Ask the Experts
By Julie E. Blend
Reprinted with permission from CAI’s Common Ground TM magazine, July/August 2014
Q: Is there anything an association can do to protect itself from eminent domain? —Katy, Texas
A: Eminent domain, an inherent power of government, is limited by the takings clauses found in the U.S. Constitution and state constitutions, which provide that no private property can be taken for public use without just compensation. Most state statutes are designed to protect property rights in a condemnation proceeding; some are more powerful than others. Texas statutes implement procedures to maximize compensation and clarify that condemnation is only lawful if it’s for a public use, as opposed to merely a private purpose.
Property can include land itself or intangible rights connected with land, such as an easement or reversionary interest. Community associations have a property interest in the intangible right to collect assessments. There is disagreement among courts, however, as to whether that right is a compensable property interest. Texas falls within the jurisdiction of the U.S. Fifth Circuit Court of Appeals, which decided in a 2013 case that an association is not entitled to just compensation for the loss of the right to collect assessments. The holding was based upon the consequential loss rule, which requires that the loss be directly connected to the physical land.
Many state statutes specifically address condemnation in the community association context. Texas statutes address condemnation awards for condominiums, including an award to owners for the loss of common element interests and a reallocation of interests. State statutes will control in the event of a conflict with association governing documents. Check your declaration and bylaws for a provision addressing the distribution of a condemnation award. It should specify that owners have a claim to be paid as opposed to only the association having a claim on behalf of owners. For condominiums, the provision should clarify that an owner is entitled to an award for loss of limited common elements, and that the association has a claim on behalf of owners for any general common elements.
In addition to a condemnation provision in your governing documents, the best protection against eminent domain is awareness of government interest in your community. Also, be prepared to substantiate your property’s value with a good appraisal. You should hire an experienced attorney to defend your association in a condemnation proceeding.
Julie E. Blend is a shareholder in the Dallas law firm of Dealey Zimmermann Clark Malouf & Blend.
© Community Associations Institute. The above article is reprinted with permission from Common Ground™ magazine, published by Community Associations Institute. Further reproduction and distribution is prohibited without written consent. Go to www.caionline.org for more information.