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COC and Reasonableness Redux
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<Guy>
posted
Client had 11 50' mature red cedars cut back to 20' to clear wires. Utility had no easement, no permission to enter, and badly exceeded their own standards. Trees are a total loss because they cannot regrow to their former heght, so clients have a new view of nearby stadium.

Replacement with fast-growing 30'leylands will cost $100-120k, not including prep or mtc back to 50' size. Property value is $44k. With prep and mtc COC may be half that. How bound is the appraiser by the 20% guideline? (I've been 30% before w copious documentation)

Should he adjust percentages to get the appraisal back to "reasonableness", or state the costs and trust that it won't get tossed?

I'm inclined to the latter, but I REALLY don't want to see it get tossed. Any thoughts?
 
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<Scott Cullen>
posted
Reply to post by Guy, on February 04, 2003 at 13:50:16:

How bound is the appraiser to the reasonable relation to property value?

It depends on the legal definition of value or the legally allowed measure of damages. If the law requires that tree value be limited to contribution to property value the professional appraiser should be bound by that... unless the lawyer for the damaged party is intending to challenge the law and requires a fuller value.

If the law does not require tree value to be limited to contribution to property value the appraiser is not bound at all.

If bound is it to 20%? 20% is near the top end of the range of contribution in the few studies in the literature. I'd guess that that contribution will apply to rather higher end properties... maybe not to lower end ones. You really should be getting input on that from a r.e. broker or appraiser... just a general idea. The 20% is for the whole landscape: trees other plants, walks, walls site lighting. So what % of the 20% is contributed by these trees?

Then you must consider the rights of the utility. Did they have a right or duty trim w/o specific easement? Did they have a duty to obtain permission? If they failed in that duty does it remove all limits from monetary damages?

IOW did the owner have an unencumbered right to the pre-existing 50'? Even if the utility exceeded its right to trim is the owner entitled to value of the 50'? Or to something less?
 
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<Lew Bloch>
posted
Reply to post by Guy, on February 04, 2003 at 13:50:16:

Guy,

My advice is to submit the appraisal that you are comfortable defending. It is not your job to interpet the law. There is case law that an appraisal of damages can be worth more than the total property damage.

Lew
 
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<Guy>
posted
Reply to post by lew bloch, on February 04, 2003 at 13:50:16:

Well thanks Lew. The current conundrum is how to defend the application of compound interest.

Estimates to replace 9 mature trees average $125k but using the CTLA formula the COC is $305k. Parity in 20 yrs., real estate value is $440k.

Surely the tree owners have lost value for those 20 yrs because the trees screened a brightly lit, noisy baseball field. Will the attorney look at the $180k add'l claim and think it unrealistic?

All I know to do is defend it as reasonable because the formula says it is, and because there is no other way I can think of to put a price on the loss of quality of life due to the noise and glare these people must endure until the trees grow for 20 yrs.
 
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<Scott>
posted
Reply to post by Guy, on February 19, 2003 at 18:07:19:

I don't think I can agree completely with Lew. It is indeed not the apraiser's job to INTERPRET the law. But the appraiser has a professional responsibility to consider the rights and interests of the parties.

If state law is dead clear that ttree value must be limited to contribution to property value then that's what you must appraise. Get legal input if you ned it. If the law is not clear then indeed go with what you are comfortable with.

You must also consider what portion of the damage was in excess of the utility's rights. At the very least you must condition your appraisal on legal determination of the utility's right to trim.

In terms of the reasonableness of cure (if cure is a legally admissable measure of damages) how much of the height (I think you said 50') is not replaceable for the $125K (I think you said 50'-30'=20') and how much of that contributes to the effective screen of the ballfield? IOW would 30' effectively cure that loss notwithstanding the pre-existing height was 50'? (And remember you brought that issue up, be prepared to defend).

Now assuming only the full 50' will cure the functional loss and assuming the law allows full cure as a measure of damages, can you defend compounding. Once again I'll say I've researched this pretty thoroughly and can find no theorteical or logical basis in the appraisal literature for compounding a current replacement cost forward to get a present value. I know individual appraisers have used compounding and had it accepted in court. I know it's in the 9th Edition. I know you could not very efffectively defend it if I was the utility's expert.

So you now have two issues: what reasonableness test must be applied to your estimate of damages and what method is defensible.

Separate issues.
 
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<Guy>
posted
Reply to post by Scott, on February 19, 2003 at 18:51:14:

Scott:
It is indeed not the apraiser's job to INTERPRET the law. But the appraiser has a professional responsibility to consider the rights and interests of the parties.
If state law is dead clear that ttree value must be limited to contribution to property value then that's what you must appraise. Get legal input if you ned it. If the law is not clear then indeed go with what you are comfortable with.
Guy: How clear is dead clear? Whether the laws you refer to are statute or precedent, they are always open to reinterpretation or overturning. The lawyer in this case says press on, give me the cost of cure.
Scott: You must also consider what portion of the damage was in excess of the utility's rights. At the very least you must condition your appraisal on legal determination of the utility's right to trim.
Guy: there was no legal record of an easement being granted; the crews left after being asked to then returned after the owners left. The utility's expert told them "You screwed up".

