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Section 4: Legal Instructions - Damages and Enhancements

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Policy

Both damages and enhancements fall into two general categories:

The state is not legally obligated to compensate a property owner for any damages that he/she may suffer which are shared in common with the community (see Legal Instructions - Noncompensable Items). Similarly, the state cannot legally claim as an offset any enhancement that may accrue to the property shared in common with the community. Consideration of damages or enhancements in the appraisal process becomes material only in cases in which they relate to and specifically depreciate or appreciate the market value of the property in question.

It is often difficult to determine whether enhancements or benefits are general or special because the courts have used the terms without adequate definition. Generally, it is said that benefits are special which will add anything to the convenience, accessibility, and use of one’s property as distinguished from benefits arising incidentally out of the improvement and enjoyed by the public generally. However, some courts have held that the test of community benefits, as opposed to special benefits, to be that the property would have been benefited anyway regardless of whether the public work was located on it or entirely on neighboring property.

Regardless of criteria used for determining the character of damages or enhancements, it is evident that the controlling factor is whether the same specifically relates to a particular parcel as opposed to the public or community in general. A careful investigation and analysis will be necessary in order for an appraiser to be able to distinguish between special and general damages or enhancements. If there is any doubt in the appraiser’s mind, he/she should request a legal opinion from TxDOT ROW Division HQ. The appraiser may not agree with the legal opinion. However, in the final analysis, this is a legal rather than an appraisal matter. The appraiser must follow any legal instructions set out in his/her report with the resulting value being “subject to the instructions” rather than an “instructed value.”

Current instructions from the Attorney General specify that appraised enhancements may be used to offset appraised damages to the remainder parcel, but may not be used to offset the value of the part acquired. However, refer to the section on Fencing regarding treatment of re-fencing damages in negotiated settlements.

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Control of Access Rights

The Commission has designated the Interstate Highway System and other portions of the State Highway System as controlled access highways. Along certain sections of highways, this makes it necessary to either limit or completely deny access to the abutting property, including the:

Denial of access may result from design issues as well.

The right of access is always held subject to reasonable regulation and control by the state under its police power, an inherent right of sovereignty. However, the right of access to an existing public way is a part of the bundle of rights vested in the owner of abutting property. It is a legal right, though such right may be limited or completely denied in some instances under a valid exercise of the state’s police power. Whether an impairment or denial of access is compensable is a question of law to be determined by a trial court. In order for the change in access to be compensable, a court must find a material impairment of direct access on or off the remaining property that affects the market value of the remaining property. Should it be determined that the change in access is compensable, the damages are to be measured by the market value of the owner’s abutting property before, as compared with the market value of the same property after the denial or impairment of the access right. In the event that denial or impairment of access is a factor, the appraiser should seek a legal opinion from the district.

Under the provisions of the Transportation Code, §203.034, the abutting owners are precluded from claiming a legal right of access to any controlled access highway on a new location (as part of the right of way acquisition), unless there is a specific grant of access by or through the Commission, and subsequently, such granted access is later denied. No damages may be claimed for the denial of access to the new facility, as the owner cannot be damaged by the loss of something that he/she never had.

If an existing road is converted into a controlled access facility, the design of which does not contemplate the initial construction of frontage roads, and the abutting owner is to be denied access to the facility pending frontage road construction, generally there is an acquisition of the owner’s access right. If an existing road is converted into a controlled access facility, the design of which does contemplate frontage roads in the initial construction, and the abutting owner is not to be denied access to the frontage road, there is no acquisition or denial of his/her access rights. Access to a frontage road constitutes access to the facility. Further control of the abutting owner’s movements, once he/she is upon the frontage road, such as one-way traffic, no U-turns, no left or right turns, denial of direct access to the through lanes, and circuitous routes are all affected under the state’s police power. They impose no more control over the abutting owner than is imposed upon the public. Any loss in value due to any or all of these causes is non-compensable.

TxDOT ROW Division HQ shall evaluate access management issues on appraisals of surplus property and may specify whether access is retained or not by the state. The appraiser shall consider the ROW Division HQ’s evaluation when appraising such surplus property.

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Impairment to Access-Damages

The Material Impairment of Direct Access Standard (effective September 1, 2011, the Texas Property Code, Section 21.042) establishes a new access standard for determining whether a property owner is entitled to damages for impairment to access resulting from the acquisition of property for a highway improvement project.

The statute provides that: "(d) In estimating injury or benefits under Subsection (c), the special commissioners shall consider an injury or benefit that is peculiar to the property owner and that relates to the property owner's ownership, use, or enjoyment of the particular parcel of real property, including a material impairment of direct access on or off the remaining property that affects the market value of the remaining property, but they may not consider an injury or benefit the property owner experiences in common with the general community, including circuity of travel and diversion of traffic. In this subsection, 'direct access' means ingress and egress on or off a public road, street, or highway at a location where the remaining property adjoins that road, street, or highway."

Meaning of "Material Impairment": Although the courts have clearly defined the prior standard of "material and substantial impairment of access”, there is very little in the way of legal authority to assist with a definition of "material impairment of direct access”. The prior standard focused on access to the entire remainder and asked whether there was still "reasonable access" to the remainder after the state's restriction of access. The new standard, however, focuses on direct access to the property from the state highway. The operative factors are whether the impairment to "direct access" (ingress and egress on and off the remaining property) is "material", and if so whether it "affects the market value of the remaining property."

Appraisal instruction:

a. A "material impairment" is one that is significant or important in the context of how the property is or may be used. Although the change must be significant or important, it no longer must be "substantial" (meaning considerable or large).

b. The appraiser should look at both the physical changes to ingress and egress on and off the remaining property and the anticipated impact on the use of the property to determine if the restriction is significant. Some of the factors to consider in the before and after scenario are:

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  • the number, location, and width of the existing, permissable, or permitted driveways;
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  • extent of difficulty for large trucks or other unique vehicles to enter the property (if that is the normal use of the property at the time of impairment);
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  • the manner in which the access impairment affects the functionality of existing improvements;
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  • whether the remaining property has access to another public road(s) (This is now just one factor; it does not automatically prevent a finding of material impairment of ingress and egress on and off the remaining property from the state highway); and
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  • whether it changes the highest and best use of the remainder (Again, this is not determinative of “materiality”, but is just one factor to be considered in making that determination.)

c. “Circuity of travel” and “diversion of traffic” are specifically excluded from the concept of material impairment of ingress and egress on and off the remaining property.

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