City & Guilds Level 4 Award in Design and Verification (C&G 2396)

Correct: In eminent domain and litigation, the ‘larger parcel’ is defined by three primary tests: unity of ownership, unity of use, and contiguity. While physical contiguity is the standard, many jurisdictions allow for functional contiguity if the tracts are used together as an integrated economic unit. Establishing this correctly is vital for determining if the taking of one part damages the value of the remaining parts (severance damages). The appraiser must provide evidence that these three unities exist to justify treating separate tracts as a single entity for valuation purposes.

Incorrect: Relying on the owner’s subjective intent is insufficient because unity of use must be based on actual or highly probable integrated use, not just future desires. Valuing each tract independently and summing them (the summation approach) is incorrect because it fails to account for the integrated value of the whole and the potential for severance damages to the remainder. Zoning consistency is a factor in highest and best use analysis, but it is not the sole legal requirement for establishing a larger parcel; different zones can still function together as a single economic unit.

Takeaway: The identification of the larger parcel through the three unities—ownership, use, and contiguity—is the foundational step in accurately assessing severance damages in eminent domain appraisals.

Correct: In eminent domain and litigation, the ‘larger parcel’ is a fundamental concept defined by three criteria: unity of ownership, unity of use, and contiguity. When a partial taking occurs, the appraiser must value the entire larger parcel before the taking and the remainder after the taking. If the appraiser treats the taken portion as an isolated site, they fail to account for severance damages (the loss in value to the remaining land) or potential benefits, which are critical components of ‘just compensation’ and the principle of indemnity.

Incorrect: The income capitalization approach is not the only recognized method; the sales comparison approach is frequently used and often preferred for land valuation. The before-and-after method is actually the standard procedure for partial takings, not total acquisitions. While personal property might be relevant in some cases, its omission is not a fundamental failure of the ‘larger parcel’ theory, which is the primary valuation risk identified in the scenario.

Takeaway: Correctly identifying the larger parcel is essential in eminent domain appraisals to ensure all severance damages and benefits to the remainder property are accurately captured for litigation purposes.

Correct: In eminent domain appraisals, particularly those following federal standards (Yellow Book), the appraiser must identify the larger parcel and determine the value of the whole property before the taking and the value of the remainder after the taking. This Before and After rule is essential for identifying severance damages—the loss in value to the remaining property caused by the taking. By only valuing the part taken, the appraiser ignores the potential impact on the remainder’s highest and best use, which is a critical component of just compensation.

Incorrect: Option b is incorrect because the unit rule is actually a principle used to prevent the summation of individual interests or components from exceeding the value of the whole; it is not the issue described in the scenario. Option c is incorrect because USPAP Standard 3 pertains to appraisal review, not the development of the appraisal itself, and USPAP does not mandate peer reviews by specific designation holders. Option d is incorrect because the Before and After method is the preferred and standard approach for federal land acquisitions, whereas the Value of the Part Taken plus Damages is more common in various state jurisdictions.

Takeaway: In eminent domain, failing to apply the Before and After rule or analyze the larger parcel risks omitting severance damages, which are essential for determining legally defensible just compensation.

Correct: The most robust strategy in condemnation appraisal for a partial taking is the Before and After Rule (or the Federal Rule). This requires the appraiser to value the entire ‘larger parcel’ before the taking, specifically ignoring any enhancement or diminution in value caused by the project itself (the Project Influence Rule). The appraiser then values the remainder property in the ‘after’ condition, which naturally accounts for the value of the part taken and any severance damages or benefits to the remainder. This process must include a fresh analysis of the highest and best use for the remainder, as the loss of access or circulation may fundamentally change the property’s most productive use.

Incorrect: The approach of calculating the unit price and adding cost-to-cure is insufficient because it may fail to capture severance damages if the loss of land or access changes the property’s highest and best use. Using the project completion date as the effective date is incorrect because the valuation must typically reflect the market value as of the date of the taking (the ‘date of value’). Allocating net operating income to a specific strip of land is theoretically flawed, as income is generally produced by the property as a whole unit, and such an allocation does not reflect how market participants value partial interests or damages to a remainder.

Takeaway: In condemnation appraisals, the appraiser must isolate the impact of the taking by comparing the property’s value at its highest and best use before the project’s influence against its value after the taking.

Correct: In condemnation appraisal, the ‘Larger Parcel’ is defined by three primary ‘unities’: Unity of Ownership (the tracts must be owned by the same entity), Unity of Use (the tracts must be used together for a common purpose or have an integrated highest and best use), and Contiguity (the tracts must be physically touching, although some jurisdictions allow for non-contiguous tracts if they are functionally integrated). Establishing these unities is essential for the appraiser to determine if a taking from one portion of the land causes compensable severance damages to the remainder of the economic unit.

