Comparable Property in Residential Cases Involving Non-Owner Occupants

In a recent metro-area residential case in which I have been involved one of the occupants of the home is disabled. That person was not a fee owner of the property and is not married to the fee owner of the property, but is the fee owner's significant other.

The home is rambler on a slab and is handicapped accessible to accommodate a motorized wheelchair, including wide doorways, a roll-in shower and has a main floor master bedroom with a reinforced floor to accommodate a hospital bed with a lift.

Prior to initiating negotiations, the acquiring authority performed a minimum compensation study. However, the home selected as most comparable in that study was not handicapped accessible and did not possess the same features as the displacement home. Not surprisingly, the home identified as most comparable in the minimum compensation study was available for sale on the market for less than appraised value of the displacement home. As a result of that the acquiring authority based its purchase offer on the fair market value appraisal rather than on the comparable property.

At the time the acquiring authority submitted its written purchase offer it did not disclose the results of its minimum compensation study to us. To this date it still has not done so and argued that Minnesota Statute 117.187 does not require it to disclose the results of that study.

When we had our appraiser perform his minimum compensation study, he selected a handicapped accessible home that had the same essential features as the displacement home. That home was for sale on the market for considerably more than the appraised value of the home. We submitted a counteroffer based upon the comparable property selected by our appraiser. In response to our counteroffer the acquiring authority raised the issue of whether the comparable property in our minimum compensation study had to be handicapped accessible because the handicapped person living in the displacement home was not the owner of the home.

As noted in previous postings, Minnesota Statute 117.187 defines owner "as the person or entity that holds fee title to the property." Based upon this definition, the acquiring authority would not reconsider its minimum compensation study. The acquiring authority argued that the statute only requires that the damages be sufficient to allow the owner to purchase a comparable property within the community, not be sufficient to allow the owner to purchase a comparable property that would be suitable for all non-fee owner occupants of the home.

For several reasons not related to this issue, the property owner chose to accept the acquiring authority's initial written offer for the purchase of her home. However, this case again raises the issue of what constitutes a comparable property within the community. It would seem that the Minnesota legislature never intended such an absurd interpretation of that phrase when it adopted this statute.

As I argued in previous postings, it seems that the legislature intended this statute to prevent property owners from ending up worse off than they were prior to the acquisition. However, that that is exactly what happened in this case. The homeowner could not find a comparable property within her community for the same price as she was paid by the acquiring authority. In order to try to afford a replacement home, she was forced to purchase a foreclosed home that was not decent, safe and sanitary and that required tens of thousands of dollars in rehabilitation expenses just to try to replace what she had in her displacement home.

While we will never how this case would have been resolved by the courts, it does raise the issue of what exactly needs to be replaced in terms of locating a comparable replacement property. Is it only what the fee owner of the property uses and possesses or is it something more than that?

It would seem simplistic and contrary to the purpose of the statute for an acquiring authority to only have to replace what the fee owner uses and possesses. This seems especially true in light of the case of the fee owner(s) having children. In such a case the fee owner(s) may only sleep in one bedroom with one master bathroom, but have 7 kids than use 6 different bedrooms and 3 different bathrooms. Based upon the acquiring authority's argument in this case, since the children are not fee owners as defined by Minnesota Statute 117.187, the comparable replacement property would only have to have 1 bedroom and 1 bathroom. Such a result would lead to absurd results as no one could reasonably believe such a home would be comparable. However, until we get some clarification from the courts on this issue we can expect acquiring authorities to raise every possible issue to avoid having to comply with this statute.

Do you have any experiences in such a case or have any thoughts in this regard.