Like a lot of residential communities these days, Foothills Reserve was developed under a master plan, and you know what that means ... a homeowner's association and CCRs (covenants, conditions, and restrictions).
The HOA owned common areas, in which the homeowners had easements under the CCR's. A "positive" easement to enter and use the common areas, and a "negative" easement which limited the common areas to use as open space. These easements ran with each homeowner's land.
As part of a highway project, the State of Arizona used eminent domain to take the common areas and the homeowners' easements. It provided just comp to the HOA for the common areas, while the HOA, on behalf of the homeowners, "sought both the value of the easements themselves and damages for the reduction in home values due to the new freeway's proximity." The State agreed it was obligated to provide comp for the easements, but disputed the "proximity damages." This isn't a taking of the homeowner's land, but only a damaging of their appurtenant easements. Severance damages are only available when land is severed in a partial taking.
The trial court ruled for the owners and awarded $12 million for proximity damages, but the court of appeals agreed with the State, concluded that "such damages are available only when the condemned property is a physical parcel of land." The Arizona Supreme Court agreed to review.
In Arizona v. Foothills Reserve Master Owners Ass'n, No. CV-23-0292 (Jan. 28, 2025), it held in favor of the owners, concluding that these proximity damages are a type of severance damages under Arizona's statute that requires severance damages when "the property sought to be condemned constitutes only a part of a larger parcel[.]"
The court held that "[o]ne type of severance damage, proximity damages, occurs when the remaining property is in close proximity to a newly built improvement on the condemned property, like the freeway here." Slip op. at 6. Proximity isn't enough, however, and "[o]nly an owner whose property is severed by condemnation is entitled to proximity damages." Id.
When land is involved, it's easy. But what about here, where the condemned property is an appurtenant easement? As the court framed the issue, "[o]ur resolution turns on whether 'the property sought to be condemned" - the appurtenant easements - was 'part of a larger parcel' owned by Homeowners." Slip op. at 7.
The court held yes, interpreting the term "property" in the statute includes nonpossessory interests such as easements, and isn't limited to land. The court rejected the court of appeals' view that the use of the term "parcel" in "part of a larger parcel" indicates that the property must be land. No so, held the Supreme Court. "Parcel" may include a nonpossessory property interest. Yes, the meaning of "parcel" includes a tract of land, but also "broadly includes all estates and interests in property, including nonpossessory interests, like easements." Slip op. at 10.
There's a lot more in the opinion, but instead of detailing the court's reasoning here, we urge you to read the entire thing. It's definitely worth it, if only as a refresher on your dirt law basics and as a reminder that yes, easements are "private property" as that term is used in the U.S. and Arizona Constitutions.
Arizona v. Foothills Reserve Master Owners Ass'n, No. CV-23-0292 (Ariz. Jan. 28, 2025)
