The Wisconsin Supreme Court held in 260 North 12th Street, LLC v. Wisconsin Department of Transportation that evidence of contamination is admissible in valuing property for condemnation purposes. 2011 WI 103. Joining what the Chief Justice in her concurrence referred to as a “slim majority” of jurisdictions to have considered the issue, the Court held that circuit courts have the discretion to allow evidence of contamination to be admitted to determine the fair value of condemned property.
The Court left unresolved interesting questions about the effect of paying contamination-reduced condemnation value on the State’s ability to sue the former owner for remediation. While it is obvious enough that a hypothetical buyer of contaminated property would take remediation costs into account in the offering price, it is less obvious that an open-market sale would result in a transaction that would allow the purchaser to sue the seller for remediation costs. If the contamination is fully disclosed and the clean-up cost incorporated into the sale price, one might expect the hypothetical transaction to include a promise by the buyer to hold the seller harmless for the contamination. If a similar protection is not available vis-à-vis the condemning authority, just compensation may have to account for this difference between a government-compelled sale and the amount for which the property could be sold in an arms’ length transaction on the open market.