Utility Easement Compensation

[NachoPerito]

Something I never thought would be very difficult has turned out to be a big headache.

We are appraising a utility easement (sanitary sewer), it is in the back of a property, doesn't effect the property functionally in any way regarding its highest and best use. The value/cost of something like this could seem small, but is more than $1.

We have tried to find other examples of compensation for easements and been unsuccessful. Utility companies, builders, indexing recorded easements, no luck. It appears that here, in Washington State, it is very uncommon to pay for utility easements.

Has anyone done a project like this or found data that would be useful?

 

[Mark K]

Most of my work involves r/w and easement valuation. It would be very uncommon NOT to pay for a utility easement in this state.

I have to wonder how they convince landowners into giving up property rights for no compensation, especially if the required easement provides no benefit to the owner?

Along the same line, if the utility companies don't pay for easements, why do they need an appraisal?

 

[Gobears81]

I just finished one yesterday. Lets say that you have a 10,000 SF site worth $50,000 (as vacant). Sounds like no damages are present here, but assuming 1,000 SF is a proposed permanent utility easement, the implied value of that portion as part of the whole is $5,000. There is typically some value retained by the owner, so it is inappropriate to compensate 100% in most cases. I've used 60% in the past for some similar cases, although I've heard some go as low as 30% or 40%. You also have to consider items such as trees that are disturbed by the process. But assuming there are no improvements/ trees in the PE and 60% is used, the implied compensation would be $3,000 in this example. That, of course, goes with the disclaimer that regulations may differ in Washington than in Illinois. Also, if the implied compensation is miniscule, you may have to round up- in Illinois the minimum compensation is $300.

 

[NachoPerito]

Most of my work involves r/w and easement valuation. It would be very uncommon NOT to pay for a utility easement in this state.

I have to wonder how they convince landowners into giving up property rights for no compensation, especially if the required easement provides no benefit to the owner?

Along the same line, if the utility companies don't pay for easements, why do they need an appraisal?

The appraisal has to do with a sewer line easement at issue between two neighbors, one is seeking damages due to errors in the easement location description

I also thought it was commonplace to pay for an easement when a property owner doesn't need a hookup, but that isn't the answer I am getting

 

[NachoPerito]

I just finished one yesterday. Lets say that you have a 10,000 SF site worth $50,000 (as vacant). Sounds like no damages are present here, but assuming 1,000 SF is a proposed permanent utility easement, the implied value of that portion as part of the whole is $5,000. There is typically some value retained by the owner, so it is inappropriate to compensate 100% in most cases. I've used 60% in the past for some similar cases, although I've heard some go as low as 30% or 40%. You also have to consider items such as trees that are disturbed by the process. But assuming there are no improvements/ trees in the PE and 60% is used, the implied compensation would be $3,000 in this example. That, of course, goes with the disclaimer that regulations may differ in Washington than in Illinois. Also, if the implied compensation is miniscule, you may have to round up- in Illinois the minimum compensation is $300.

Today I heard a standard was 10-25% of full value within setback and 25-50% outside setback.

 

[JTip]

Yep, $1. You are lucky if they plant grass at the end of the project, let alone paying for site improvement (trees, bushes, etc).

Utilities are big, bad and tough. People want infrastructure but not if getting it affects their property.

 

[Mark K]

Yep, $1. You are lucky if they plant grass at the end of the project, let alone paying for site improvement (trees, bushes, etc).

Utilities are big, bad and tough.

You must have some unusual state laws that trump the 5th Amendment regarding just compensation.

On occasion a utility will try to play the hard azz and pay little or nothing but in this state but if the owner tells them to "f-off, take me to court", the utility changes their tune pretty quickly. In condemnation cases, the condemner has to pay for their own attorneys and often for the landowner attorney, court costs, the court-appointed appraiser fees, and then whatever compensation the jury decides is just. They usually won't take that chance and settle for a reasonable amount prior to court. It usually costs the condemner a minimum of $15K to take a landowner to court and then they have no idea what the jury will decide. That's what scares them the most. The landowner has nothing to lose in most cases, again, that's here.

As far as what percentage of fee is just compensation, it all depends on the wording of the easement and the rights taken/remaining that tells me a reasonable %, usually 25-50% of fee for a subsurface easement assuming the landowner continues to have reasonable use of the surface rights.

 

[Gobears81]

Today I heard a standard was 10-25% of full value within setback and 25-50% outside setback.

I've never had any criticism of my percentages, but it sounds like you have some information that better parallels your market and property type. I appreciate the differentiation in compensation for setbacks in some cases, but with that said, I'm a bit more comfortable with the range that Mark quoted above and have not yet seen a 10% compensation for a PE

 

[JTip]

It's a sewer line, under the ground, out of sight. A slender stick in the bundle. Once the grass grows one will never know without checking the deed.

Per you post, it doesn't change H&BU, back of the property, no future functional issues. I'm not seeing the damages here......

 

[Gobears81]

I'm not seeing the damages here......

No damage to the remainder in many cases, but explaining the lack of damages for said area to a farmer would be an uphill battle Even if crop damages aren't to be considered, the recognition of a subsurface easement isn't well received for that type of property