UP Standards

4.7.2. Temporary Inverse Takings.The measure of compensation for temporary inverse takings is the same as for other temporary acquisitions—that is, the market rental value of the property acquired for the term of the acquisition.953 Temporary inverse takings may be physical or regulatory in nature.954 And whether a compensable temporary inverse taking occurred will be determined by the court, using a “more complex balancing process” than in alleged permanent takings.955  Similarly, whether an alleged inverse taking is temporary or permanent is a legal question requiring legal instruction. In deciding this issue, “[t]he essential element of a temporary taking is a finite start and end to the taking.”956 This determination can have a significant impact on the valuation, and therefore on the amount…

4.7.1. Leaseholds.As in appraising a fee estate, the best evidence of the market rental value of a leasehold estate is comparable transactions—for leaseholds, comparable lease transactions.929 As the Eighth Circuit stated, “comparable sales of other leaseholds in the immediate area [a]re adequate and substantial evidence of the market value of this leasehold.”930 Generally, “the more comparable a sale is, the more probative it will be” of the market value of the property being appraised.931 Elements of comparability in leasehold valuations include the familiar elements of size, time, location, and so forth (discussed in Section 4.4.2),932 as well as the period (term) of the lease (e.g., six months, one year, five years, etc.),933 the number and terms of any option(s) to…

4.7. Leaseholds and Other Temporary Acquisitions.When the government acquires a leasehold or other temporary interest in property, the measure of compensation is the market rental value of the premises acquired for the term acquired.920  Definition of Market Rental Value  The rental price in cash or its equivalent that the leasehold would have brought on the date of value on the open competitive market, at or near the location of the property acquired, assuming reasonable time to find a tenant.  As with market value, the federal definition of market rental value921 requires willing and reasonably knowledgeable market participants, not compelled to buy or sell, giving due consideration to all available economic uses of the property.922 Temporary acquisitions also require a rigorous,…

4.6.5.3. Appurtenant Easements to the Servient Estate.Slightly different valuation issues arise when the United States’ acquisition of a servient estate also acquires or extinguishes a third party’s appurtenant easement; for example, in a fee acquisition of Owner A’s parcel through which Owner B has an access easement to connect B’s other property to a highway. In such an acquisition, Owner A is entitled to compensation for “what the owner has lost”—i.e., the encumbered fee.907 And Owner B, “the owner of a condemned access easement[,] is entitled to compensation for the diminution in value of the property which it serves.”908 In such instances, departure from the unit rule “may be necessary to avoid grossly unjust results[,]”909 as the usual valuation of…

4.6.5.2. Lands Encumbered by Easements.In federal acquisitions of property already encumbered by an easement, the appraiser must value the property in light of the preexisting easement—and not as an unencumbered fee.899 As the Supreme Court held:  [T]he Constitution does not require a disregard of the mode of ownership—of the state of the title. It does not require a parcel of land to be valued as an unencumbered whole when it is not held as an unencumbered whole. It merely requires that an owner of property taken should be paid for what is taken from him. It deals with persons, not with tracts of land. And the question is what has the owner lost,? not What has the taker gained?900  As…

4.6.5.1.3. Sale or Disposal of Easements.Although the before and after method of valuation is required by these Standards when the government acquires easements,898 use of the before and after method of valuation is not required when the government sells or otherwise disposes of an easement interest. In disposing of easement interests, agencies are therefore free to consider the value of the easement to the acquirer, customary “going rates” or other measures, as well as the diminution to the government’s property by reason of the encumbrance. 

4.6.5.1.2. Temporary Easements.For temporary easements, like other temporary acquisitions, compensation is measured by the market rental value for the term of the easement, adjusted as may be appropriate for the rights of use, if any, reserved to the owner.895 Federal courts apply this measure even to acquisitions of temporary property interests that are “seldom exchanged.”896 “After all, what . . . is required . . . is to determine the figure which would compensate [the landowner] for the loss it suffered by being deprived of this property for this period of time.”897 

4.6.5.1.1. “Going Rates” and Nonmarket Considerations.For some types of easements, such as for electric, telephone, fiber optics, cable, transmission line, or pipeline purposes, there may be a customary “going rate” (per pole, per line-mile, or per rod, for example). But while customary rates may offer a convenient pricing system in other settings, going rates cannot be used as a proxy for market value in federal acquisitions requiring payment of just compensation.890 Going rates tend to reflect non-compensable considerations above the market value of the property acquired, such as avoiding the cost of condemnation or other litigation, and economic pressures to complete construction and place the planned facility or infrastructure in operation. As the Fifth Circuit recognized, “consideration of the expense…

4.6.5.1. Dominant Easement Interests.Compensation for the acquisition of a dominant easement interest is measured by “the difference in the value of the servient land before and after the Government’s easement was imposed.”876 Accordingly, federal acquisitions of dominant easement interests must be valued using a before and after methodology, reflecting compensable damage and special (direct) benefits to the remainder, as with all other partial acquisitions.877  If an acquisition imposes an easement upon an entire ownership, there is a remainder estate in the land within the easement.878 If the easement is impressed upon less than the full area of the larger parcel, the remainder will also include the portion of the parcel outside the easement.879 In either setting, it is well established…

4.6.5. Easement Valuation Issues.In general terms, an easement is a limited right to use or control land owned by another for specified purposes.871 An easement is a property interest less than the fee estate, with the owner of the underlying fee (the servient estate) retaining full dominion over the realty, subject only to the easement (the dominant estate); the fee owner may make any use of the realty that does not interfere with the easement holder’s reasonable use of the easement and is not specifically excluded by the terms of the easement.  Easements are either appurtenant or in gross. An appurtenant easement benefits another tract of land, and typically is useful only in conjunction with other property but has no…