Scott: Now assuming only the full 50' will cure the functional loss and assuming the law allows full cure as a measure of damages, can you defend compounding. Once again I'll say I've researched this pretty thoroughly and can find no theorteical or logical basis in the appraisal literature for compounding a current replacement cost forward to get a present value. I know individual appraisers have used compounding and had it accepted in court. I know it's in the 9th Edition.
Guy: I accept as a logical basis what's stated in the 9th edition; that the clients will be without the trees' contribution for 20 years while the trees grow to parity. The present value holds in it the promise of future value; if the utility hadn't hacked em the clients would have the freedom from noise and glare for 20 years. I see no better way to cure that loss than by compounding interest.
The only way to make them whole is to factor in their complete loss over time, not just their loss of that contribution as they experience it today.

Scott: I know you could not very efffectively defend it if I was the utility's expert.
Guy: Well I'd be as effective as I could be. It seems the present value of any other feature of the real estate depends on its future as an asset. A house with a roof that will last 50 years appraises higher than one with a roof that is good for only 5, right?

Scott: So you now have two issues: what reasonableness test must be applied to your estimate of damages and what method is defensible. Separate issues.
Guy: I don't think I can completely agree with Scott here [Smile] Defensibility determines reasonableness.
 
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<Lew Bloch>
posted
Reply to post by Scott, on February 19, 2003 at 18:51:14:

Wellllll, I don't think I can agree completely with Scott-----

It is NOT my job to determine if state law is clear as to how appraisals should be done. Case law is changed all the time and the lawyer must determine how far he or she wants to go with it. Until Booksa v Patel, the Massachusets Rule (self help) was the law of the land. Because of an appeal in that case, this mentality is changing nationwide.

I am involved in an appellate hearing right now in Md. which, until now, has never had a treble damage award. I was a plaintiff witness in a case in which my client was awarded 11K, but no punitive damages because of the judges instructions to the jury. The appellate court ruled that the lower court was wrong, and that their expert (me) did prove the trees were merchantable (even a 21" dia. locust) and were covered under the Md. statute. The apppeals court did cite cases in other states, including 1 in Wisc.that stated that even though the pltf. might not to be able to prove depreciation of her property value, she was deprived of something valuable to her. They also cited a case in which the jury could allow for the cost to restore a property to its original condition even though it could be more than the value of the lot. They also made note that the defendant attorney trivializingt he pltfs. relations with feeding her birds was off the mark. These are just some of the highlights of this interesting turn of events that could possibly help overturn Pennsylvanias ruling on the value of trees.

Although I think I have used compounding only once, maybe twice, I think it is well defendable. IMHO, if a 50' hedge is destroyed, a 30" hedge may well be a suitable cost of cure; not needing compounding.

Sorry to be so verbose--I much prefer brevity.

Lew
 
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<Guy>
posted
Reply to post by lew bloch, on February 19, 2003 at 19:19:45:

Welll I sure do agree with Lew(mostly); thanks for the generosity of your verbosity:
"The apppeals court did cite cases in other states, including 1 in Wisc.that stated that even though the pltf. might not to be able to prove depreciation of her property value, she was deprived of something valuable to her. They also cited a case in which the jury could allow for the cost to restore a property to its original condition even though it could be more than the value of the lot."

This is hugely interesting to me in several ways. I wasn't sure that courts in one state could/would refer to cases in another. Is that only on the federal level?
And it's really good to hear someone else say that case law is dynamic, and should not limit the appraiser's effort to document lost value if as Scott said the perpetrators were clearly operating way beyond their rights.

(This all speaks to the need for an updated text on trees&law; too bad there is not a good source for funding/publishing that.)

But: In this present case 30' replacement trees will do nothing to restore lost screening function and so is not a suitable COC. The client can now mow his lawn or practice his chip shots or read a newspaper by the lights of the silvery stadium any time a game is on. COC to parity is suitable, even if it's 70% of the RE value.

Thanks Lew for coming out of lurkdom.
 
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<Scott>
posted
Reply to post by lew bloch, on February 19, 2003 at 19:19:45:

OK, let me see if I can combine responses to Lew and Guy (twice).

Guy’s first response:
 
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<Scott>
posted
Reply to post by Scott, on February 21, 2003 at 18:01:51:

OK, let me see if I can combine responses to Lew and Guy (twice).

Guy’s first response:
 
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<Scott Cullen>
posted
Reply to post by Scott, on February 23, 2003 at 14:15:22:

I tried to paste in a long reponse twice and Knothole doesn't seem to take it on submission. Let's
 
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<Scott>
posted
Reply to post by Scott Cullen, on February 23, 2003 at 14:16:11:

This is a PITFA. OK I'll try to e-mail this stuff to you both directly.
 
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