Early Negotiations

Government Code section 7267.2(a) states that “prior to adopting a resolution of necessity…and [before] initiating negotiations…” with the owner, the public entity must: (1) approve an appraisal; (2) make an offer to the owner no lower than the approved appraisal; and (3) include with the offer a summary of the basis for the offer.  That said, where the public agency is not planning to initiate an eminent domain action if the property cannot be acquired voluntarily, there is no duty to prepare and present a written appraisal summary to the owner that complies with Section 7267.2.

This principle is best illustrated in the case of Melamed v. City of Long Beach (1993) 15 Cal.App.4th 70.  In that case, the City of Long Beach negotiated the purchase and sale of property in the amount of $8 million without advising the owner that the City’s appraiser had valued it at $8,690,000.  After learning of the City’s appraisal, the owner sued to set aside the sale on grounds that the City violated Section 7267.2 of the Government Code.  The court found that the City acquired the property “in an ordinary purchase” (i.e., an “ordinary negotiated buy/sell agreement”), and that nothing in the course of the negotiations included elements necessary for the City to invoke its eminent domain power.  Accordingly, the court held that Section 7267.2 mandates an offer in the appraisal amount only by a “public entity planning to initiate eminent domain proceedings through a resolution of necessity.”  As such, the court ruled that Section 7267.2’s requirement, which demands that offers be no less than the agency’s appraisal, is inapplicable to an ordinary purchase of property by a public entity.

Based on the foregoing, if there exists the potential of a future eminent domain action, ROW staff should not negotiate with an owner for the purchase of the property before the agency has made a statutory written offer based upon an approved appraisal as required by Section 7267.2(a).  However, if the agency has no intention of condemning the property if it cannot be acquired voluntarily, staff may rely on a restricted use appraisal report, and there is no requirement that a summary of this report be provided to the property owner.  However, if the agency has no intention of condemning the property if it cannot be acquired voluntarily, staff may rely on a restricted use appraisal report, and there is no requirement that the agency purchase the property for the appraised amount or that a summary of the appraisal report be provided to the property owner.

 

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