The Colorado Supreme Court’s October 18, 2010 decision in Bly v. Story clarifies two issues with respect to condemnation proceedings in Colorado.  Bly involved a private party’s condemnation of an easement for a private way of necessity over a neighbor’s driveway.  The court, construing C.R.S. § 38-1-102(1), held that a metes and bounds legal description and specification of the particular purpose of the condemnation is not required in a condemnation petition.  Applied to the facts, the court found that a “general description,” along with a map that made the location of the proposed easement clear, was sufficient.  With respect to the proposed use, the court found that, for a private condemnation, mere recitation of any of the purposes listed in C.R.S. § 38-1-102(3) is sufficient.

Though this suggests that the rules for the sufficiency of driveway.jpgcondemnation petitions are fairly liberal, in Bly, a metes and bounds description, and a more detailed explanation of the nature of the proposed use of the easement were provided during discovery and/or in trial testimony.  Accordingly, while a somewhat vague petition may survive a motion to dismiss, condemnors would probably be well-advised to include more specifics in their petitions, if possible, and such information should definitely be supplied at some point during the course of the proceeding. 

Bly also addressed the admissibility of valuation evidence in a condemnation case.  The owners of the condemned land sought to introduce evidence of the cost of replacement of the driveway at issue, but the trial court refused to admit the evidence.  Even though the relationship between the evidence and the ultimate issue—the value of the easement—was tenuous, the Colorado Supreme Court concluded that the evidence should have been admitted.  However, in the circumstances, the court found that the failure to admit the evidence was harmless error. 

What is potentially important for future cases is the court’s clear statement of very liberal rules of admissibility of various forms of valuation evidence in a condemnation trial.  Depending on the facts of the case, some evidence may be entitled to more weight than others, but:

The evidentiary rules applicable to a trial for an award of just compensation are expansive, and all evidence relevant to the determination of market value of the condemned property is admissible.

Photo by normanack (Flickr)

159659669_1f15d48922_t.jpgAs the presence of carbon dioxide increases in the atmosphere, so does interest in ways to dispose of that carbon dioxide.  One possibility is to store it in underground gaps, voids or pore space.  This process is known as carbon sequestration.

Currently, real property is generally divided into a surface estate and a severable mineral estate.  The mineral estate includes substances in the ground, such as coal, oil, gas and other hard minerals.  It is not entirely clear, however, how existing case law and statutes would address underground pore space. 

The Colorado Department of Natural Resources convened a panel, including Tom Ragonetti from our firm, to discuss legal issues surrounding the ownership of underground pore space and possible legislation.  There are several options, including allocating ownership of the pore space to the surface estate, the mineral estate or the State of Colorado for the public’s benefit.  Any resolution will have advantages and drawbacks.  Here are a few questions to consider:

  • How will pre-existing severances of minerals be treated?  Would the language of the severance make a difference?  For instance, what if the severance or reservation was broad enough to include not just “minerals” but anything of value under the surface? 
  • Would a void caused by the extraction of minerals, such as oil, gas or coal, be treated differently from a naturally occurring void?
  • How will owners deal with voids that cross property lines?  Could an owner be required to accept carbon dioxide in a void he or she owns?

In any case, the ability to control the rights to store carbon dioxide underground could be a new source of value in real property.

Photo by eMaringolo (Flickr)

Despite today’s economic reality, real estate developers should consider the unique opportunities of pursuing land use entitlements now.  While there is expense entailed in pursuing annexation, zoning, subdivision and related approvals, many jurisdictions are experiencing a significant drop in tax and fee revenues due to reduced development activity.  Accordingly, developers who are able to pursue land use entitlements during this difficult economy may find these jurisdictions more responsive to development proposals than they historically have been.

Although obtaining entitlements now may be “early” (end users or the ultimate land plan may be unknown), jurisdictions have been recognizing such circumstances and the need for flexible zoning that will allow for diverse development opportunities.  Planned Unit Development (PUD) or similar zoning can provide for standards that differ from the jurisdiction’s generally applicable zoning or technical standards to accommodate a variety of users.

Because there are fewer development applications being submitted today, applications may be processed in an abbreviated period of time.  And, as it traditionally may take years to process and obtain final approval of complete land use entitlements, there is no better time than the present to initiate that process.

On Wednesday, October 13th, a group of attorneys general and bank regulators from all 50 states and the District of Columbia announced a coordinated probe into potentially improper foreclosure practices of various national lenders.  At the heart of these investigations are allegations that some banks used erroneous or incomplete paperwork in foreclosing on residential mortgage loans.  Getting particular attention is the alleged practice of using “robo-signers” to sign foreclosure documents without reviewing the background materials and loan documentation.Loan Docs.jpg

According to news reports, it is not expected that many individuals will regain homes they lost to foreclosure even if improper steps were taken.

Economists speculate that these investigations and the related internal reviews of foreclosure procedures by various lenders could have the short-term effect of temporarily propping up residential housing prices but the long-term effect of prolonging the housing downturn by delaying the inevitable.

Photo by Casey Serin (flickr).

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If Colorado voters approve Amendment 61 in November, it is likely to eliminate the primary tool used by real estate developers to finance the installation of infrastructure in new developments. 

Amendment 61, together with its sister initiatives, Amendment 60 and Proposition 101, has recieved a lot of attention here in Colorado as we approach the November election.  While many believe that all three could have serious fiscal consequences for Colorado, it is Amendment 61 that is garnering some national attention.  The Wall Street Journal has recently reported on Amendment 61.  

Among other things, Amendment 61, if adopted, will:

  • expressly prohibit all types of borrowing by special districts other than bonded debt, including, for example, short‑term loans, certificates of participation, and lease-purchase transactions;
  • require voter approval for any bonded debt that is issued;
  • require that all bonded debt have a term and be repaid within 10 years; and
  • limit the amount of outstanding bonded debt to a total of 10% of the then-existing assessed values of the property within the special district’s boundaries.

 Real estate developers often form special districts for the purpose of installing and operating infrastructure for new projects.  The infrastructure must be installed before any development can occur, so either bonds are issued by the special district in order to fund the cost of installation of infrastructure, or the developer installs the infrastructure and the special district agrees to reimburse the developer with future bond proceeds or tax revenues.   Whether bonds are issued to pay the infrastructure costs directly from the outset or the special district enters into a reimbursement arrangement of some sort, the provisions of Amendment 61 would apply.  Amendment 61 would prohibit the reimbursement arrangements altogether, as such arrangements are essentially borrowing by the special district not in the form of bonds.  And, based on the timing of issuing bonds to raise capital to pay directly for the installation of infrastructure, the amount of bonds that cab be issued will be capped at 10% of the assessed value of the vacant land, which generally has a far lower value than the developed land. 

These and other issues with Amendment 61 have the attention of the local government community.  Because of the intersection between special districts and real estate, the real estate community should be paying attention too. 

.Photo by Daquella manera (flickr)