Expropriation is a specialised field … and we have assembled one of the strongest expropriation litigation support teams in North America. Each expropriation appraisal team member is the product of our own training program: they thus combine breadth with depth. Each expropriation appraisal team member is thoroughly conversant with the most recent expropriation Case Law. In the words of a legal client we have “a strong bench”…
Expropriating authorities typically employ real estate appraisers to quantify the compensable losses suffered by expropriated property owners. But identifying and calculating the Heads of Claim under the various Expropriation Acts is a specialised field. It is necessary to have knowledge and understanding of the relevant Expropriation Act, Federal or Provincial. Keeping abreast of evolving Expropriation Case Law is also essential. We therefore subscribe to Canada Law Book’s Land Compensation Reports and other services that report on Expropriation Case Law in Canada and other jurisdictions that have commonalities with our legal system. The legal and fiscal attributes of real estate often have greater relevance than the physical component when assessing expropriation compensation. Today’s expropriation expert requires a broad education and training, a knowledge of the major disciplines that impact on real estate … finance, economics, law, planning, geosciences, construction, as well as expropriation appraisal. If the expropriated property is a business asset, knowledge of accounting, marketing, strategic management, business research and operations management are necessary prerequisites to successfully formulating accurate expropriation claims for Injurious Affection and Disturbance … two items that are usually ignored or misunderstood by real estate appraisers acting for acquiring authorities in expropriation cases.
To avoid the expense, delay and uncertainty inherent in a court action, most real estate expropriation cases are settled by negotiation. Because our professional personnel are educated and trained in the process, we form part of the expropriation negotiating team, providing advice, guidance and support to legal counsel, or negotiating expropriation compensation directly on behalf of property owners.
The underlying principle of most legislation governing real estate expropriation is that the property owner is entitled to be financially no “worse off” as a result of losing part, or all, of their property. Compensation for financial loss resulting from the expropriation of real estate will fall under some, or all, of the following Heads of Claim:
(1) Market Value
The expropriating authority, usually the Federal, Provincial or Municipal government, is required to pay the property owner the Market Value of the interest they have expropriated in the property. Market Value is the amount of money the property owner would have obtained for the expropriated interest in the property, had it been sold in the open market by a willing seller to a willing buyer. If only part of the property is expropriated, the acquiring authority has to pay the property owner the Market Value of the portion expropriated plus “Injurious Affection” i.e. any loss in value to the remaining property.
The owner will not get any extra expropriation compensation however if the property has a “special” value to the expropriating authority, over and above its Market Value.
(2) Home For A Home
If the expropriated property is an owner occupied family home, which has been expropriated in its entirety, or has been so adversely impacted by a partial taking that it is no longer suitable for a family home, the owner may be entitled to additional expropriation compensation. If, for example, the expropriated property is located in a neighbourhood of higher priced homes, and the Market Value compensation is inadequate to purchase a replacement property in the same neighbourhood, the expropriated property owner will be able to claim additional compensation sufficient to purchase a replacement home, albeit superior to the expropriated property. If no homes are available for purchase, some Expropriation Acts provide sufficient compensation to purchase a lot and build an identical dwelling in the same neighbourhood.
(3) Disturbance
When a property owner is forced to move out of their home because it has been expropriated, they will be able to claim for the cost of moving expenses, together with items such as new drapes, etc. If it is not practicable to estimate these costs, some Expropriation Acts (Federal and Nova Scotia) provide an allowance instead of up to 15% of the Market Value of the expropriated property. The New Brunswick Expropriation Act allows, in addition to moving expenses, 5% of the Market Value of the residential portion of the expropriated property to compensate for the cost and inconvenience of finding another residence.
When business premises are expropriated the occupant will suffer a variety of losses because they are forced to relocate. The firm will have to print new stationery, inform its customers, incur staff overtime packing and unpacking prior to and after the move, new signage, etc. as well as the cost of the move itself. Whether the business moves or not, profits will usually be adversely impacted, especially by a road widening scheme, and/or the relocation. Trade, once lost to competitors, may take years to recapture, or may be lost forever. The resultant loss, capitalised as “goodwill” will be compensable together with the remaining disturbance costs resulting from the property expropriation.
(4) Special Purpose Properties
Some types of properties do not normally sell on the open market: churches, schools, hospitals, religious and charitable institutions, are examples. If the expropriated property falls into this category and the owner has, and intends, to relocate, they are entitled to base their compensation claim on the reasonable cost of creating a similar property (technically known as “the cost of equivalent reinstatement”). Even though the property they are vacating may be old, their claim can be based on the cost of building a new, otherwise identical structure, plus the cost of acquiring a replacement site. However the Federal and New Brunswick Expropriation Acts attempt to claw back some of the compensation if the owner has improved their position. The Federal Expropriation Act extends equivalent reinstatement to all properties that do not normally sell on the open market, but the other Acts generally restrict this provision to institutional properties.
