On June 8, 2006, the Virginia Supreme Court issued its opinion in Norfolk Redevelopment & Housing Authority v. C and C Real Estate, Inc., 272 Va. 2 (2006). For the first time in fifty years, (1) a Virginia property owner defeated a housing authority’s attempt to take private property. Despite this ruling, the Commonwealth is by no means a zealous guardian of private property rights. (2) The Court applied a rational basis standard of review for legislative determinations, making it extremely difficult for a targeted private freeholder to overcome a government resolution to condemn his property:
A locality’s determination pursuant to a conservation plan that property is blighted and subject to [involuntary] acquisition is a legislative act which, on review, is entitled to a strong presumption of validity . . . that may be set aside . . . only on a showing that the locality acted arbitrarily. (3)
In 1996 Charles Andrews, in the name of his corporation, purchased a salvage yard on 22nd Street in Norfolk. Acting as C and C Real Estate, Inc., Charles leased the property to his son Andy, who continued to operate their business there as Downtown Used Auto Parts, Inc. For the next several years, Andy enjoyed a successful business.
In early 1999 the Andrews learned that their neighbor, Mid-Atlantic Coca-Cola Bottling Company, wanted to acquire their property for additional parking as they expanded operations in Norfolk. Rather than purchase the property from C and C, however, Coca-Cola relied on the City of Norfolk and the Norfolk Redevelopment & Housing Authority to condemn the property, using the City’s power of eminent domain.
On December 1, 1999, the Housing Authority notified C and C that it intended to acquire their property, relying on a conservation plan that had been approved eleven years earlier. In the intervening eleven years, C and C’s property had never been noticed as being blighted; nor had the City ever taken any legal action against C and C or the Andrews concerning problems with the condition of the property. On August 16, 2000, the Housing Authority submitted a written offer to purchase C and C’s property, which C and C ultimately rejected. C and C acquired part of a adjacent street from the City of Norfolk and, having heard nothing more from the Housing Authority, continued improving its business operations. In 2003 the Housing Authority increased its offer, which C and C again rejected. In the fall of 2003, the Housing Authority passed a resolution authorizing condemnation and filed its petition for condemnation.
At that point, C and C engaged the assistance of Waldo & Lyle, a law firm limiting its practice to the representation of property owners in eminent domain proceedings, to represent them in the attempt to condemn their property. C and C’s counsel was able to obtain, through Freedom of Information Act requests, many internal documents from the City of Norfolk and the Housing Authority that dealt with the subject property. The internal documents disclosed what the Andrews already knew — that Coca-Cola was the driving force in the Housing Authority’s attempt to condemn C and C’s property. The documents revealed that Coca-Cola’s desire to expand had prompted the Housing Authority to file for condemnation, planning ultimately to lease C and C’s property exclusively to Coca-Cola.
The purchase price the City offered for condemnation reflected a diminished property value. If C and C had been allowed to place the property on the market for sale, C and C would have been able to receive full payment for its entire interest in the land: its successful, ongoing business operating on the property. In condemnation proceedings, however, business losses are not compensable. Coca-Cola was attempting to acquire C and C’s property without paying for its full value.
To allow Coca-Cola to circumvent the free market, the Housing Authority relied on a conservation plan adopted by the Norfolk City Council in 1988. The conservation plan allowed the City to identify and to acquire property it deemed “blighted” at the time of the plan’s adoption. The City Council had designated as blighted the property C and C would later come to own.
Presenting a matter of first impression to the Supreme Court of Virginia, C and C argued it was unjust and impermissible for the Housing Authority to take its property, based solely on a fifteen year-old “blighted” designation, without considering its current condition. The Court agreed. In May 2006 it held that “the current status of the property must be considered when determining whether the original purpose of the acquisition remains viable at the time the condemnation occurs.”
Conservation plans, the Court noted, only permit eminent domain to be used to cure blighted conditions. Allowing the use of that power to condemn property that was denoted as “blighted” fifteen years earlier could lead to improper uses of the eminent domain power to take property that is no longer blighted. To ensure that property is evaluated for blight closer to the time of the intended taking, an authority condemning property under a conservation plan is statutorily required to provide the owner written notice of the deficiencies creating the blight at least one-year from the time of the taking. The Housing Authority failed to provide proper notice to C and C of the areas of their property that were blighted. Though the Court was careful to say that it was not ruling for C and C on procedural due process grounds, it nonetheless employed due process principles in its ruling.
