Tag Archives: highest and best use

The strangest eminent domain case ever

There is an intriguing eminent domain case going on in south Mississippi. It involves a popular, well-known local eatery, the Mississippi Department of Transportation (MDOT), the local county government and a 100-foot strip of land alongside a highway. The real estate issue is property value, but that is only the beginning.

Let’s begin with a brief, but incomplete factual timeline because there are so many issues with this case.

2001 – The Shed Barbecue and Blues Joint opens on Highway 57 in Jackson County. It becomes popular and well-known outside the county. It even had a season on the Food Network channel.

February 2012 – The Shed destroyed by fire.

2012 – Owners rebuild, but without permits in a special flood-hazard area, and for having unpermitted signs out front, according to county officials.

August 2012 – MDOT files court case to take 100-feet of The Shed’s property to widen Highway 57.

2012 – 2014 – Owners given permission by county to operate as a temporary structure.

July 2014 – County notifies The Shed it is in violation of building code.

April 26, 2016 – Jackson County cites The Shed with building code violations

October 2016 – MDOT case is set to go to trial over taking of strip of land beside roadway. Case had been continued five times. MDOT has said the land is worth less than $200,000. The business owners want more than $1 million for the .43 acre.

November 2016 – A jury sets the value of .4 acres at The Shed at $408,334 that the Mississippi Department of Transportation will have to pay owners. Owners deciding whether to appeal.

In short, there are two cases: An eminent domain case with MDOT and a building permit violation case with the county. One of the main issues in the eminent domain case was how much the business value contributed to the land value. And one argument there is whether a business that may be operating without the proper permits even has any value. Obviously, the jury thought so.

Now for a bit of real estate primer.

Highest and best use is defined as that use that is physically possible, legally permissible, financially feasible and most profitable. These four attributes are the ingredients for determining highest and best use. In this case it could be argued that because The Shed’s use was not legally permissible then the current use is not the highest and best use. It does not mean that it has no value.

Value, as it applies to anything, has for basic components, as represented by the acronym DUST, where D stands for demand, U is for utility, S is for scarcity and T is transferability. For something to have value it must have all four. Demand means that there is a market for the property or the item. There is someone willing to pay for it. Utility refers to that idea that it has some use. For example, a pencil can be used for writing, a refrigerator can store things at a cool temperature and a parcel of real estate can be developed or can be used for other purposes, such as agriculture or recreation. Scarcity means that there is a limited supply available. All real estate parcels are considered scarce because no two are exactly alike if for no other reason than they are physically located in different places. Transferability refers to the concept that title to the property can be conveyed to another party.

There are many different types of value. For example, there is sentimental value, assessed value and insurable value. When valuing real estate, the most common form of value used is market value, which is defined as “The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under duress.”

It will be interesting to see how these cases are resolved. As mentioned earlier, The Shed is a popular, well-known place. It is a bona-fide tourist attraction. It serves thousands of customers each weeks in a collection of – well – sheds. The owners are involved in the community, and the community is involved in The Shed. After Hurricane Katrina over 50 volunteers helped to rebuild the place. There was some wonderment in the county about whether there could be found twelve impartial jurors.

Now that the eminent case has been before a jury, we now await the county’s building code case. The question being asked: What’s the future of The Shed?

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