Supreme Court Rejects Business’s Loss of Value Claim for Lost Street Access

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Highway projects regularly change the access points that properties have to roads, and landowners believe (correctly or incorrectly) the change in the access affects the value of their business or property. Few can argue that access isn’t important to certain types of commercial uses. During construction of highway projects, the Department of Transportation (“DOT”) regularly obtains temporary limited easements (“TLE”) to complete the construction of its projects. However, the taking of the easement may not cause the loss of access. In this instance, according to a recent Wisconsin Supreme Court decision, the landowner cannot seek compensation for the loss of access. Only the value of the TLE is compensable.

In an April 25, 2014 blog post, I wrote about the Court of Appeals’ decision, 118th Street Kenosha, LLC, v. Wis. DOT, involving 118th Street Kenosha, LLC’s (“LLC”) loss of access to 118th Avenue due to a DOT reconstruction project. The LLC claimed it was entitled to damages for its commercial property’s diminution in value based on its loss of direct access to 118th Avenue in Kenosha, WI. The Court of Appeals held that the LLC was permitted to introduce evidence related to the property’s fair market value before and after the taking of the TLE, including the loss of direct access from DOT’s reconstruction.

The Wisconsin Supreme Court reversed the Court of Appeals decision and held that diminution in value damages are not compensable damages when the TLE did not directly cause the loss of access, and remanded the case to the circuit court to dismiss plaintiff’s action for damages.

The LLC argued that its damages for the TLE should include damages under Wis. Stat. § 32.09(6g) for its loss of direct access and proximity to 118th Avenue. It further argued that a landowner is entitled to compensation for loss of direct access to a public road abutting the landowner’s property, and that a taking of such access is a taking of a property right, which requires compensation. Narloch v. DOT, 115 Wis. 2d 419, 430, 340 N.W.2d 542 (1983).

The DOT, on the other hand, argued, among other things, that the LLC cannot recover diminution in value damages under Wis. Stat. § 32.09(6g) for its loss of direct access because the TLE did not cause the LLC to lose direct access and proximity to 118th Avenue.

The Supreme Court sided with the DOT. It found the LLC’s loss of access to 118th Avenue was not a result of the DOT’s taking of the easement. The LLC’s loss of access was caused by the DOT’s relocation of 118th Avenue. As a result, the court held that the plain language of Wis. Stat. § 32.09 did not provide the LLC with compensable damages. “Because the temporary limited easement did not cause the diminution in value of the LLC’s commercial property, no published Wisconsin case interpreting § 32.09(6g) allows the LLC to recover damages for its commercial property’s diminution in value as part of the LLC’s damages for the temporary limited easement.” 118th Street Kenosha, LLC, v. Wis. DOT, 2014 WI 125, ¶ 43, __ Wis. 2d __, __ N.W.2d __. It further reasoned that “compensation due for this temporary limited easement does not properly include damages for the commercial property’s diminution in value based on its lost direct access and proximity to 118th Avenue, which resulted from the relocation of 118th Avenue.” Id., ¶ 55.

The Supreme Court’s decision clarifies an important issue that affects many businesses facing DOT reconstruction near its commercial properties. As the decision explains, damages for diminution in value for loss of access must be directly caused by the taking of an easement. An indirect loss of access from a taking of an easement does not provide compensation for a property owner.

If you have questions about this blog post, please contact Attorney Streck at sstreck@axley.com or 608.283.6723.

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