Monday, July 30, 2012

Carruth v City of Etowah

The Tennessee Court of Appeals issued a new opinion last week on condemnation procedures. In this case, the city missed the boat. Proper procedure was not observed.

The case is Carruth v City of Etowah, and the city was intent on the demolition of a residential structure located within the city. Unfortunately, the city inspector failed to hold the administrative hearing which is normally required by state law, TCA §13-21-101 et seq. As is the case in many municipalities, if the structure could not be repaired with the expenditure of less than 50% of the value, it was subject to condemnation. The city inspector determined that it would cost more than 50%, but did not specify how much it would cost to repair or the total value. Furthermore, although he invited the owner to his office to discuss the issues involved, there was no true administrative hearing held in any event.

Once the city finally informed the property owner that he had 30 days to tear down the building, the owner filed suit and asked for a temporary injunction (within the world of certiorari procedure, this is usually referred to as a writ of supersedeas). The trial court issued the injunction (writ of supersedeas) and ultimately held a hearing, the proof, and concluded that there was insufficient evidence upon which to conclude that would cost more than 50% of the value of the property to repair.

In fact, according to the Tennessee Court of Appeals, the only testimony concerning the cost to repair was the estimate by the owner himself who testified that would cost approximately $2000 to fix it up entirely. The owner testified that most of the difficulties were cosmetic and could be repaired at little cost. The owner testified that the value the property was approximately  $20,000, although the city contested them by showing the appraised value the property was $7400. The court pointed out that even if it was $7400 as a correct value (which it seemed to doubt), 2000 was still less than 50%, and the cities determination of condemnation was therefore unfounded.

This case emphasizes two important points in condemnation procedure pursuant to the state statute. First, administrative hearing must be held or at least offered to the property owner. Failure to provide an administrative hearing, or again, simply offer one, maybe a violation of the owners civil rights, but more importantly, it will certainly make it difficult to support any findings that the property should be condemned.

Second, and many city codes departments overlook this issue, it is important to give an estimate of what the construction costs for repair might be, as it relates to the overall value of the property. There certainly have been some cases where the court has accepted a rough estimate that it would cost more than 50% for example to repair the property and as a result, the order of the administrative agency has been upheld. But it is far more reliable to give an estimate of the repairs, an estimate of the overall cost of the improvements on the property, and to calculate the relationship from that. For example, if the property is worth $150,000, and the repairs would cost $100,000, obviously then the cost of repairs exceeds 50% and the building may be condemned. But to simply say in the administrative findings that the cost would exceed 50%, without specifying either the cost of repairs or the value of the property, is much less precise and may lead to a reversal on appeal.

In my book, Legal Handbook for Tennessee Codes Officials, I devote an entire chapter (Chapter 6) to this issue. If you do any work in this area as a codes enforcement official, or if you're an attorney working in this area, it might pay to take a look at that chapter.

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