Value in Use and Plottage Value

[Doug DeMars]

...Court has already found title company at fault and is now requesting damages. Title company appraisal before and after is the same with no consideration by the appraiser for the value in use as a commercial access easement. Question is, would a before and after appraisal, with the before value being supported by the "value in use" to the commercial operation be favorably considered by the courts. Thank you for any advice, Happy Thanksgiving.

Sounds to me the current damage is 0. A lucky error on the part of the title company.

It would be interesting to see who would be blamed for damages if the sale went through as planned. I would think the Commercial Owner (neighbor) would have a solid case against the developer for selling him/her something that was never needed. At that point...damage would be done.

 

[Dan Umstead]

I agree with Doug DeMars.

Tilting a windmills, where the lawyers will be the only winners.

Charge a large fee for you work, by the hour. (remember, most of my lawyer friends charge $385+ per hour) Do not be shy, regarding your fee, as this may be along, drawn out process.

 

[Greenra]

I agree with the preceding posts and add my thoughts to your dilemma.

I don’t see value in use as an acceptable argument unless there are some extenuating circumstance. With that said, the value in use argument should be addressed by attorneys prior to an appraisal--- possibility a bifurcated hearing where the court would provide direction on the appraisal.

Keep in mind, that given the imprecision of appraisals, it is difficult to measure the impact on value using the before/after methodology when the division of property rights is relatively minor. Hence, state rules that are widely used in state courts. The before/after method is most relevant when there are two independent sets of data that accurately represents the before and after scenarios.

Plottage value exists when the value of the whole is greater than the value of the independent parts. Thus, the HBU would be to combine the parts if plottage value existed above the cost associated with combing the parts.

[FONT=&quot]My last comment is that courts typically find it difficult to accept zero impact on value when an item affects a property such as an easement. [/FONT]

 

[hastalavista]

The subdivision guy thought he had the commercial guy over a barrel and was greedy... until he found out he had nothing to sell.

This is where I was going before I took off for the Holiday.
I'm not even sure if the subdivision guy thought there was any additional value for the rear site prior-to purchasing the entire development site; that thought might have germinated after the purchase of the development site and when it was determined that the back lot really wasn't necessary at all to the development, but would be valuable to the commercial owner (with the existing easement being unknown throughout that entire period).

I don't think there is any loss attributable to the title company's error... except for (a) the costs associated with the failed sale to the commercial guy (attorney fees, surveys, etc. Not any loss due to a sale price, but expenses of the costs associated with the process of selling the property) and (b) the cost of the lawsuit against the title company.

I know the above is something for the lawyers to negotiate or a judge/arbitrator to determine. I think you (as the appraiser) can still assist in this process by determining that the value of the rear lot isn't tied to the commercial property's use but to what it would be worth as surplus land to the development; presuming the developer paid that price for it in his purchase of the development site, then there is no loss in value associated with the title company's error.
The developer can probably recoup his expenses for the failed sale and for this litigation, which would include your appraisal fee.

Good luck!

 

[hastalavista]

Interestingly enough, CAN & I worked on an assignment that had some similar elements (easement rights & development potential); the identification of the easement wasn't clear in the title report, and its necessity for the transaction to make sense only became apparent when CAN and I researched the project at the county planning department.

Once we discovered it, the entire structure of the purchase (this involved a purchase) had to be changed. Fortunately, the buyer and seller were willing to make the changes (this was also a non-arm's length transaction; buyer and seller wanted to consummate the deal equitably, not screw or sue one another).

 

[CANative]

Just thought of something else FWIW. How and where did the easement work when the subdivision parent lot was still whole? How does it work now that the lot is split? I sounds like the orphan parcel is between the commercial property and the subdivision finished lots. Can commercial vehicles go through the subdivision to get to the commercial area (e.g. access the commercial from the residential highway side.

Also, it strains credulity that the subdivision guy didn't figure out the easement while developing the lots. Seems like more than just the title company f'd up.

 

[fedresource2]

Thank you everyone for your input.