Colorado Real Estate Journal -
The term “larger parcel” is considered in every eminent domain appraisal. It refers to the “parent” parcel that will be considered in establishing the before value of the property being appraised. The determination of the larger parcel is a process unique to eminent domain since in most property appraisal assignments, the appraiser is instructed by the client which is the property to be appraised. In eminent domain appraisal, the larger parcel to be appraised is determined by the appraiser after analyzing three aspects (contiguity, ownership, and use) of the property being condemned. The fifth edition of the Appraisal Dictionary (2010) defines the larger parcel as “In condemnation, the tract or tracts of land which are under the beneficial control of a single individual or entity and have the same or an integrated highest and best use. Elements for consideration by the appraiser in making a determination in this regard are contiguity, or proximity, as it bears on the highest and best use of the property, unity of ownership, and unity of highest and best use.” Understanding these three aspects is essential in establishing not only the value of the property (larger parcel) in the before condition, but also in instances of partial takings, which are much more common than entire takings, it is crucial in determining the value of the part taken, damages or benefits to the remainder, and cost to cure. The larger parcel is not always obvious since it can be comprised of various property combinations. J.D. Eaton, in his book Real Estate Valuation in Litigation (1995), states, “The larger parcel may be all of one parcel, part of a parcel, or several parcels, depending to varying degrees on unity of ownership, unity of use and contiguity.” The process of determining the larger parcel can be relatively straightforward when the property facing condemnation is a single tract of land offering contiguity, (say a platted five-acre site) with unity of ownership being held by one entity and unity of use/highest and best use (say apartment development). In this property example, all three conditions for determining the larger parcel are met in a relatively straightforward manner. The process becomes much more complicated when, for example, the property facing condemnation is a large, mixed development project consisting of multiple parcels that may or may not be physically contiguous, parcels that may be held in different ownership names as a result of multiple partnership agreements, and is made up of parcels having different highest and best uses (retail, apartment, office) whereby the three individual uses are not the same but yet all three uses are integrated, forming unity of use. Larger parcel determination also is important because value created by assemblage, often referred to as plottage value, would be a positive value enhancement while a very sizeable larger parcel might be impacted by size regression whereby large parcels tend to sell for lower unit values than small parcels. In all cases, determining the larger parcel for the subject property will also determine the sale and/ or lease comparables to be utilized in the valuation. In general, the physical contiguity of parcels has been less of a factor in larger parcel determination than unity of use and unity of ownership. As in all appraisal assignments, the highest and best use in determining the larger parcel cannot be speculative but rather must rely upon the facts related to the property at the time of condemnation. Since determination of the larger parcel is unique to appraising property for eminent domain, it is important for the appraiser to understand the larger parcel concept, its implication on property value and acceptance by the court.