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The Michigan Uniform Condemnation Procedures Act, MCL 213.51, et seq.: Can a Gas or Electric Company Condemn Your Real Property?

The State of Michigan defines condemnation action as “the legal action taken by government to acquire private property or public use . . .” Gas or electric companies, formed under the Electric and Gas Corporations Act, MCL 486.252, have the authority to condemn property “which may be necessary to generate, transmit, and transform electric energy for public use in, upon, or across private property.” MCL 486.252. However, in such cases, the condemnation or acquisition of your property must be for public necessity, and you must receive just compensation for any property that the entity acquires through condemnation.

If you wish to prevent a utility company from condemning or taking your property through eminent domain, there are potential methods to do so.

 

Challenging the Necessity of the Condemnation Under the Michigan Uniform Condemnation Procedures Act

In certain circumstances, you can prevent the condemnation, in whole or in part. The Uniform Condemnation Procedures Act, MCL 213.56 states, in pertinent part, “an owner of the property desiring to challenge the necessity of acquisition of all or part of the property for the purposes stated in the complaint may file a motion in the pending action asking that the necessity be reviewed.” This means you have an opportunity to challenge whether the condemnation of your property by a utility company is necessary for public use.

However, before challenging the necessity of the condemnation, it is important to note whether the electric company is a public agency or a private agency as it alters your burden of proof. The Uniform Condemnation Procedures Act, MCL 213.56, defines each:

(h) “Private agency” means a person, partnership, association, corporation, or entity, other than a public agency, authorized by law to condemn property.

***

(j) “Public agency” means a governmental unit, officer, or subdivision authorized by law to condemn property.

If it is a public agency, “the determination of public necessity by that agency is binding on the court in the absence of a showing of fraud, error of law, or abuse of discretion.” MCL 213.56. On the other hand, if the gas or electric company is a private agency, “the court at the hearing shall determine the public necessity of the acquisition of the particular parcel” unless otherwise outlined in the statute. MCL 213.56. Thus, it is much more difficult to prevent the condemnation when a public agency is involved as opposed to a private agency.  Michigan has various municipal owned utilities throughout the state.  However, the vast majority of electric and gas utility services are provided by one of the following private utility companies:

    • Alger Delta Cooperative Electric Association
    • Alpena Power Company Cherryland Electric Cooperative
    • Cloverland Electric Cooperative
    • Consumers Energy Company
    • DTE Electric Company
    • Great Lakes Energy Cooperative
    • Indiana Michigan Power Company
    • Midwest Energy & Communications
    • Northern States Power Company – Wisconsin (Xcel)
    • Ontonagon County Rural Electrification Association
    • Presque Isle Electric & Gas Co-op
    • Thumb Electric Cooperative
    • Tri-County Electric Cooperative
    • Upper Michigan Energy Resources Corporation
    • Upper Peninsula Power Company
    • Wolverine Power Supply Cooperative, Inc.

Importantly, “[i]f a motion to review necessity is not filed as provided in this section, necessity shall be conclusively presumed to exist and the right to have necessity reviewed or further considered is waived.” MCL 213.56. Moreover, The Uniform Condemnation Procedures Act, MCL 213.56, states:

If a motion to review necessity is not filed under section 6, the title to the property described in the petition shall vest in the agency as of the date on which the complaint was filed. The right to just compensation shall then vest in the persons entitled to the compensation and be secured as provided in this act. If the motion to review necessity is denied after a hearing and after any further right to appeal has terminated, title to the property shall also vest in the agency as of the date on which the complaint was filed or such other date as the court may set upon motion of the agency.

Therefore, if you are served with a complaint from a utility company attempting to condemn your property, it is imperative that you immediately contact a real estate attorney. A delay in contacting a real estate attorney could result in you losing all opportunity to be heard by a court and to prevent the condemnation.

If successful in preventing the condemnation, meaning no necessity is found for public use, a court will likely determine that the utility company cannot condemn the property. If a public necessity is found for only a portion of the property that the utility company desires to condemn, a court is likely to alter the terms of the condemnation, and only permit a taking of the portion of the property that it deems necessary for public use.

 

Tree Trimming and Vegetation Management of Utility Easements

In Michigan, there are often disputes between electrical companies and property owners that relate to maintenance of easements and the rights of the utility company to trim or remove trees and vegetation on private property.  However, the Michigan Court of Appeals has held that utility companies did not have the right to expand an existing utility easement under the guise of necessity for public use.

