Chapter 11-8 Property Valuation and Damages

• Jurisdiction: United States

11-8 Property Valuation and Damages

Damages to or loss of tangible property (real property or tangible personal property) may be assessed by determining the market value or diminishment in market value of the property, the remedial cost of repair, the value of the temporary loss of use of the property, the intrinsic value of the property lost, or some combination of these.

Note that under the Property-Owner Rule, a property owner is qualified to testify as to the market value of her property, whether real or personal, even though she would not otherwise be qualified to testify about the value of other property.¹⁷⁵ Available to natural persons and organizations alike, the rule is premised on the idea that a property owner is familiar with her own property and its value.¹⁷⁶ As such, the property owner's testimony must be based on a familiarity with the market value of the property, rather than speculation or conclusory statements.

11-8:1 Real Property Valuation and Damages

When dealing with real property, a distinction is commonly made between those damages that are permanent and those that are temporary in nature.¹⁷⁷ Whether an injury to real property is temporary or permanent is a question of law (although the determination may turn on the jury's answer to a predicate question of fact).¹⁷⁸ An injury to real property is considered permanent if it cannot be repaired, fixed, or restored, or it is substantially certain that the injury will repeatedly, continually, and regularly recur; it is considered temporary if it can be repaired, fixed, or restored, and any anticipated recurrence would be only occasional, irregular, intermittent, and not reasonably predictable.¹⁷⁹

Damages for permanent injuries to realty are normally measured by the difference in value of the property before and after the permanent injury,¹⁸⁰ or by the difference in value of the property with and without the permanent nuisance.¹⁸¹

there are multiple methods for assessing the value of real property (and of property rights such as access rights, easements, and water rights) that correspond to the three approaches used in business valuations (i.e., income approach, market approach, and cost approach). In most valuations, all three methods are considered, although one method may be found to be the most determinative of value in that par-ticul ar situation. Appraisers will typically state which method is being relied upon primarily and why, but they will then describe the analysis under the other methods to serve as a reality check on the primary method. If each method has more or less equal applicability, the appraiser will essentially average the valuations of all three.¹⁸² In most circumstances, these methods are seeking to assess "fair market value" as that term is historically defined, which is the price a willing buyer would pay a willing seller when neither party is acting under any compulsion to buy or sell.¹⁸³

Damages for temporary injuries to realty usually include costs of repair and recovery for the intervening loss of use of the property.¹⁸⁴ the valuation for loss of use of property can be calculated in various ways depending on the circumstances of the case¹⁸⁵ and can be based on reduced rental value,¹⁸⁶ the lost value of produce from the land,¹⁸⁷ the amount of out-of-pocket expenditures incurred during the time of lost use,¹⁸⁸ or loss of profits.¹⁸⁹ In addition, if some amount of diminished market value remains after repairs are made, that diminution in value may also be recovered.¹⁹⁰

the texas Supreme Court has recognized an "economic feasibility exception" to these general rules. In cases involving temporary injury, when the cost of required repairs or restoration exceeds the diminution in the property's market value to such a disproportionately high degree that the repairs are no longer economically feasible, a temporary injury is deemed permanent, and damages are limited to the loss in fair market value.¹⁹¹ (there is also, however, an exception to the exception; specifically when trees have been destroyed but there is no loss—or only nominal loss—to the land's fair market value, the intrinsic value of the trees may be recovered.)¹⁹²

11-8:2 Personal Property Valuation and Damages

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