UW, in the hope of building a music school on the site, exercised the power of eminent domain and offered Brothers owners Eric and Marc Fortney $2.1 million for the building and $150,000 in moving costs.
The Fortneys, who paid more than $1.98 million for the property in December 2006, refused that offer. A city of Madison assessor valued the property at $682,000. A private appraisal came up with $1.1 million. A deal has yet to be reached.
In an attempt to sort out what could happen next and other matters of real estate, The Badger Herald sat down with Thomas Mitchell, a UW associate professor of law and an expert on property law.
BH: What does the state have to prove in order to use the power of eminent domain?
TM: It’s a radical thing in the law to take someone’s property rights. The notion behind eminent domain is that there is some better use of the property that will help the public generally.
There’s a requirement under eminent domain that the taking has to be for a public use. And so that’s the key thing. … Now, what is the public use? That has been a standard that has evolved over the last 150 years.
Initially, public use meant something quite literal. It meant that the public had to be able to use the property in a physical sense. Typically, the type of use that was permitted is if you took it for a public park.
Over time, that’s changed. [Public use] has been essentially redefined to mean public benefit. So once you have a public benefit, that doesn’t necessarily mean that the public has to be able to physically use the property.
BH: Once the state has decided to use the power of eminent domain over a property, then they must offer just compensation to the property owners. If the state does this and their offer is rejected, can the state condemn the building?
TM: Over many, many decades the just compensation requirement has been interpreted by the Supreme Court to require that the property owner in almost all cases be paid fair market value. What typically happens is disputes arise between some property owners and the government authorities about what is fair market value for that property.
In most cases, people don’t have the awareness of what their legal rights are, or they feel that they don’t have the legal resources to fight the government in terms of the valuation of their property. Most property owners who have their property what we call “condemned” under eminent domain do not end up negotiating in a vigorous way about what the price should be.
The kind of studies that have been done on eminent domain have come to the conclusion that properties that are of average value or lower value tend to be undercompensated. But that property that is of higher value tends to be overcompensated. In other words, the property owners tend to get more than the fair market value.
BH: Besides the Brothers property, are there other examples of eminent domain cases between the university and other entities?
TM: You don’t actually have to get to the eminent domain point, to the extent that you have a willing seller. I’m not sure how the university has acquired various properties on campus in the last few years. It seems at least in the vast majority of those they were able to enter into a private agreement.
There have been a couple examples where the city has used [eminent domain] where it’s generated a lot of attention. Some people thought it was unfair in different ways.
When the city was building the Overture Center, it was Dotty Dumpling’s Dowry that generated controversy. There are some people with Dotty’s that have indicated that that’s an example of a property owner who actually did quite well in the process.
BH: We’ve had commenters on The Badger Herald’s website insinuate that Brothers Bar owners don’t necessarily care about staying in their current location as much as they care about holding out for more money.
TM: In these small percentages of eminent domain cases that do result in a lot of litigation, there is this pattern where people who are sitting on a prime property recognize that and basically indicate that they’re going to cause all kinds of problems, generate public protests, hire their own experts. Oftentimes the dynamic of that is they end up doing much better in the process.
BH: Does the Brothers case seem typical of one that would go to trial?
TM: It’s hard to know. It’s hard to know whether the positions that have been taken are positions that both parties genuinely feel and believe, or whether this is strategic. It might be that what we’re seeing is just the final skirmishing in terms of something that’s going to be a settlement. Or alternatively, it could be that there will be a trial.
Under the Fifth Amendment, the state must offer just compensation, or fair market value, to those property owners in cases of eminent domain.
Fair market value is “where the property is well advertised and neither the seller nor the buyer is under any pressure,” UW law professor Thomas Mitchell said. “People need to be able to get as much information as (they want).”
In order to sieze a property by eminent domain, the state must prove the property will be for the public use. Historically, this meant physical use by public citizens but is now more often interpreted as “for the public benefit.”
“Supermotivated” property owners will sell for less and buyers who will stop at nothing for a property will likely pay more. But typically motivated buyers and sellers in the real estate market are under no external pressures.