Although unpublished, Consumers Energy Co. v. Storm, No. 350617, 2022 WL 3569329, at 1 (Mich. Ct. App. Aug. 18, 2022) is recent example of a successful challenge to the necessity of the acquisition or condemnation. In that case, property owners owned a property with powerlines running in front of and along the side of their property. Id. The powerlines provided power to over eight-thousand consumers. Id. Although Consumers Energy had legal access to some property by the powerlines already, Consumers Energy believed that it needed additional property to maintain the powerlines and vegetation and filed a lawsuit to obtain a perpetual easement to an eighty-foot portion of the owner’s property, which stretched over the owner’s side yard, back yard, and almost completely covered the owner’s house. Id. The property owner claimed that there was no public necessity, stating that there was no vegetation or trees to maintain, among other things for Consumers Energy to maintain. Id. at 2. When the trial court agreed and found that there was no public necessity, Consumers Energy appealed. Id. at 4. However, the Michigan Court of Appeals also found that there was no public necessity as Consumers Energy already had access to the powerlines, that the vegetation had been maintained for fifty years with the prior access, and there was no need for additional vegetation maintenance. Id. at 6.

 

Challenging the Just Compensation Under the Michigan Uniform Condemnation Procedures Act

In addition to challenging the necessity of taking property for public use, a property owner may also challenge a public or private agency’s determination of just compensation in a condemnation action.  As an initial matter, sections MCL 213.55(1) and MCL 213.55(2) of The Uniform Condemnation Procedures Act require a utility company to determine the value of property that it desires to condemn and contains procedures as to how the utility company should determine just compensation, as follows:

(1) Before initiating negotiations for the purchase of property, the agency shall establish an amount that it believes to be just compensation for the property and promptly shall submit to the owner a good faith written offer to acquire the property for the full amount so established. At the same time, if the taking of the property might require relocation, the agency shall provide written notice to the occupants of the property stating that an eminent domain proceeding has commenced and outlining the occupants’ basic legal rights in the process, including, but not limited to, the fact that any person who has a leasehold interest of less than 6 months is entitled to a $3,500.00 moving allowance as provided under section 2 of 1965 PA 40, MCL 213.352, and that an individual who is a residential occupant may not be displaced until moving expenses or a moving allowance is paid as provided under 1965 PA 40, MCL 213.351 to 213.355, and the person has had a reasonable opportunity, not to exceed 180 days after the payment date of moving expenses or the moving allowance as provided under 1965 PA 40, MCL 213.351 to 213.355, to relocate to a comparable replacement dwelling. If there is more than 1 owner of a parcel, the agency may make a single, unitary good faith written offer. The good faith offer shall state whether the agency reserves or waives its rights to bring federal or state cost recovery actions against the present owner of the property arising out of a release of hazardous substances at the property and the agency’s appraisal of just compensation for the property shall reflect such reservation or waiver. The amount shall not be less than the agency’s appraisal of just compensation for the property. If the owner fails to provide documents or information as required by subsection (2), the agency may base its good faith written offer on the information otherwise known to the agency whether or not the agency has sought a court order under subsection (2). The agency shall provide the owner of the property and the owner’s attorney with an opportunity to review the written appraisal, if an appraisal has been prepared, or if an appraisal has not been prepared, the agency shall provide the owner or the owner’s attorney with a written statement and summary, showing the basis for the amount the agency established as just compensation for the property. If an agency is unable to agree with the owner for the purchase of the property, after making a good faith written offer to purchase the property, the agency may file a complaint for the acquisition of the property in the circuit court in the county in which the property is located. If a parcel of property is situated in 2 or more counties and an owner resides in 1 of the counties, the complaint shall be filed in the county in which the owner is a resident. If a parcel of property is situated in 2 or more counties and an owner does not reside in 1 of the counties, the complaint may be filed in any of the counties in which the property is situated. The complaint shall ask that the court ascertain and determine just compensation to be made for the acquisition of the described property. As used in this subsection, “comparable replacement dwelling” means any dwelling that is all of the following:

(a) Decent, safe, and sanitary.

(b) Adequate in size to accommodate the occupants.

(c) Within the financial means of the individual.

(d) Functionally equivalent.

(e) In an area not subject to unreasonable adverse environmental conditions.

