Torromeo Industries owned a 12-acre parcel zoned “Industrial.” Two buildings — one a home, the other a 4,000 square foot industrial building — were on the land. Sole access to the property way by a private driveway along the 149 foot frontage of the parcel. Industrial zoning has a minimum lot size of 80,000 square feet, and frontage of 150 feet. Yes, Torromeo’s parcel was one precious foot short of conformity with the frontage requirement.
But land use mavens know what this means: a nonconforming use. So back in 1989, the town’s planning board affirmed that status and that it considered the uses a permitted preexisting use.
Flash forward to 2015, when the State condemned 2 acres of the land for a service road, along with 30k square feet for easements. This had the effect of subdividing Torreomeo’s formerly single parcel into three lots: (1) a 1/3 acre lot on which the house sits; (2) 10 acres for the industrial building; and (3) a 1/4 acre “remnant” parcel.
The State first offered $500 as just compensation, and then upped it to $35,000 after the Board of Tax and Land Appeals ruled it should pay more (what gives, State of New Hampshire, with the lame $500 offer?). Torremeo was not satisfied with this amount, and sought de novo review in court.
At trial, the State’s expert testified that the highest and best use in the before condition was as the property was being used: for a home, the industrial building, with the remainder being held for future development. He also testified that based on his conversation with town officials, it was unlikely that in the before condition, the owner could get a variance from the zoning requirements.The after condition’s highest and best use “was to hold the surplus land for future development and to continue to use the 1/3 acre for the home and the 10 acres for the industrial building,” and, most importantly, as a “de facto subdivision.” He used the income/cap rate approach. (In other words, the taking was a good thing for the property owner!)
Torromeo’s appraiser had a different view. He had two main points of difference: (1) he believed that in the before condition, the highest and best use was to subdivide the property, and he did not believe it was impossible to get a variance; and (2) he used the cost approach. The delta between the State’s and Torromeo’s appraisers was $35,000.
The trial court “expressed skepticism” that the land could be subdivided in the before condition. The court mostly accepted the State’s appraiser’s view, and the only major difference was the judge concluded that the value of the residential lot was not affected by the taking. Thus, the court awarded Torromeo $70k for the fee take, plus an additional $800 for the temporary construction easement. The State appealed.
In Torromeo Industries v. New Hampshire, No. 2019-0121 (Mar. 13, 2020), the New Hampshire Supreme Court agreed with the State. The court affirmed the before-and-after method is the usual way of determining just compensation in partial takings, but noted that highest and best use “cannot be predicated upon potential uses which are speculative and conjectural.” Slip op. at 7. To avoid being speculative and conjectural, evidence of highest and best use “is only relevant if the use is likely to be ‘reasonably probable’ in the reasonably near future.” Id.
Applying this, the court concluded:
The State challenges the trial court’s determination that the residential lot could have become a separate, saleable lot before the taking, contending that this determination has no support in the evidentiary record. We agree. In order for the residential lot to have become a separate, saleable lot before the taking, the property would have had to have been subdivided.
. . . .
The only evidence before the trial court regarding whether subdividing the property would have been reasonably probable before the taking came from the State’s expert, who testified that the possibility of obtaining planning board approval to subdivide the land before the taking “was remote at best.”
Slip op. at 8. By contrast, the court concluded that the owner’s appraiser “did not discuss whether subdividing the property before the taking was reasonably probable[.]” Slip op. at 9.
And here’s the takeaway: the availability of a variance from zoning regulations is a matter of fact, not a matter of law because the zoning ordinance makes variances only available if the “specific circumstances” of each case allow it:
To the extent that the trial court determined that, before the taking, Torromeo would have been entitled to a waiver from the subdivision regulations, as a matter of law, its determination is similarly without basis in the record. The Town’s subdivision regulations allow the planning board to waive specific regulatory requirements only if “[s]trict conformity would pose an unnecessary hardship to the applicant and waiver would not be contrary to the spirit and intent of the regulations” or “[s]pecific circumstances relative to the subdivision, or conditions of the land . . . , indicate that the waiver will properly carry out the spirit and intent of the regulations.” Plaistow, N.H., Subdivision Regulations art. II, § 235-11(A) (2018). No evidence was admitted with respect to those waiver requirements during the bench trial.
Slip op. at 9-10.
Torromeo Industries v. New Hampshire, No. 2019-0121 (N.H. Mar. 13, 2020)