I’ve had a few calls recently from individuals and companies affected by land acquisitions for large scale public projects. In some cases, the authority doing the work has expropriated land (or will be expropriating land) and the issue of compensation for “disturbance damages” has come up. What are “disturbance damages”, and how do you calculate them?
Compensation – The Statutory Entitlement
According to s. 31 of the Expropriation Act, the “basic formula” for calculating compensation is “the market value of the owner’s estate or interest in the expropriated land plus reasonable damages for disturbance…”
“Reasonable damages for disturbance” (or, simply, “Disturbance Damages”) are defined in s. 34 of the Act as “reasonable costs, expenses and financial losses that are directly attributable to the disturbance caused to the owner by the expropriation.”
A simple example in a situation where your home has been expropriated is the cost associated with packing up your belongings and moving them to a new house. That is a cost that you would not have incurred if the expropriation did not take place, and it is clearly “directly attributable to the disturbance caused to the owner by the expropriation”. As a result, you are entitled to claim that cost under the heading of “Disturbance Damages.”
Where an expropriation involves a partial taking, or where a business is forced to relocate as a result of an expropriation, the calculation is not always so simple. In some cases, a business can relocate efficiently, with little or no change to the bottom line (other than the moving costs). In other cases, however, there may be increased costs or reduced income, or both – as a result of the relocation of the business. In these kinds of cases, Disturbance Damages may include business losses.
When considering the issue of Disturbance Damages, it is important to remember that the onus of proving a claim for Disturbance Damages is on the party making the claim – so if you are a homeowner or the owner of a business affected by an expropriation, it is important to keep detailed records of the effect of the expropriation on your property or on your business. If you think the effect of the expropriation on your business will be significant, you may want to get some legal and/or financial advice to assist you in (a) reducing the extent of the losses, if possible, and (b) keeping the right kinds of records to assist you in a potential claim in the future.
Since the duration and extent of business losses are rarely known at the time of relocation, the act requires a business owner to wait a minimum of 6 months before making a claim for Disturbance Damages (see s. 34(3) of the Act).
It is important to recognize that the analysis and calculation of Disturbance Damages can be complex – where the claim is substantial, an expert opinion from a financial and/or accounting expert may be needed to establish the change in the financial condition of the company, so that the Court can assess damages. There may be other complicating factors – for example, what do you do when a newly established business is expropriated? What about a very old business where the owner is close to retirement? As with so many things in the litigation world, assembling the right “team” of professionals at an early stage will play a key role in constructing a successful claim for Disturbance Damages.