Highest and best use and zoning changes in eminent domain cases
“Typically in eminent domain cases, the court system seeks to achieve just compensation through the remedy of damages. It’s important for both property owners and attorneys to recognize the types of eminent domain damages that may or may not be available when calculating just compensation.
We’ve discussed direct damages in eminent domain cases in previous articles, but as a refresher, these damages consider the value of the land and any improvements to the land which are actually taken by a governmental entity. The market value must be determined based upon the highest and best use of the land and improvements which are being taken.
Generally speaking, commercially zoned property will have a higher value than property zoned as residential. When looking at the various subgroups of commercial zoning, retail generally has the highest commercial use, specifically “impulse commercial” as in fast food restaurants or convenience stores. The next highest commercial value is typically “destination commercial” such as an insurance agency or medical building. Industrial or multi-family residential typically produce the next highest value, followed by residential, and finally agriculture or recreational zoned land. Remember, the levels of use described here are general rules and there are always exceptions to the rules. For example, we’re working on an eminent domain case in New York City where the current use of the property is industrial, but the highest and best use is residential.”
Biersdorf & Associates 23 April 2013