Incorrect: While zoning and physical proximity are related to the unities of use and contiguity, historical acquisition dates are irrelevant to the current economic unit’s value at the time of the taking. Tax assessments and legal descriptions are administrative or legal identifiers that do not dictate the economic reality of how the land is used or its highest and best use. Topography and financing instruments are physical and financial characteristics that may influence value but do not constitute the legal test for defining the larger parcel in eminent domain proceedings.

Takeaway: The determination of the larger parcel in condemnation proceedings relies on establishing the unities of ownership, use, and contiguity to ensure that damages to the remainder are accurately captured.

Correct: In eminent domain cases involving a partial taking, the appraiser must perform a ‘Before and After’ analysis. A critical component of this is the Highest and Best Use (HBU) analysis. Because the taking involves the primary access point, the property’s HBU could potentially change from a high-traffic retail use to a lower-intensity use. Failure to analyze the HBU of the remainder (the ‘after’ condition) would likely result in an inaccurate calculation of severance damages and a violation of professional appraisal standards.

Incorrect: Focusing only on the part taken ignores the potential for severance damages to the remainder, which is a fundamental requirement in partial taking appraisals. Applying an arbitrary 10% liquidity discount for construction delays is not a recognized appraisal methodology for determining just compensation. While the cost approach may be used, it is not prioritized over the sales comparison approach simply because access has changed; appraisers are expected to find and adjust comparable sales that reflect similar changes in utility or access.

Takeaway: In partial taking scenarios, a comprehensive highest and best use analysis of the remainder property is essential to accurately quantify severance damages or benefits.

Correct: In eminent domain and condemnation appraisals, the appraiser must first identify the larger parcel to determine the scope of the appraisal. This is traditionally defined by three criteria: unity of title (ownership), unity of use (integrated use), and physical contiguity. Establishing the larger parcel is essential because it dictates whether the taking of one portion of land impacts the value of the remaining land, which is the basis for calculating severance damages.

Incorrect: While the principle of substitution is a core appraisal concept, it is used for valuation rather than defining the legal and physical extent of the property being appraised. Tax benefits related to involuntary conversion are matters of accounting and tax law rather than real property valuation for just compensation. Business goodwill is often considered a business interest or personal property rather than a real property interest, and identifying the larger parcel is a more fundamental step in the real property appraisal process than assessing interim use.

Takeaway: Identifying the larger parcel through the unities of ownership, use, and contiguity is the essential first step in assessing damages in a partial taking for condemnation.

Correct: In condemnation proceedings involving a partial taking, the appraiser must determine the value of the property before the taking and the value of the remainder after the taking. A critical component of this is analyzing whether the taking changes the highest and best use (HBU) of the remaining property. If the loss of parking or access makes the current use (retail) no longer the HBU, or reduces its efficiency, severance damages must be accounted for to provide just compensation.

Incorrect: Calculating only the pro-rata value of the land taken fails to account for the potential loss in value to the remaining portion of the property, which is a core requirement in partial taking appraisals. Business lost profits are generally considered non-compensable business enterprise value rather than real property value in most eminent domain jurisdictions. Using historical purchase prices adjusted for inflation is not a recognized appraisal methodology for determining current market value in a condemnation context.

Takeaway: In partial takings, the appraiser must evaluate the highest and best use of the remainder to identify severance damages that occur when the taking impairs the utility of the remaining property.

Correct: In condemnation appraisals, the ‘larger parcel’ is the portion of the property that is relevant to the valuation of the part taken and the assessment of damages to the remainder. To establish a larger parcel, three criteria must generally be met: unity of ownership (the same entity holds the interest), unity of use (the tracts are used for a common purpose), and contiguity (the tracts touch, or are so closely located and integrated in use that they function as one). Identifying the larger parcel correctly is essential for calculating severance damages in a partial taking.

Incorrect: Restricting the analysis to the legal description in the notice of intent is incorrect because it may ignore the economic reality of how the land is used, leading to an omission of severance damages to the remainder. Aggregating all properties in a zip code is inappropriate as it ignores the requirements for contiguity and unity of use, leading to speculative valuations. Relying solely on tax assessor parcel numbers is a common error; tax parcels are created for administrative convenience and do not necessarily reflect the legal or economic unity required for a professional appraisal of the larger parcel.

Takeaway: The larger parcel in condemnation is defined by the three unities: ownership, use, and contiguity, which are necessary to accurately assess severance damages in partial takings.