J. Allen Smith is a eminent domain and condemnation expert at Settlepou, a Dallas law firm. In June 2016 Smith and Paul Wright gave a presentation on billboard appraisal methodologies and case law at the International Right of Way Association Conference. Insider interviewed Smith this week about billboard condemnation and amortization issues. For more information on Mr Smith, please see Smith’s Settlepou bio.
Allen, how did you happen to get involved with billboard issues?
Dave, I first was introduced to the industry when a local real estate manager for the Dallas office of Patrick Media called me in 1987 concerning a Landlord Tenant dispute. The rest is history as I have represented many members of the industry concerning a variety of matters concerning a wide range of different legal issues over the years since.
When might a local government seek to condemn a billboard?
Most condemnations of billboards occur with highway widening and expansion. However, that is usually the State DOT that initiates those projects. I have seen other instances with local governments where their transit system (such as the Dallas and Houston light rail systems where I represented the industry) were being built and many billboard locations were affected as they were located near railroad intersections with roads. Also, I have represented the industry in permit regulation issues with municipalities where they attempted to revoke a large number of issues permits on a new toll road after previously issuing the construction of billboards on the toll road and numerous land development matters where a local government was developing the land for civic centers, parks, etc. and were condemning a billboard site.
What steps should a billboard company take if a local government seeks to condemn a billboard?
Call a legal expert in the area as soon in the process as possible. Often the government will contact the owner to assess the property to make an offer to buy the land which is typically a prerequisite to initiating the condemnation process. I have often been able to help the owner in the reply to the offer to persuade the government to increase their offers to a level that is satisfactory to the client before condemnation is instituted.
Is it reasonable to assume that a billboard company will receive fair market value if a billboard is condemned?
Not necessarily. The governmental entities often will raise issues about the compensability and valuation of the billboard property interest owned by the billboard company. So, what is reality in the open market in the buying and selling of billboard properties are not necessarily the same value the government places on that same property in the condemnation offer process. An example is I had a client that was expanding inventory and bought a local Billboard location in Ft Worth with a 99 year lease for more than $1 million from a local billboard company and the State DOT only offered $50k to purchase that billboard site. We won a jury trial awarding that more than million dollars to my client.
Some municipalities pass restrictive zoning codes which make most billboards in the community non-conforming and then say that the boards are subject to amortization without compensation after a certain period of time. Can amortization be challenged legally?
Absolutely. Amortization is not a replacement for compensation as required under the 5th Amendment of the United State Constitution. Almost every billboard location in most major cities are now legal nonconforming locations which only makes the value of such locations more valuable than when they were conforming locations. Amortization should always be challenged!
