Over the next five years, the federal government is expected to spend over $1 trillion on a variety of infrastructure projects, including road widening, bridge repairs, and modernization of transit and electric grids (to name a few). Some projects require the government to exercise its powers over eminent domain to seize private property, create new access rights, or expand existing access rights.
Franchisors and franchisees must pay special attention to road widening and bridge improvement projects, as they often involve highway access modification and sidewalk installation. These projects often negatively impact on-site access and maneuverability, and can result in the loss of parking space. Also, franchisors and franchisees need to review the termination clause in their real estate leases to know what rights, if any, they have when it comes to site changes caused by the government project. Termination clauses in leases are rarely negotiated and often overlooked by the parties.
When the government acquires all property from a private owner, the revenue is a “complete revenue”. However, for many infrastructure projects, the state only requires a portion of the land, resulting in ownership “participation”. This article focuses on fractional earnings.
When the government is trying to widen a road or improve a bridge, they will often try to bring access to the property “up to date” and make it compliant with current law. For example, a small retail location may have 3 or 4 curb cuts along the frontage of a property, which may violate existing ordinances due to the number, location, or size of the cuts. If the government decides to align the access points with the Code as part of a road or bridge project, a property owner may be forced to close certain openings, modify others, or relocate the access points. Depending on the layout of the property, changing access can devastate a franchise location. In addition to changing the size and location of access, the government often takes land adjacent to the freeway to widen the road or create a sidewalk. Although ingestion may be as little as 10 to 15 feet, it can significantly impact the utility and value of the property and result in loss of parking or through lane disruption.
It’s important to note that some access changes are non-recoverable, even if the changes are devastating to an organization. The government’s management of freeway access sometimes falls under the parameters of government “policing” which can exempt the government from the obligation to pay just compensation. The trade-off between exercising police power and fairly compensating an owner for land grabbing is a challenge for even the most seasoned domain name attorney, so hiring an experienced attorney is crucial.
What should a franchisor or franchisee do when they see a local project moving forward?
First, determine if there will be any road works that could result in a change in access to your property. If access is to be changed, the property owner should consider hiring a traffic engineer to review the change and determine if the change will affect use of the site (ie, customer access, on-site propagation patterns, access for delivery). TRUCK).
Second, if changing access is going to be a problem, owners should consider hiring experienced legal counsel to raise their objections with the government. There are often short objection periods, so act quickly. The attorney can explain the hearing process, prepare witnesses and cross-examine government engineers.
Third, property owners need to determine whether government actions will oblige the government to pay adequate compensation for the damage caused by the project. With every land grab, the government must pay the owner just compensation, but a change in access may or may not require the payment of just compensation. Damage analysis in cases of partial extraction can be complicated as the property owner must consider not only the current use of the property but also future uses (ie how will the extraction affect future plans to expand the site).
When the franchisor or franchisee is a tenant, the situation becomes even more complex. For example, some leases require the landlord to notify the tenant of certain government actions or allow a tenant to request a rent reduction if a specified number of parking spaces is lost. If the lease is long-term, the landlord may not have the same incentive to contest the change in access. It is extremely important to have an open line of communication with the landlord and to work together to minimize the impact of ingestion.
“Location, location, location” is a mantra in the real estate industry. However, access and site layout are often just as important for franchise locations, and changes to either can ruin the business. If the government wants to do work on or near your property, find out exactly what is going on and be prepared to protect your property rights.