We appreciate it when courts include photos and maps in opinions.
A quick one from the Colorado Court of Appeals on an issue of first impression in that state.
In City of Westminster v. R. Dean Hawn Interests, No. 23CA0315 (Aug. 1, 2024), the court concluded "for the first time, that an executory contract for the purchase and sale of land is relevant and admissible, at the district court's discretion, as evidence of the value of the condemned property." Slip op. at 1.
Short story: the city sought to take RDHI's a 37-ish acre portion of its 105-ish acre land to build a water treatment facility. The property is zoned for mixed-use development, and everyone agrees the highest and best use was for large-scale mixed-use development (including retain, office, and multifamily housing). Slip op. at 4. In addition to just comp for the property taken, RDHI sought severance damages to the remainder.
The parties' appraisers were pretty far apart: RDHI's opined the just comp for the property was $31-ish million, plus an additional $6-ish million for severance. The city's appraiser, on the other hand, concluded $9-ish million in compensation and no severance. Before the trial got underway, the city objected to introduction of, inter alia, evidence by RDHI of an option contract between it and a third party (Erickson) for a sale of the remainder property that was not completed. The city asserted the court should exclude evidence of this executory contract as speculative.
The court said no, and the commissioners concluded that just comp was $25-ish million and $1.6-ish million for severance.
After first affirming the trial court's related ruling that several of RDHI's appraiser's comps were ok (see slip op. at 6-15), the court held that the commissioners were property allowed to consider the executory contract as evidence of value of the condemned property.
Here's the situation regarding the RDHI / Erickson contract:
On April 4, 2022, RDHI and Erickson executed the Erickson agreement for Erickson’s purchase of the remainder, along with a small additional parcel of land that is not part of this condemnation action. Erickson indicated that it intends to build a senior housing facility on the remainder, with 1,500 independent living units. Erickson agreed to buy 73.9 acres from RDHI for $51,500,000 and paid a $515,000 deposit. The Erickson agreement included a due diligence period during which Erickson could terminate the contract and receive a refund of its deposit. Erickson sought two extensions of that period, and that period had not expired by the time of the valuation trial. By the time of trial, Erickson had taken significant steps toward the property’s development, including hiring a government relations firm to work with Westminster to ensure certain entitlements.Slip op. at 16-17 (footnote omitted).
Hold on, the city argued, appraisers are only allowed to use evidence of completed transactions, not things like not-fully-completed sales! Slip op. at 19. The court acknowledged the general rule that "[a]n offer to purchase land that does not result in an actual sale is inadmissible to prove value of the subject land." Slip op. at 20. But lots of other courts have allowed such evidence in, in certain circumstances, the court concluded.
These are not merely offers, but transactions that go a bit beyond that. Executory contracts are not options either, but a valid agreement to buy and sell, in which the parties have really agreed to a price. Here, you had an actual agreement and price, a deposit, and a buyer who "is in the business of developing retirement communities and had developed a retirement property in Highlands Ranch, showing that two sophisticated parties executed the Erickson agreement." Slip op. at 24-25.
And the buyer didn't just do that. It "had undertaken substantial efforts to move the property's development forward." Slip op. at 25. Given all that, the trial court did not abuse its discretion in allowing the evidence in. After all, the standards for admitting evidence of value in just compensation cases are liberal and "expansive and favor the admissiblity of evidence." Id.
Check it out. A good lesson in fundamentals from the court. And congratulations to our friend and colleague Sean Metherell for the win.
City of Westminster v. R. Dean Hawn Interests, No. 23CA0315 (Colo. Ct. App. Aug. 1, 2024)