(5) Injurious Affection
If only part of the property is expropriated the acquiring authority has to pay the owner the Market Value of the portion they have acquired. They also have to compensate the property owner for any loss in value to the remaining property resulting from (1) the expropriation of part of the property and the construction of works thereon, and (2) the use of the expropriated property.
For example, a property owner may lose part of their front yard because the municipality widens the highway. The front yard provides amenity space for the dwelling and affords it a privacy and noise buffer, all of which will be lost because of the expropriation. In addition the expropriated land is to be used as a new traffic lane. The road will then be closer to the dwelling and there will be increased traffic noise, fumes, visual intrusion, etc. The new highway may be at a higher grade than the old road too, resulting in drainage or access problems for the property. In addition the expropriation may deprive the property of its parking, or it may be more difficult to get out of the driveway. The remaining property will suffer Injurious Affection i.e. be depreciated in value as a result of the foregoing.
Or perhaps the property comprises a woodlot or a farm. Land expropriated for a new limited access highway cuts through the middle of it rendering part less accessible and severed from the farm buildings. This is called severance. The less accessible land will be worth less as a result of the severance. Or the remaining farm buildings may be worth less than was the case before the expropriation, because the land base they support is much diminished by the loss of acreage for the new highway.
Some Expropriation Acts include Disturbance (and loss of Goodwill) under the heading of Injurious Affection. This is not significant other than the fact that some expropriating authorities, such as the Province of New Brunswick, will not calculate Injurious Affection until well after the event.
In our experience Injurious Affection is generally the most substantive part of any loss resulting from expropriation. It is usually calculated by the “Before and After” method i.e. the property is valued before part is expropriated and then valued again on the assumption that the expropriation has taken place. The difference between the two values, less the Market Value of the land expropriated, is the Injurious Affection.
(6) Special Economic Advantage
If the expropriated property is owner occupied i.e. not rented, the property owner may be able to claim for any special economic advantage arising out of, or incidental to, their occupation of the property, to the extent that they have not been compensated under the other Heads of Claim.
If for example, the property owner, or a member of their family, is disabled and the home has been adapted to meet their requirements, e.g. with paraplegic ramps, grab bars, wider doorways and hallways, stair lifts, etc. the owner will be able to claim for the cost of these improvements.
The same conditions apply too with commercial property that has been adapted to suit the unique requirements of the business. It applies as well to property that has additional value because of its location, such as a woodlot proximate to the owner’s mill and therefore more valuable to the mill owner than its Market Value would indicate.
Some Expropriation Acts e.g. Newfoundland and Labrador, Prince Edward Island, do not mention Special Economic Advantage specifically but it would, in our view, still be a valid compensable item.
(7) Professional Fees
The governing principle is quite clear; expropriation is the exercise of police power by the state, the expropriated property owner has to assert a claim for their loss against an expropriating authority with more resources and deeper pockets; in this David versus Goliath scenario the expropriating authority has a moral responsibility to level the playing field by providing the expropriated party with paid appraisal, legal and other advice. Unfortunately only the Federal Expropriation Act rises to the challenge, most of the Provincial Expropriation Acts fall short and it is under the latter that municipalities expropriate. The Federal Expropriation Act requires that the expropriating authority pay the legal, appraisal and other costs reasonably incurred in ascertaining a claim for compensation. (The property owner is obligated to ensure that the costs are reasonably incurred, rather than being responsible for ensuring that they are reasonable). The Nova Scotia Expropriation Act provides for the payment of “reasonable costs necessarily incurred”, New Brunswick and Newfoundland make payment conditional on the outcome of a subsequent court action, Prince Edward Island has yet to acknowledge the necessity to protect expropriated property owners. In practice however expropriating authorities want to avoid the adverse publicity, time and cost of proceeding to court so are usually willing to reimburse the expropriated property owner their reasonable appraisal and legal costs as part of the negotiation process.
(8) Betterment
If part, or all, of the property remaining after the expropriation increases in value as a result of the scheme the resultant increase (Betterment) usually has to be “offset” against the total compensation payable, Heads of Claim other than the value of the land taken, or the property remaining after the expropriation, depending on the terms of the applicable Expropriation Act.
Click here for relevant expropriation case law.
