Case Alert – Arizona Supreme Court – Real Estate Law
Court Expands Damages Available to Landowners for Condemnation of Appurtenant Easements
This week, the Arizona Supreme Court issued a new opinion in State of Arizona v. Foothills Reserve Master Owners Association (link to case: CV230292PR.pdf). The Court held that, in eminent domain cases, a landowner who owns an appurtenant easement (an easement that benefits the landowner’s property and runs with the land) is entitled to compensation for both: (1) the value of the appurtenant easement condemned, and (2) severance damages, which may include the diminution in value of the landowner’s remaining property caused by the condemnation of the easement.
Prior to this case, it was not settled whether a landowner was entitled to severance damages when no portion of the landowner’s physical property was condemned. The Court clarified that severance damages are not available to those who hold an easement in gross, which is a personal privilege not tied to any property owned by the easement holder.
In this case, the State condemned a portion of the common area owned by a homeowners’ association for the construction of the Loop 202 South Mountain Freeway. The homeowners’ association received $6.5 million for the condemnation of fee title to the common area, but contested the compensation owed to the homeowners for the loss of their easements over the common area. The community’s covenants, conditions, and restrictions granted the homeowners both positive and negative easements over the common area—namely, the right to enter and use the common areas, and a restriction requiring the common area to remain undeveloped open space.
Ultimately, the Court ruled that the homeowners were entitled to both compensation for the condemnation of their easements and additional severance damages, which could include proximity damages—representing the loss in value of the homeowners’ properties due to their proximity to the new freeway.
This ruling ensures that when an appurtenant easement is condemned, the landowner should be compensated for both (1) the fair market value of the easement, and (2) the damage to the value of the remaining property caused by the condemnation of the easement.
If you are a property owner facing or threatened with a condemnation action, this decision may enhance your rights to compensation. Understanding these expanded rights is crucial to ensure you receive full compensation for your property.
Celebrating more than 40 years since our founding, Gammage & Burnham continues to get the job done because we know Arizona—its laws, values, customs, and people. Since 1983, our firm has played an integral role in helping shape the dynamic growth of the state alongside many of its core organizations. If you have any questions about how this new Arizona Supreme Court decision may affect you or your business, or have other real estate questions, please contact James Senften at jsenften@gblaw.com.
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