The Supreme Court of Virginia did not reach the “public use” issue for which the United States Supreme Court’s Kelo decision has received so much attention. (5) The Court did, however, apply the same standard of scrutiny used in Kelo, rational basis, to the Housing Authority’s underlying decision to take C and C’s property; the Court just found that the Authority had not followed proper procedures in implementing its decision. The Court held that the original determination that the property was blighted and should be taken was entitled to a strong presumption of validity. In so holding, the Court placed the burden on the property owner to show by clear and convincing evidence that the property was no longer blighted or exerting a blighting influence on the surrounding area.
Fortunately C and C was able to prevent the loss of its property to the Housing Authority, but it seems that the principles upon which Kelo was decided have, so far, gone unchecked by the Supreme Court of Virginia. Prior to the Kelo decision, former delegate (now Congresswoman) Thelma Drake was able to obtain passage of an amendment to the redevelopment plan provisions in Virginia’s Housing Authorities Law (6) that prevented the condemnor from acquiring property by condemnation more than five years after the plan was approved. Although the slippery public use/ public purpose slope has caught the attention of some judges and jurists (7), Virginia, unlike many other states, was unable to enact legislation after the Kelo decision to address public use abuses by condemnors. The legislature should consider three statutory condemnation abuse-busters, which would have made a difference in C and C, and will guard Virginians’ private property rights. Those proposals would:
1. Impose a five year limitation for acquiring property under conservation plans similar to that provided for redevelopment plans;
2. Provide for a procedural evidentiary hearing on whether the subjective determination of blight by a governmental agency is tainted by the desire of the government’s executive branch (which appoints the agency) to make private property available for acquisition by “favored” buyers or users;
3. Permit an award to property owners of costs, including reasonable attorneys fees, when incurred in a successful challenge of a housing authority’s decision that the property owner’s property was a blight or exerts a blighting influence, regardless of whether a condemnation suit is filed. (8)
C and C represents an important victory for property rights in Virginia. But property owners must demand more security for their property from their state representatives and their courts. The great deference the Supreme Court of Virginia appears willing to give legislative bodies that decide to use eminent domain must be counterbalanced. The Virginia General Assembly must act to protect property owners from being exploited in an environment where larger, more powerful owners can enlist the power of the government to take what they want if property rights are to be given the full protection our constitutions intend.
*Mr. Charles M. Lollar is a partner at Waldo & Lyle, P.C., in Norfolk, Virginia, which limits its practice to the representation of property owners in eminent domain proceedings and property rights. Mr. Lollar is a former Chair of the Real Property Section.
(1) The Court had not ruled for a property owner since Bristol Redevelopment & Housing Authority v. Denton, 198 Va. 171 (1956).
(2) Professor James W. Ely, Jr. has described property as the “guardian” of every other constitutional rightin his property rights bible, The Guardian of Every Other Right (1992).
(3) Id. at 11.
(4) C and C, 272 Va. at 11.
(5) See Kelo v. City of New London, 545 U.S. 469, 125 S.Ct. 2655, 162 L.Ed. 2d 439 (2005) (cited for the proposition that the U.S. Constitution prohibits the government from taking private property unless taken for public use and the owner receives just compensation). In Kelo the Court displaced long-time homeowners, some of whom were born in the taken homes, to facilitate a private economic development project. The decision caused such a public backlash that it generated a movement to condemn Justice Souter’s New Hampshire homestead.
(6) Va. Code Ann. § 36-51C.
(7) See Chief Justice Hassell’s dissent in the recent opinion in Hoffman v. City of Alexandria, 634 S.E. 2d 732 (2006), for a detailed description of the slippery slope resulting from the majority’s approach to determining whether a public benefit dominated the private gain to a developer. In that case the majority held that so long as the condemnor owns the property, it can condemn. The majority’s holding, like Kelo, raises concerns about how deep property rights may slide: a storm water box culvert qualified as a “public use” for condemnation purposes, even though the culvert was relocated from a location where it was functioning satisfactorily with a useful life of up to seventy years to the Hoffman’s private property, thereby decreasing the capacity of the City’s storm water system, in order to permit the developer of the property already burdened with the culvert to avoid reducing the building design of the high-rise apartment by 60,000 square feet at a cost in value to the developer of at least $2,090,000.
(8) Justice Lacy noted in the C and C opinion that the property owner did not challenge, at the time, the Authority’s decision that C and C’s property was a blight and exerted a blighting influence on the area, suggesting that property owners should not wait until the condemnation suit is filed. See C and C, 272 Va. at 10. But Virginia Code § 25.1-419 does not provide for reimbursement of attorneys fees at that stage of the proceedings, so the owner who involuntarily finds his property the subject of such a decision must have the means to challenge it.