The Talk Before the Take: Exploring Virginia’s Bona Fide Offer Requirement for Condemning Authorities

The United States and Virginia Constitutions grant various governmental authorities, including state agencies, counties, cities, towns, sanitation districts, and many others, the power of eminent domain, permitting these authorities to “take” private property for public uses in exchange for payment of “just compensation.” This eminent domain power is a fundamental aspect of the government’s ability to improve and expand its infrastructure for the benefit, safety and convenience of its citizens. In Virginia, however, the exercise of this power can prove complex and filled with traps for the unwary. In fact, even before the power of eminent domain may be exercised, there are certain required prerequisites that condemning authorities must follow. Among these is Virginia Code § 25.1-204(A)’s “bona fide offer” requirement.

What a “bona fide offer” requires

The “bona fide offer” requirement, at a high level, mandates that, before a condemning authority may file a Certificate of Take to condemn private property, it must undertake a legitimate effort to purchase that property from the owner without condemnation—i.e., negotiate in good faith to buy the land. While this concept may seem simple at first, the alleged failure of the condemning authority to make a “bona fide offer” is commonly raised by landowners in condemnation proceedings. Importantly, the “bona fide offer” requirement is a jurisdictional one, meaning if a landowner succeeds in challenging the condemnor’s negotiation efforts, the condemnation proceedings are dismissed entirely and the process must begin anew.

Traditionally, the Supreme Court of Virginia has defined a “bona fide offer” simply as one “made in good faith” and to “further the framework for further negotiations”—free from fraudulent and oppressive conduct. Norfolk Redevelopment & Housing Auth. v. Baylor, 214 Va. 1, 2–3 (1973). Since the Baylor decision, however, the General Assembly has enacted several amendments relating to what is needed to make a “bona fide offer.”

Amendments to the “bona fide offer” statute

At the time of Baylor, for instance, the offer was not required to be the amount of the appraisal. Now, the offer must be at least as high as the appraisal (where required) and the appraisal report must be provided to the landowner as part of the offer package. The statute has also been amended over the years to include the following form requirements for the written offer:

• A statement explaining the factual basis for the taking;
• A description of the public use for which it is necessary to acquire the owner’s property;
• A certification that the acquisition has been reviewed by the condemnor for purposes of complying with § 1-219.1;
• The offer must be upon the condemning authorities’ letterhead and signed by an authorized employee.

Landowners have used the addition of these requirements to argue that the “good faith” standard no longer controls and that condemnors’ offers and efforts are to be given stricter scrutiny. So long as the statutory requirements are met, however, courts have generally upheld offers under the “good faith” standard where challenged on other grounds.

In State Highway & Transportation Commissioner v. Herndon, 225 Va. 380 (1983), for instance, the Supreme Court upheld an offer that was based upon a mistake in the amount of land being acquired, reasoning that the offer was made in good faith and not the product of “fraud or oppressive conduct.” In Norfolk Housing & Redevelopment Authority v. Norva Properties, Inc., 84 Va. Cir. 45 (Norfolk Cty. 2011), the court found that the requirement that the offer be at least the amount of the appraisal did not supplant the “good faith” standard, and it upheld an offer over a challenge to the manner in which the appraisal was performed.  Moreover, in City of Norfolk v. Hedgepeth, 96 Va. Cir. 199 (2017), the court upheld an offer despite the appraisal it was based upon employing improper methodologies and a mistake of law, again relying on the “good faith” standard.

Thus, so long as the form requirements of the offer are met, and the amount of the offer is at least the amount of the appraisal (if required), the “good faith” standard appears to be alive and well with respect to other aspects of the offer and negotiations efforts.

Challenges to the “bona fide offer”

Despite the continuing application of the “good faith” standard, landowners continue to raise challenges based upon the “bona fide offer” requirement. The reasons for such challenges range far and wide, including the amount of the offer, qualifications or methods of appraisers, a change in the scope of the acquisition post-offer, and, of course, the “good faith” of the condemnor. While courts still apply the “good faith” standard to these challenges, it has been held that the burden is on the condemnor to demonstrate that it made a “bona fide offer” where the landowner claims otherwise.

