Real Estate Law Title

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In the old days, railroad agents had the responsibility of buying up land from the Native Americans for right of ways upon which they could build their tracks. One story tells of a rather shrewd Chief who understood the situation well. This Chief was approached by a railroad agent who offered to buy a particularly poor stretch of land:

Buy my land? . . . Sure, me sell for $50,000, said the Chief.

$50,000! Why that land is no good for planting or pasture. It is just no good for anything! the agent exclaimed.

The Chief grunted, It heep good for railroad. [i]

While this anecdote may seem silly, Kimble County landowners can take from it two important lessons: The first of these lessons is that, like the railroad, the LCRA power transmission lines are probably coming through Kimble County whether we like it or not. While we are only talking about easements and need not fear the total divestment of our ownership rights that the Native Americans went through, a taking is a taking. Public utility companies like the LCRA have the immense power of eminent domain and condemnation bolstering them.

Eminent Domain is common law principal given statutory strength at the State legislature level. It empowers government and quasi-government entities to take any U.S. citizens land for public use. The only real restrictions placed upon this power lie in the Takings Clause of 5th Amendment, which states that €œprivate property shall not be taken for public use, without just compensation[ii]

This article is not some sort of call to arms supporting legislative reform. If that is a cause you intend to support, I suggest you take a look at materials provided by the various landownership rights groups or other like-minded organizations around the country.

Rather, what this article hopes to accomplish is to provide helpful tips and background information to Kimble County landowners so that they may better prepare for what is coming and hopefully obtain the best outcome possible.

This brings me to the second lesson we may take from the wise Chief.

Landowners must be aware of and prepared to defend the value of their land. As a property owner, or the “big chief” on your land, can you simply accept what the railroad/LCRA agent thinks the easement over your land is worth? Sure and indeed your life will be simpler that way. However, their offer may not be what you feel entitled to and may be much less than what you could receive with some additional preparation.

Understand that eminent domain/condemnation proceedings are adversarial in nature. This means that even while you may or may not ultimately be able to prevent the installation of the transmission line over your property, you certainly have a voice in determining what the 5th Amendment’s just compensation will be for you. Preparation is key, you are going to be dealing with a team of professionals trained by the LCRA to adhere to a budget and a schedule. Your rights and compensation are NOT their priority.

It is apparent that there is much confusion amongst the public as to how eminent domain/condemnation actions actually work and are going to transpire. Familiarizing yourself with the progression will enable you to better make better decisions when it comes time. The following five steps are a drastically abbreviated schedule of how a normal eminent domain/condemnation matter will likely proceed.

1: If it hasn’t happened already, the LCRA will contact you and request permission to inspect, survey, and appraise your property.

2: An LCRA representative presents to you a valuation of your property and makes an offer.

3: This offer is time sensitive and must be accepted within a specific time frame. If you do not respond or if you reject the offer outright, the LCRA will then likely file their condemnation lawsuit against you.

4: Once this happens the Court selects three special commissioners to conduct a hearing on the matter. The special commissioners will be disinterested property owners that reside in Kimble County. At this hearing, you are able to present evidence to the panel in support of your valuation, cross-examine LCRA appraisers, and generally explain to them why the LCRA valuation is too low. Once the presentation of evidence is conclude, the Commissioners make a determination of value and make that figure their “special award.”

5: This “special award” is not the end game unless you are satisfied with it. If unhappy with the commissioners award, you have a short period of time in which you may object to it and appeal. In this new trial both parties start over from the beginning, and the case proceeds as if the commissioners’ hearing never happened. You will be able to choose whether a judge or a jury decides your case.

As you can see, it’s really all just about money. The steps I have outlined are your opportunities to have a say in how much you are going to receive. Essentially, you have three primary options: come to negotiated agreement with LCRA, accept the special commissioners’ award, or have a judge or jury decide how much you should receive.

