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Condemnation and Compensation; RELU

Condemners will tell you that “just compensation” is for the value of the property being taken and the diminution in value of the remaining property , if any, and that no matter the impact a taking may have on a business, condemnation does not provide compensation for that impact.  That would be a business loss. 

 However, in certain circumstances, a decrease in the volume of business conducted on a property that is the subject of a condemnation action may be considered in determining the depreciation of the market value of the property.  Oregon law is well-established that lost profits or business is not compensable, but courts around the country have allowed a property owner to present evidence of a decrease in the business operated on the property if the evidence is offered to establish a depreciation in the value of the real property for continued operation in its current use, and not as a separate measure of damages.  In a recent trial in Clackamas County, the judge allowed the property owner (who operated a gas station on the subject property) to present evidence relating to the volume of fuel sold at the property because evidence was also offered that prospective buyers and sellers of gas station properties consider the volume of sales as an important factor in determining the fair market value of the real estate.  While the property owner was not entitled to present evidence of the lost revenue or profits in monetary amounts as a result of the decrease in volume of fuel sales, it was able to put on evidence of the difference in volume of fuel sold before the taking and what the appraiser anticipated the volume would be as a result of the taking.  The owner was also permitted to analyze these volumes in the context of fuel sold at other gas station properties under the sales comparison approach.  Accordingly, it is important to consider whether and how to present evidence of “business loss” as it relates to the fair market value of the property in its highest and best use, especially in situations involving specialty investment properties that are valued in the market based on the operation of a specific business on the property.

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We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.
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