Environmental Stigma Can Reduce Value of Property

Environmental Stigma Can Reduce Value of Property
Application of a 5 Percent “Standard” Stigma Devaluation for Contaminated Property Upheld by Pennsylvania Supreme Court
Summary
In a case that will have an impact on the owners of property that has been devalued as a result of environmental conditions, the Pennsylvania Supreme Court recently agreed that contaminated real estate could be appraised at 5 percent less than its unimpaired fair market value. This case provides helpful authority for those seeking to sell contaminated property or those defending against environmental property damage claims, especially where, as here, a seller or defendant is under a standing obligation to remediate or cure the environmental harm.  This case will also be helpful for those owners of contaminated real estate where such property has been appraised for tax purposes at full value.  Municipal governments ought to take note of this case as it will have an immediate impact on the value of certain properties within their jurisdictions.
 
In Harley Davidson Motor Company v. Springettsbury Township, et al., slip op. (September 29, 2015), the Pennsylvania Supreme Court upheld a property appraiser’s opinion valuing contaminated property at fair market value minus 5 percent for environmental “stigma,” which the appraiser described as “standard practice in the appraisal community.”  
 
Harley Davidson had challenged its property tax assessment, arguing that the county had ignored the high cost to cure environmental contamination.  The Court held that the county’s appraiser did not need to account for the cost-to-cure because Harley Davidson had already agreed to clean up the contamination.  In so doing, the court considered the county appraiser’s testimony that 5 percent stigma devaluation is “standard practice in the appraisal community,” ruling that Harley Davidson’s objection that this number lacked foundation went to the appraiser’s credibility and not the admissibility of his testimony.
 
While this case recognizes that stigma can cause devaluation, sellers of contaminated property and defendants in property contamination cases can leverage the 5 percent diminution opinion in this case to assert that stigma damages are relatively insubstantial. 
 
If you would like more information about how to address the financial impact of contamination on property, these Saul Ewing Environment and Natural Resources attorneys would be happy to assist you:
 
Joel Burcat - 717.257.7506 • jburcat@saul.com
Pam Goodwin - 609.452.3109 • pgoodwin@saul.com
Randy Lutz - 410.332.8614 • rlutz@saul.com
John Snyder - 610.251.5079 • jsnyder@saul.com
Thomas Prevas - 410.332.8683 • tprevas@saul.com
Sean O’Neill - 215.972.7159 • soneill@saul.com
Carrie Tongarm - 412.209.2559 • ctongarm@saul.com
Megan Albright - 215.972.1088 • malbright@saul.com
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