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See some of Saul Fenchel's eminent domain articles covering various subjects in Eminent Domain Condemnation.

What if my property has environmental problems?

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Many properties are affected by environmental problems. For example, contaminated soils or water. The costs to remediate can be substantial and the estimates to accomplish remediation can vary considerably. Sometimes, it would appear that if the estimated cost of remediation is deducted, it can result in the property owner being offered nothing. However, in the condemnation proceeding itself, the costs of remediation cannot be deducted from market value in arriving at the just compensation award. However, valuation may be affected by the “stigma” of contamination.1 In any event, this does not relieve the property owner or tenant of possible liability for environmental remediation, which may then be the subject of a completely separate proceeding.

1The valuation standard in a condemnation context is completely different than the valuation standard for purposes of determining valuation for real property tax. In contrast to a condemnation proceeding where the property is valued at its “highest and best use,” in a tax certiorari or real property tax appeal context the property is valued “as is.” Applying this concept, the courts, in respect to real property valuation (tax certiorari), have held that the cost of remediation can be deducted dollar for dollar or, alternatively, the diminishment in value due to the environmental contamination may be taken into account in determining valuation for real property tax purposes.

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