(f) In a location generally not less desirable than the location of the individual’s dwelling with respect to public utilities, facilities, services, and the individual’s place of employment.

(2) During the period in which the agency is establishing just compensation for the owner’s parcel, the agency has the right to secure tax returns, financial statements, and other relevant financial information for a period not to exceed 5 years before the agency’s request. The owner shall produce the information within 21 business days after receipt of a written request from the agency. The agency shall reimburse the owner for actual, reasonable costs incurred in reproducing any requested documents, plus other actual, reasonable costs of not more than $1,000.00 incurred to produce the requested information. Within 45 days after production of the requested documents and other information, the owner shall provide to the agency a detailed invoice for the costs of reproduction and other costs sought. The owner is not entitled to a reimbursement of costs under this subsection if the reimbursement would be duplicative of any other reimbursement to the owner. If the owner fails to provide all documents and other information requested by the agency under this section, the agency may file a complaint and proposed order to show cause in the circuit court in the county specified in subsection (1). The court shall immediately hold a hearing on the agency’s proposed order to show cause. The court shall order the owner to provide documents and other information requested by the agency that the court finds to be relevant to a determination of just compensation. An agency shall keep documents and other information that an owner provides to the agency under this section confidential. However, the agency and its experts and representatives may utilize the documents and other information to determine just compensation, may utilize the documents and other information in legal proceedings under this act, and may utilize the documents and other information as provided by court order. If the owner unreasonably fails to timely produce the documents and other information, the owner shall be responsible for all expenses incurred by the agency in obtaining the documents and other information. This section does not affect any right a party may otherwise have to discovery or to require the production of documents and other information upon commencement of an action under this act. A copy of this section shall be provided to the owner with the agency’s request.

If a property owner disagrees with the valuation of the property that is subject to condemnation, the property owner may dispute the agency’s valuation. The Uniform Condemnation Procedures Act, MCL 213.55(3), provides as follows with respect to determining just compensation in a condemnation proceeding:

(3) In determining just compensation, all of the following apply:

(a) If an owner claims that the agency is taking property other than the property described in the good faith written offer or claims a right to compensation for damage caused by the taking, apart from the value of the property taken, and not described in the good faith written offer, the owner shall file a written claim with the agency stating the nature and substance of that property or damage. The owner’s written claim shall provide sufficient information and detail to enable the agency to evaluate the validity of the claim and to determine its value. The owner shall file the claim within 90 days after the good faith written offer is made pursuant to section 5(1) or 180 days after the complaint is served, whichever is later, unless a later date is set by the court for reasonable cause. If the appraisal or written estimate of value is provided within the established period for filing written claims, the owner’s appraisal or written estimate of value may serve as the written claim under this act. If the owner fails to timely file the written claim under this subsection, the claim is barred.

(b) The parties shall exchange the agency’s updated appraisal reports, if any, and the owner’s appraisal report within 90 days after the expiration of the period for filing written claims, unless a later date is set by the court in accordance with section 11(1) for reasonable cause. If the agency believes that the information provided by the owner is not sufficient to allow the evaluation of the claim, the agency may request additional information from the owner and, if that information is not provided, may ask the court to compel the owner to provide additional information to enable the agency to evaluate the validity of the claim and to determine its value. If the owner fails to provide sufficient information after being ordered to do so by the court, the court may assess an appropriate sanction in accordance with the Michigan court rules for failing to comply with discovery orders, including, but not limited to, barring the claim. In addition, the court also shall consider any failure to provide timely information when it determines the maximum reimbursable attorney fees under section 16.

(c) For any claim that has not fully accrued or is continuing in nature when the claim is filed, the owner shall provide information then reasonably available that would enable the agency to evaluate the claim, subject to the owner’s continuing duty to supplement that information as it becomes available. The owner shall provide all supplementary information at least 90 days before trial, and the court shall afford the agency a reasonable opportunity for discovery once all supplementary information is provided and allow that discovery to proceed until 30 days before trial. For reasonable cause, the court may extend the time for the owner to provide information to the agency and for the agency to complete discovery. If the owner fails to provide supplementary information as required under this subdivision, the court may assess an appropriate sanction in accordance with the Michigan court rules for failing to comply with discovery orders, including, but not limited to, barring the claim. In addition, the court also shall consider any failure to provide timely supplemental information when it determines the maximum reimbursable attorney fees under section 16.

