis,' opting instead to rely on the result the court had reached, however reluctantly, in Village of Highland Falls. The court ignored a difference between McCurdy and the previously decided cases: in McCurdy, the land subject to the easement was vacant, while in the other two cases, the land had already been devoted to its highest and best use. In A & P and Highland Falls, the court could be confident that the easement did not cause the landowner any lost opportunity; so long as the landowner continued to operate, the easement had no effect on current or prospective value of the land. By contrast, in McCurdy, the temporary easement would have made it unattractive for a developer to put the land to more productive use.

Conclusion

Nevertheless, the court in McCurdy did not articulate a sweeping rule precluding any recovery of consequential damages for periods when the temporary easement did not, in fact, interfere with current use. Instead, the court emphasized that this claimant 'failed to show that the temporary easement interfered with the parcel's marketability or development in a more than conjectural sense.' Hence, the court denied relief because 'there is no evidence in this record from which a fact finder might conclude that claimant was, in fact, planning to sell or develop his property.' What evidence would suffice to support a consequential damage claim was left for another day.

Stewart E. Sterk is Editor-in-Chief of this newsletter.

When the state condemns a temporary easement that encumbers the frontage of a vacant parcel, but uses the easement for only a fraction of the easement's total duration, how should the landowner's compensation be computed? In McCurdy v. State (NYLJ 3/21/08, p. 27, col. 3), the Court of Appeals concluded that landowner was entitled to consequential damages for harm to the interior land not encumbered by the easement, but only for the period when the state's use of the easement obstructed landowner's access to the interior of the parcel. The court's opinion, however, did not foreclose the possibility of more generous compensation in a future case.

The McCurdy Facts

In 1980, McCurdy purchased a vacant quarter-acre parcel fronting on the Montauk Highway in the Town of Islip. McCurdy operated a dental office on an adjacent parcel, which he did not own. In 1999, the state set out to reconstruct the highway, and appropriated a 71-square-foot slice of McCurdy's land. The parties do not dispute that the value of this slice was $850. At the same time, however, the state appropriated a temporary easement over a larger, 679-square-foot slice of McCurdy's land. The temporary easement was designed to facilitate grading during reconstruction of the road, and was to terminate upon completion of the highway work. The temporary easement ultimately terminated on Feb. 1, 2001, nearly two years after the condemnation had become effective.

McCurdy sought damages for taking of the temporary easement, contending that he was entitled to the rental value of his entire parcel for the full period of time the easement was in effect, regardless of how long access to the parcel was actually blocked. The state, by contrast, argued that it was obligated to award consequential damages for harm to the interior areas unencumbered by the easement only for those days when access was actually blocked. McCurdy submitted evidence that the highest and best use of the property was to develop it as a medical office building, but conceded that he had never applied to any governmental agency for a permit to develop the parcel.

On these facts, the Court of Claims awarded McCurdy the rental value of the entire parcel for the duration of the easement, and the Appellate Division affirmed, noting that the record supported the conclusion that the temporary easement rendered McCurdy's property unavailable for development for the period of the temporary easement. The Court of Appeals modified, holding that because McCurdy had not demonstrated that the temporary easement thwarted the highest and best use of his land, the award of rental value for the duration of the easement could not stand.

Conceptual Issue and Case Law

When the state condemns a temporary easement that has the potential to impede access to a landowner's parcel, the landowner suffers two forms of damage: damage that results from actual interference by activity on the easement, and damage that results from the threat of interference. The right to block access is itself a property right, which, it would seem, should generate compensation to the landowner whether or not the state exercises the right.

Nevertheless, in two cases before McCurdy, the Court of Appeals had limited landowner's compensation for diminution in value of property abutting a temporary easement, holding that compensation was not available for periods during which the state had not actually interfered with landowner's use. Thus, in Great Atlantic & Pacific Tea Co., Inc. v. State , 22 NY2d 75, the state condemned a portion of a supermarket building, and also condemned a temporary easement over an adjacent portion of the building in order to facilitate demolition of the portion the state had permanently condemned. The state did not enter the property until nine months after the date the state appropriated the easement. The court denied a claim for the loss in rental value of the property during that nine-month period, holding that because the supermarket continued in business during that period, the existence of the easement had caused no loss, and hence no entitlement to damages.

Revisiting the Issue

The court revisited the issue in Village of Highland Falls v. State of New York , 44 N.Y.2d 505, in which the state condemned a temporary easement over land used by a village for a water treatment facility. Although the state had the right to use the easement for its entire duration, the easement interrupted operation of the treatment facility for a total of three days. In evaluating the village's claim for compensation, the court acknowledged that:

A temporary easement that leaves the property owner under constant threat that his use of the property may be curtailed or stopped is likely to affect business or other financial decisions even if use is never interrupted in fact. The threat imposed by the condemnor's legal right to occupy may be almost as damaging as the actual occupation of the property. Damages caused by such uncertainty, difficult as they may be to measure, should generally be compensable.

Nevertheless, the court acknowledged the rule developed in the
A & P case, and indicated that '[w]hatever the merits of that rule if applied generally,' the rule worked no injustice in Village of Highland Falls, because the condemnee was a governmental entity that had suffered no economic harm. Rather than endorsing the A & P analysis, the court invoked stare decisis and concluded that '[a]ny conceptual or logical inconsistencies in the method of retrospective computation should await reanalysis in a case where claimant is truly prejudiced.'

The court in McCurdy did not undertake that 'reanalysis,' opting instead to rely on the result the court had reached, however reluctantly, in Village of Highland Falls. The court ignored a difference between McCurdy and the previously decided cases: in McCurdy, the land subject to the easement was vacant, while in the other two cases, the land had already been devoted to its highest and best use. In A & P and Highland Falls, the court could be confident that the easement did not cause the landowner any lost opportunity; so long as the landowner continued to operate, the easement had no effect on current or prospective value of the land. By contrast, in McCurdy, the temporary easement would have made it unattractive for a developer to put the land to more productive use.

Conclusion

Nevertheless, the court in McCurdy did not articulate a sweeping rule precluding any recovery of consequential damages for periods when the temporary easement did not, in fact, interfere with current use. Instead, the court emphasized that this claimant 'failed to show that the temporary easement interfered with the parcel's marketability or development in a more than conjectural sense.' Hence, the court denied relief because 'there is no evidence in this record from which a fact finder might conclude that claimant was, in fact, planning to sell or develop his property.' What evidence would suffice to support a consequential damage claim was left for another day.

Stewart E. Sterk is Editor-in-Chief of this newsletter.