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Evidence of reasonable probability of rezoning permitted in condemnation proceeding.

The Helmick Family Farm consisted of 168 acres in Culpeper County, Virginia. The land was essentially vacant and was being used for cattle grazing and growing hay. The area around the property included some businesses, including auto repair facilities and a mulch processing plant as well as more vacant land.

In order to build a diamond highway interchange, the state Commissioner of Highways (Commissioner) filed a certificate to take a portion of the farm--2.155 acres in fee simple as well as less than an acre of easements for drainage, construction, and utilities. The Commissioner offered Helmick $20,281 for the taking, which was refused, so the Commissioner filed a petition for condemnation in the county circuit court.

Helmick planned to offer testimony from a former county planner at trial. In his written report, the planner opined that the property had been planned for commercial or industrial development for several years. He acknowledged that the property was currently zoned agricultural and that no application for rezoning was pending at the time of the taking.

Helmick also obtained an appraisal. The appraiser detailed his conversations with the County planning staff and the proximity of the land to major roadways in concluding that the highest and best use of the land would be to rezone 31.5 acres for commercial or industrial use and hold the remaining property for investment purposes. As a result, in his valuation he used sales of land zoned industrial or com mercial and comparable sales, rather than land zoned agricultural, and concluded to a total value of the taking of $321,000.

Prior to trial, the Commissioner filed a motion to exclude all evidence concerning a hypothetical rezoning of the property before the date of the taking. The court agreed, reasoning that such evidence would be too speculative and remote. Accordingly, the planner was prohibited from testifying as to the area surrounding the property or the probability of rezoning, and the appraiser could not testify regarding the comparable sales he used in his appraisal, nor his opinion of highest and best use.

Following a trial in which only the Commissioner's appraiser and Helmick's manager testified, the court instructed the jury that it should only consider uses of the property that can be made under its existing zoning category, not a hypothetical rezoning before, on, or after the date of the taking. The jury awarded Helmick $22,592, and Helmick appealed, arguing that it should have been permitted to introduce evidence of the reasonable probability of a rezoning of the land taken.

The state supreme court acknowledged that none of its prior decisions had directly addressed whether such evidence is admissible in a condemnation proceeding. However, prior cases held that everything which affects the market value is to be taken into consideration, including the property's adaptability and suitability for any legitimate purpose in light of existing or reasonably expected conditions.

The court then noted an "avalanche of authority" from other jurisdictions making clear that such evidence is widely permitted. The reason, according to the court, for allowing the factfinder to hear such evidence is obvious: a willing buyer would pay more for a property that presents a fair prospect for more favorable zoning than a property that offers no such prospect.

The Commissioner agreed that evidence of the reasonable possibility of rezoning is relevant, but that the evidence here was too remote and speculative. The court disagreed, noting that the entire enterprise of assessing the market value of property hinges on proof concerning the acts of a hypothetical third party who would purchase the property. In some instances, it would be speculative to indulge in predictions about the probable decisions of third parties, but in other cases, the known facts may make such a determination possible.

The court concluded that its cases reflect an unwillingness to accept transparent manipulations by a landowner to artificially inflate land values based on conjecture and speculation. But here, Helmick sought to prove the actual present market value based on the reasonable probability of rezoning. Accordingly, the court held that the reasonable probability of rezoning should be taken into consideration in compensating landowners, and the trial court's order was reversed with an instruction to conduct a new trial.

Helmick Family Farm, LLC v.

Commissioner of Highways

Supreme Court of Virginia

August 29, 2019

297 Va. 777

Benjamin A. Blair, JD, is a partner in the Indianapolis office of the international law firm of Faegre Drinker Biddle & Reath LLP, where his practice focuses on state and local tax litigation for clients across the United States. A frequent speaker and author on taxation and valuation issues, Blair holds a juris doctor from the Indiana University Maurer School of Law, where he also serves as an adjunct professor. Contact:
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Title Annotation:Recent Court Decisions on Real Estate and Valuation
Author:Blair, Benjamin A.
Publication:Appraisal Journal
Date:Mar 22, 2020
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