Eminent Domain

SB 1566 Ketron / HB 1576 Carr

Most Recent Action

TACIR Releases Eminent Domain Report

The Tennessee Advisory Committee on Intergovernmental Relations (TACIR) released its report Eminent Domain in Tennessee, a study of two bills referred to TACIR by the General Assembly last year: Senate Bill 1566 (Ketron) [House Bill 1576 (Carr)] and House Bill 2877 (Gotto) [Senate Bill 2745 (Johnson)].

Senate Bill 1566 would have allowed a property owner to require the local government to submit to binding arbitration in order to determine the price of property to be taken by condemnation. If it had passed, local governments would not have been able to object to the use of binding arbitration. Like litigation, arbitration is a process for dispute resolution whereby a neutral third party renders a decision after a hearing at which both parties have an opportunity to be heard. With binding arbitration, the parties are legally obligated to comply with the arbitrator's decision. While binding arbitration generally reduces the time required to resolve a dispute, it has many of the disadvantages of litigation. Binding arbitration is less time consuming than litigation, mainly because the decision cannot be appealed simply because the parties do not like the result, but it is potentially as expensive because the parties still hire lawyers, appraisers, and other experts when arbitrating disputes.

One alternative to settling disputes that is already widely used in Tennessee is mediation, which is essentially a form of assisted negotiation. Less time consuming and less costly than other methods of resolving disputes, mediation is an informal process through which a neutral third party, the mediator, helps the parties reach agreement. The report says that mediation should always be considered before arbitration. Mediation is generally much quicker and much less costly than either litigation or arbitration. Moreover, the determination of value is left to the parties. If successful, mediation would make the overall process less costly and time consuming and would allow the parties to decide the price for themselves.

The other bill referred to TACIR for study, House Bill 2877, would have eliminated the power of housing agencies to condemn property, and would instead require local elected bodies to institute condemnation proceedings on behalf of them. In practice, local governments already have oversight of housing authorities' use of eminent domain through approval of the redevelopment plans under which the authorities operate. Under Tennessee's redevelopment law, however, a governing body may delegate authority to approve redevelopment plans to another agency, including a housing authority, which then could both approve a redevelopment plan and use it as a basis for condemnation. The Commission found no local government that has delegated this authority.

TACIR also studied a related bill not referred to the Commission for study, Senate Bill 548 (McNally), House Bill 952 (Dunn). This bill would have given a right of first refusal to property owners whose property was condemned by a local government or a state agency. Currently, a right of first refusal exists only in the case of condemnations by the Tennessee Department of Transportation (TDOT). Accordingly, the Commission recommended adoption of the TDOT model, including limiting the right of first refusal to ten years from the date of condemnation, limiting it to the former property owner only, and setting the price based on appraisals of fair market value.

The full report is available on TACIR's web site at www.tn.gov/tacir/pubs_by_date.html

last updated 3/14/2013

Over the summer and fall, TACIR studied a number of bills three or which deal with emiment domain. In its November meeting, the Commission reviewed a draft report on eminent domain that included the following 3 recommendations:

• They agreed that that local governments should not be forced into binding arbitration, and that mediation is the preferred option;
• That, should the government not use land for its condemned purpose, the right of first refusal should extend to landowners' heirs; and that
• Governing Bodies should continue to approve redevelopment plans.

TACIR will consider the final report in this issue at its next meeting in February 2013.

last updated 12/17/2013

SB1566 was referred to TACIR for study, which stops movement on the bill.

Currently, municipalities are authorized to condemn property for a number of public uses. While the separate authorizations for municipal condemnations are spread across the Code, each condemnation typically follows one of two processes for determining just compensation. Of these, the so-called supplemental process is the most efficient and most commonly used method for condemnations in the state.

The bill preempts the existing statutory processes available to cities and counties for determining just compensation for damages relating to condemnations and, instead, requires a municipality or county to follow a new process created under the bill. The bill also severely narrows the definition of "eminent domain" and "public use" to preclude the use of condemnation for municipal utilities and to redevelop blighted areas. The new process provides that for every municipal condemnation, the affected property owner(s) will be given 4 choices following the city's offer. The property owner may:

1. Accept the city's offer of compensation for damages
2. Reject the city's offer and exchange counteroffers. If the limited exchange of counteroffers does not yield an agreement, then both parties are compelled to participate in binding arbitration
3. Reject the city's offer and proceed directly to binding arbitration
4. Reject the city's offer and proceed to court

Under this new process, the city is not afforded an opportunity to make any choice other than to accept or reject a property owner's counteroffer. All other decisions are the exclusive prerogative of the property owner.

TML opposes the revised bill for the following reasons:

1. The bill singles out cities and counties, absent cause, and creates a new burdensome and expensive process that cities must follow for any condemnations in the future.

2. Effectively precludes cities from exercising condemnation authority when acquiring property and securing easements or rights-of-way for the construction and repair of municipal utilities.

3. Effectively precludes municipal condemnation for renewal and redevelopment of blighted areas.

4. Under the bill, the determination of compensation relating to a condemnation for the provision of water, sewer, natural gas and drainage would subject to an archaic and largely-forgotten process enacted in 1858.

5. The bill requires the city to enter into binding and final arbitration at the sole discretion of the property owner. Under the process created in the bill, the city is not afforded an opportunity to make any choice other than to accept or reject a property owner's counteroffer. All other decisions in this process are the exclusive prerogative of the property owner.

6. Allows the property owner to negate the city's right to a jury trial.

7. The bill, in direct conflict with the Uniform Arbitration Act, provides that the award of an arbitrator is binding and final, which denies either party the right to request the award be modified, corrected or vacated and denies either party the right to appeal the arbitrator's award or subsequent judgment.

8. Imposes differing standards of valuation of property during arbitration. At least one of these standards is undefined under Tennessee law.

9. Imposes time limits that will often be impossible to meet.

10. Mandates actions within unrealistic time limits that are confusing and inconsistent with the Rules of Civil Procedure, and that could possibly be construed to delay a local government's right to initiate condemnation or to obtain possession of the property.

11. If a property owner challenges the legitimate public use of a taking as well as the amount of compensation, then there would be two separate legal processes - judicial process to determine the constitutionality of the taking and arbitration to determine the compensation.

12. The bill requires that the American Arbitration Association be the exclusive provider of arbitrators in all municipal and county condemnation proceedings.