What Does the Phrase "Must Relocate" Mean

In Minnesota Statute 117.187 it states that "When an owner must relocate, the amount of damages, at a minimum, must be sufficient for an owner to purchase a comparable property in the community." While the statute defines "'owner' as the person or entity that holds fee title to the property" it does not define the word "relocate".

Obviously, there is no case law on this issue and, as of right now, there does not appear to be any consensus as to whether the minimum compensation statute only applies to an owner-occupant that actually moves and reestablishes at a new site or if it applies as well to an owner that leases the property to a tenant. This is important because many, if not the majority, of commercial property owners are not owner-occupants of their properties. If we take the narrow view of the phrase "when an owner must relocate" it would appear that this statute would only apply to a small number of property owners.

It would seem incongruent for the legislature to adopt such a sweeping change in eminent domain law, but intend for it to only apply to the small number of property owners that are also actually owner-occupants. From my perspective, the legislature would not have intended such a result and that property owners that are not owner-occupants to end up in a worse position just because they did not also occupy the property they owned.

Additionally, what about cases where the property is owned by an LLC with only one shareholder (or is a closely held corporation) and the business is owned by that same person, but owned as an S-Corp. Technically it is the business that must relocate, not the LLC. 117.187 is unclear as to whether the LLC be entitled to make a minimum compensation claim or if it would be barred from doing so because it does not have to relocate. Based upon my understanding of the statute and the legislature's intent in adopting it, this is the exact type of case for which it was intended to apply. The small business that is in risk of losing everything because it cannot afford to purchase a replacement site and therefore, such a hyper-technical reading of the statute is not warranted.

However, here is an ongoing case that may not be so easily reconciled in light of the phrase "when an owner must relocate." In this current case the property and building are owned by 5 different partners in equal percentages. However, only 2 of the 5 partners own the business that occupies the building. Clearly, that business must relocate, but it is only owned by 2 of the 5 partners that own the property. Are all 5 property owners entitled to make a minimum compensation claim or are they barred from doing so because all 5 property owners do not also own the business. What if the 5 property owners transferred title to the property to the 2 owners of the business prior to the filing of the Petition with the district court, would this make the 2 partners/business owners entitled to make a minimum compensation claim.

There is also not yet any case law or consensus as to whether the owner actually has to relocate and reestablish at a new site. Under traditional eminent domain proceedings a property owner is not required to purchase a replacement property to receive payment for the property being taken by the acquiring authority. The reason for this is that the property owner is being compensated for the damages they have incurred as a result of the taking of their property. Clearly, 117.187 identifies minimum compensation as another way to calculate the damages suffered by a property owner. However, it also says "must relocate". Does this mean a property owner that makes a minimum compensation claim must actually purchase a replacement property in order to make a minimum compensation claim.

This is important because there are no temporal requirements in the statute for when a person has to purchase a replacement property. As a practical matter, is the property owner supposed to wait to end of the condemnation proceedings so they know how much they have to spend on a replacement site and are the damages awarded placed in escrow with the district court, only to be released once a replacement site has been secured. What happens if the property owner purchases a replacement property, but it is for less than the amount they claim they are entitled to under their minimum compensation claim. Should they only receive payment based upon what they purchase and actually occupied when there is no such language in the statute.

If it is determined that a property owner must purchase a replacement property in order to obtain payment based upon a minimum compensation claim, how long are they required to own that property. If there are no temporal requirements in the statute, what happens if the property owner purchases a replacement property in order to secure their minimum compensation claim, but then one day later immediately put the property back up for sale on the market. This would seem to be wasteful and not really necessary for a property owner to make a minimum compensation claim.

Do you have any thoughts raised on these particular issues.