Make no mistake; property valuation can be very complicated in the eminent domain context. Perhaps you have sold a property in the past; maybe you even contested the tax valuation of your own home. The appraisals and valuations in these situations are very simple calculations compared to those in used condemnation matters. Property valuation evidence in condemnation proceedings must adhere to and reflect a body of condemnation law hewn out over decades in Texas Appellate Courts. It would be wise to seek professional assistance early in the game.

Fundamentally, in valuating easements in the transmission line context, we are really actually talking about de-valuation. How much less is my property worth now that there are power lines running through it, and is that amount of devaluation also the amount of money I could be compensated with and be happy? To set the tone, throw out some actual numbers, and give you a general idea of what sort of devaluation I am referring to, consider the following:

In 1997, the LCRA actually commissioned a study to figure out just how much that its power transmission lines affected the value of the properties they cross.[iii] The geographical area studied was around Georgetown, Texas. This study was completed by an appraiser who the LCRA had hired to do all of the appraisal work on an easement acquisition project very similar to the one proposed for Kimble County. The only difference is that this study was done for a much smaller 138 Kv transmission line than the double circuit 345 Kv lattice tower we are facing today.

In this study, completed by an appraiser paid by LCRA, undeniable devaluation was found. It concluded that a transmission line easement has less than a 10% impact on price, and in most instances, less than a 5% impact on price.[v] Importantly, this is a possible 10% overall impact on price for the entire property.[vi] Put simply, if you owned targeted land around Georgetown around the millennium, the LCRA turned your $500,000.00 property into a $450,000.00. - $475,000.00 property.

For the land directly underneath and near the line, the study concluded:

“It is concluded that the area located within an electric transmission line easement has a 90% diminution in value due to the presence of the easement. [and] [i]t is concluded that an area 200 feet wide adjoining the proposed easement has some diminished value. The extent of the diminished value can be dependent on various factors which would include the location of the easement relative to the whole tract, and the physical characteristics of the remainder.[vii]

This is, of course, is ten year old data from a single source that only considers strict real estate values. Additionally, this study was conducted for much smaller transmission lines; and should be considered only as a point of reference.

Much has changed since 1997, but is my opinion that it has changed in favor of the landowner rather than the LCRA. To arrive at a more fair devaluation figure, one must start with a strict real estate calculation like the above, and then add other important considerations.

One such consideration is our land-based businesses. Kimble County landowners are ranchers, farmers, and hunting lease operators. To varying extents LCRA transmission lines will harm these businesses. A business is property, and as with real estate, the takings clause of the U.S. and Texas Constitution require that compensation be paid to the owners when it is taken or damaged for public use.[viii] These are separate harms from the real estate devaluation and landowners need to be compensated for them as well.

Then there are considerations that affect valuation that have less to do with you as a businessperson, and more to do with the business that LCRA can do with its easement across your land.

The LCRA is not only in the power distribution business. They are also in the data transmission business. In today’s digital, hyper-connected age, right of way easements are hot commodities for those industries that rely on hard line data connections. These lines transmit data involving everything from the plain old internet to national security. If you aren’t careful, you could find yourself legally bound to watch silently as the LCRA installs much more than just the power transmission lines across your property. The question is: are you as a landowner entitled to any of that extra value that may be coming into the LCRA in the form of communication line leases to non-governmental third partys?

Texas Courts haven’t ruled sufficiently on the matter; conventional statistical methodologies say yes. The reason I am bringing it up is not so much to advocate for it being a huge valuation issue in Kimble County eminent domain proceedings, but more to stress the importance of know exactly what rights you are giving up and are being compensated for.

As you can see, there is a wide range of issues that can come into play in these eminent domain matters and many can become very complicated. As a landowner dealing with the LCRA, you will be meeting with a sophisticated group of people who deal with this subject every day, all day long. You are at an inherent disadvantage and the only way to overcome it is by educating yourself.

[i] The Appraisal Journal, October, 1978, pp. 514-515 (Quoted from the April 1963 Newsletter of the American Right of Way Association)

[ii] U.S. CONSTITUTION, Amend. V.

[iii] Larry Kokel, MAI. Impact of Electric Transmission Lines on Value. (Study prepared for LCRA). 1997.