How Do You Define "Community"?

In my second post I discussed a recent minimum compensation case I had against a metro-area municipality. One of the issues that came up in that case was how does one define the word "community" as it is used in Minnesota Statute 117.187.


In that case the property owners owned a small "mom and pop" used car dealership in the west metro that also had one service bay with a hoist. The property owners estimated that 80-90% of their clientele lived within 5 minutes of their shop.


In searching for a comparable replacement property within their community that would serve as the basis for their minimum compensation claim, we were unable to locate a property that was currently available on the market in that immediate area. Once we determined no comparable properties existed in that immediate area we had two options: (1) expand the scope of our search for comparable properties, which would expand the property owner's community; or (2) obtain an estimate for how much it would cost to construct a similar building on property available within that immediate area. We decided to simultaneously pursue both options so the property owners could make an informed decision on how they wanted to proceed with their minimum compensation claim.

We determined that it was going to cost well in excess of $1 million to construct a new building on an existing property within the property owner's immediate area. We also determined that a comparable replacement property existed on the market for $779,000. However, that property was approximately 17 miles away, but was still located on the west side of the metro area. The property owners concluded it was more reasonable to use the existing property as the basis for its minimum compensation claim, even though it was 17 miles away, than submitting a claim based upon the cost to construct a new building.

When the municipality finally concluded its minimum compensation study it identified several properties that it thought could serve as potential comparable replacement properties. All of those properties were on the market for less than the comparable replacement property identified by the property owners. The properties identified by the municipality were all located in St. Paul or the east side of the metro area. Those properties were probably closer in size, age and condition that the property identified by the property owners, but served a completely different client base.

We argued that even though the comparable replacement property identified by the property owners was 17 miles away, it was still at least on the west side of the metro area and closer to their existing client base. We also argued that the properties identified by the municipality were so far away from their existing client base, that the property owners would essentially be creating a new going concern because they would have to start all over in creating a new client base. Unfortunately, the matter never went to a commissioners hearing so we did not reach any definitive conclusion on this issue.

However, this case raises the interesting question of what constitutes a property owner's community. Is community narrowly defined as the municipality in which the property is located, is it more broadly defined as the property owner's customer base/service area or is it based upon a number of different factors.

From my perspective community must be decided on a case-by-case analysis of the particular facts of the property owner. No two cases are going to be exactly alike because the community for a small mom and pop used car dealership is going to nothing like an internet based retail service. Some of the factors to consider when trying to identify a property owner's community should include a combination, or all, of the following:

1. Location;
2. Traffic counts;
3. Visibility;
4. Accessibility for clientele;
5. Competition in the area;
6. Service area;
7. Customer base;
8. Type of business; and
9. Licensing, permitting and zoning issues.