That redevelopment project that’s been in the works for decades has finally gotten the green light, and your property is on the chopping block. After several letters from the city notifying you of its imminent takeover of your property, you finally get a purchase agreement. You need some advice from your Minneapolis Eminent Domain attorney to know what to sign and how to proceed. 

As you take a closer look at the purchase agreement, you notice the it is not from your city but some third-party developer. There’s a clause in the agreement that says if you sign, you’re not entitled to relocation assistance, services, payments, or benefits. You raise an eyebrow. Is it legal for a third-party contract to waive your right to relocation benefits from the government?

In short, no. But let’s take a closer look at why the government can’t use a third-party contractor to create a relocation benefits loophole.

What Are Relocation Benefits?

Under Minnesota state eminent domain law, residential and commercial property owners are entitled to just compensation for their properties as well as relocation assistance and benefits. “Just compensation” is the fair market value of your property and is negotiable. Many property owner’s do not realize they can negotiate the purchase price of their home when compelled to sell under eminent domain.

Relocation benefits include the costs to move and reestablish your home or business elsewhere. They can cover closing costs, professional assistance finding a new property, and increased mortgage interest costs. They also cover the difference in price between your new home and your old one if a home in a comparable neighborhood elsewhere is more expensive.  

When Richfield Tried to Pull a Fast One

In August 2002, Mr. Wren, a homeowner in Richfield, Minnesota (and my client), received a purchase agreement for his home. His property would be bought directly by a third party during the final phase of a large redevelopment project. The city had hired the third-party company to draw up the contract and complete the final phase of property acquisition on the city’s behalf.

In an addendum to the contract, the company had snuck in two sentences that would embroil the city and my client in years of litigation. “Seller specifically acknowledges and agrees that neither [the company] nor the City of Richfield shall have any obligation to pay or provide to Seller, any relocation assistance, services, payments or benefits,” the addendum said. “Additionally, Seller expressly waives any claim to relocation assistance, services, benefits or payments.”

A month later, Mr. Wren was in the throes of moving. He submitted a claim for relocation benefits under the Minnesota Uniform Relocation Act. The administrative law judge who reviewed the claim concluded Mr. Wren was eligible for relocation benefits, despite the clause in the contract with the third-party company that purportedly waived his rights. The administrative law judge ruled that this clause was invalid because it did not comply with the Minnesota Uniform Relocation Act.

That’s when the City of Richfield stepped in. Its Housing and Redevelopment Authority (HRA) asked for a reconsideration of the judge’s decision, which was denied.

The Minnesota Court of Appeals and Supreme Court Affirm the Right to Relocation Benefits

Doubling down, the HRA appealed to the Minnesota Court of Appeals and the Minnesota Supreme Court. Its argument at both courts was not that the clause was invalid under Minnesota law. Its argument was that because a third party had negotiated and signed the purchase agreement, the HRA itself never acquired the home.

After a review of the statutes under the Minnesota Reform Relocation Act and lengthy consideration of the city’s role in the redevelopment project and related property acquisitions (and a discussion of the legal definition of the word “undertaken”), both the Court of Appeals and Supreme Court upheld the administrative law judge’s decision.

Both courts ruled that outsourcing property acquisition to a third party did not absolve the city of its duty to provide relocation assistance. Upon review of the city’s actions during the redevelopment project, the courts found the City of Richfield sent property owners approximately 20 letters regarding the project and property acquisition. One of these letters encouraged property owners to negotiate with the third party.

The courts concluded that “The HRA had significant involvement in the redevelopment . . . and undertook the ‘acquisition’ of Wren’s property within the meaning of the relocation act. Wren is entitled to relocation benefits. . . .”

What This Means to You

The government cannot outsource its property acquisition to a third party to avoid paying property owners relocation assistance and benefits. Doing so is in violation of Minnesota state law. If your city is using a third-party company in an attempt to find a relocation benefits loophole, seek the advice of an eminent domain attorney.