(d) After receiving a written claim from an owner, the agency may provide written notice that it contests the compensability of the claim, establish an amount that it believes to be just compensation for the claim, or reject the claim. If the agency establishes an amount it believes to be just compensation for the claim, the agency shall submit a good faith written offer for the claim. The sum of the good faith written offer for all claims submitted under this subsection or otherwise disclosed in discovery for all items of property or damage plus the original good faith written offer constitutes the good faith written offer for purposes of determining the maximum reimbursable attorney fees under section 16.

If the above procedure does not resolve any dispute regarding the valuation of the property, a court will determine the value of the property, and certain penalties may be imposed if a court determines that a party did not act in in good faith.

 

Attorney’s Fees Under the Michigan Uniform Condemnation Procedures Act

A property owner that is successful when challenging the condemnation of their property, may be entitled to attorney’s fees and costs. The Uniform Condemnation Procedures Act, MCL 213.56, states:

(2) If the property owner, by motion to review necessity or otherwise, successfully challenges the agency’s right to acquire the property, or the legal sufficiency of the proceedings, and the court finds the proposed acquisition improper, the court shall order the agency to reimburse the owner for actual reasonable attorney fees and other expenses incurred in defending against the improper acquisition.

(3) If the amount finally determined to be just compensation for the property acquired exceeds the amount of the good faith written offer under section 5,1 the court shall order reimbursement in whole or in part to the owner by the agency of the owner’s reasonable attorney’s fees, but not in excess of ? of the amount by which the ultimate award exceeds the agency’s written offer as defined by section 5. The reasonableness of the owner’s attorney fees shall be determined by the court. If the agency or owner is ordered to pay attorney fees as sanctions under MCR 2.403 or 2.405, those attorney fee sanctions shall be paid to the court as court costs and shall not be paid to the opposing party unless the parties agree otherwise.

Thus, The Uniform Condemnation Procedures Act, MCL 213.56, requires that the property owner challenging the condemnation prove two things.  First, property owner successfully challenged the agency’s right to acquire the property or the legal sufficiency of the proceedings.  Second, the court must find that the proposed acquisition was improper. If a property owner succeeds in a challenging the legal sufficiency of the taking, the proposed acquisition is automatically deemed improper. Escanaba & Lake Superior R Co v Keweenaw Land Ass’n, Ltd, 156 Mich App 804, 812; 402 NW2d 505 (1986). The same cannot be said for successful challenges to the agency’s right to condemn or acquire the property though.

 

Conclusion

If your property is at risk for being condemned by a utility company, you may have some viable options to prevent or mitigate the damage to your property or its value. However, it is imperative that you act swiftly and with the help or a real estate attorney, or you could be barred from litigating the matter and lose out on any potential remedy. Understanding the laws and circumstances surrounding condemnation claims can be difficult without the help of an experienced real estate attorney. A real estate attorney will be able to help navigate through the Michigan laws applicable to your property.

Kara Moore is an attorney at Hirzel Law, PLC and focuses her practice on general real estate litigation. Ms. Moore received her Bachelor of Arts degree in Communication from Bob Jones University in South Carolina. Ms. Moore earned her Juris Doctor degree from Western Michigan University Cooley Law School. While in school, Ms. Moore made the Honor Roll for six terms and the Dean’s List for seven terms. Ms. Moore is a member of the Macomb County Bar Association and the Genesee County Bar Association. Ms. Moore has extensive experience performing legal research, arguing motions, conducting depositions, and drafting pleadings and discovery in real estate litigation, probate litigation, Landlord-Tenant litigation, and civil litigation, and drafting estate planning documents. She can be reached at (248) 480-8704 or at kmoore@hirzellaw.com.

 

 

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kmoore@hirzellaw.com

Kara Moore is an Associate Attorney with Hirzel Law, PLC and focuses her practice on general real estate litigation. Ms. Moore received her Bachelor of Arts degree in Communication from Bob Jones University in South Carolina. Ms. Moore earned her Juris Doctor degree from Western Michigan University Cooley Law School. While in school, Ms. Moore made the Honor Roll for six terms and the Dean’s List for seven terms. Ms. Moore is a member of the Macomb County Bar Association and the Genesee County Bar Association. Ms. Moore has extensive experience performing legal research, arguing motions, conducting depositions, and drafting pleadings and discovery in real estate litigation, probate litigation, Landlord-Tenant litigation, and civil litigation, and drafting estate planning documents.

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