United States: Reserving Goodwill Claims

[Gunnar Larson]

https://www.mondaq.com/unitedstates/real-estate/1403290/reserving-goodwill-claims?email_access=on



United States: Reserving Goodwill Claims
20 December 2023
by Kristin L. Mendenhall
Nossaman LLP
Your LinkedIn Connections
with the authors
View Kristin L. Mendenhall Biography on their website
In California, a business operating on real property being acquired, in
whole or in part, for a public project may make a claim for loss of
goodwill and be entitled to compensation if the business operator
establishes the foundational elements: (1) the taking caused the loss, (2)
the loss could not be prevented by relocation or other reasonable
mitigation measures, (3) the loss is not includable as a reimbursable
relocation expense, and (4 ) the loss does not duplicate other compensation
being paid. (Code Civ. Proc. §1263.510(a).) As part of its affirmative duty
to mitigate damages, a business often relocates its operations to a new
site to preserve its goodwill. Appraisers retained by the business and
agency typically compare the business' goodwill in the "before condition"
(at the subject property) and in the "after condition" (at the replacement
property) to determine the amount of loss, if there is any loss.

This comparison can be difficult when appraisals must be exchanged at a
time when the business has little to no operating results at the
replacement property because it has not yet moved or is still in a start-up
period. When the replacement property selected by the business has many of
the same characteristics as the subject property and the project impacts
are well understood from detailed construction plans, the parties usually
choose to resolve the goodwill claim along with the real property claims in
the existing litigation. The appraisers are able to use historical data to
determine goodwill in the before condition and compare it to the goodwill
in the after condition, which they usually determine by making adjustments
for the impacted condition. The appraisers' adjustments take into
consideration the project plans, the owner's testimony, other expert
opinions, paired sales if available, and their own expertise. Subjectivity
obviously creeps in with so many unknowns at play. However, if the
adjustments are substantiated and the appraisal testimony credible,
goodwill claims often settle, and sometimes go to trial, without the need
of actual performance at the replacement property to compare with their
performance (unimpacted) before the relocation.
-------------- next part --------------
A non-text attachment was scrubbed...
Name: not available
Type: text/html
Size: 2928 bytes
Desc: not available
URL: <https://lists.cpunks.org/pipermail/cypherpunks/attachments/20231221/b44feedb/attachment.txt>