Best practices for condemning authorities

Because the requirement is so often the subject of controversy in condemnation proceedings, condemning authorities need to take measures up front to ensure both their offer and negotiation efforts are unimpeachable. While not all strictly required, condemnors should strive to do the following in connection with their offer and negotiations:

• Start by setting the goal as negotiating a fair deal for the property at issue without going to court. Even setting aside the statutory requirements, this is a good practice that can avoid prolonged litigation, so long as the price is right.
• If required depending on the value of the acquisition, get a qualified appraiser to appraise the property and determine just compensation to the landowner. Have the appraiser prepare a written appraisal report that explains the basis for the value determination. If an appraisal is not required, the condemnor should make its own determination of value based upon reliable data, and prepare a written explanation for the figure.
• Once the owners have been identified and value has been determined, the condemnor should begin discussions with the landowner even before the offer, informing the landowner of the project, the need for the property, and the impending offer of purchase. During this time, the condemnor should work on preparing its offer package.
• Then, the offer package should be sent to the landowner. The offer package should consist of, at a minimum, a written offer letter in compliance with Va. Code § 25.1-204(B), the title report required by Va. Code § 25.1-204(D), a copy of the written appraisal report (or other written value determination), and the relevant plans for the project.
• After the offer is submitted, the condemnor should seek to meet with the landowner, to explain the project and its purpose, the scope of the acquisition and its necessity, and the consequences of failing to reach an agreement (i.e., condemnation).
• The condemnor should then seek to remain in frequent contact with the landowner to try and negotiate a deal, and it should be willing to answer questions from the landowner regarding the project and acquisition. Contacts with the landowner attempting negotiation should continue until such time as it becomes clear that no agreement will be reached and the parties are at an impasse.
• Once the parties have reached an impasse, the condemnor may begin the condemnation process by sending the landowner a letter of intent to file a Certificate of Take.

If the condemnor follows these guidelines, it will be less susceptible to later challenges concerning its offer and efforts at negotiations. Even following these steps, however, does not guarantee that the condemnor is insulated from challenges relating to the “bona fide offer” as appraisal errors, calculation mishaps, and even innocent typos can give rise to such challenges even where the negotiation efforts are extensive. When such challenges arise, however, having gone through this process will equip the condemnor to fend off contentions that it has not made a “bona fide offer” or acted in good faith by demonstrating its extensive efforts at resolution. For this reason, it is also helpful to keep a negotiations log that details contact with the landowner and documents efforts at negotiation.

When further negotiation is futile

Notably, while a condemnor does need to work in good faith to try and negotiate a deal, it has been held that a condemnor is not required to pursue futile efforts and continue to negotiate when it is clear that a deal cannot be reached. Unfortunately, though, the courts have provided little guidance on what specific level of delta between the parties makes the condemnor’s efforts futile. While it seems safe to say that an offer of $1,000 being countered with an offer of $1,000,000 would demonstrate futility, there is no clear line.

Title examination in a “bona fide offer”

As to the title report in the offer package, while not covered here, Virginia Code § 25.1-204((D) requires that, even prior to making the offer to purchase the property, the condemnor must have a title exam performed on the property. The provision lays out specific requirements for the title exam.

When a “bona fide offer” is not required

A bona fide offer is not required if the owner of the property is (a) a “person under a disability” as defined by Virginia law or otherwise unable to covey title; (b) unknown; or (c) cannot with reasonable diligence be found in Virginia. In these cases, the condemnor is not required to attempt to negotiate a purchase before proceeding to file a Certificate of Take.

Conclusion

In sum, although the “good faith” standard remains appliable to aspects of the offer not specifically addressed by statute, condemnors’ offers and negotiation efforts all too often are the subject of consequential challenges seeking to dismiss the condemnation proceedings. To minimize these challenges and ready itself to defend them when they inevitably occur, the condemnor should be careful to ensure its offer includes everything required, its efforts at negotiation are legitimate, and that it will be able to demonstrate the “good faith” it exercised in attempting to work with the landowner prior to condemnation.

For assistance in preparing or defending offers, and with any other aspects of eminent domain, do not hesitate to contact Sands Anderson, whose experienced team of eminent domain attorneys stands ready to help!

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