Owner of Unleased Commercial Property Can Testify about Its Fair Market Value

What Happened: A Texas owner paid $60,000 for a warehouse back in 1999. In 2014, he leased the property to a welding firm. After a short lease term, the building remained empty for several years with the owner steadily investing in improvements for future rentals. But in 2018, a transport company employee ruined his plans by running his truck into a telephone pole, starting an electrical fire that burned the entire place and everything in it to the ground. A jury found the company liable for the employee’s negligence and awarded the owner $500,000 in damages. The company appealed the liability part of the award, claiming there was no evidence of the building’s fair market value at the time of the fire.

Ruling: The U.S. Fifth Circuit Court of Appeals upheld the jury award.

Reasoning: The company acknowledged that the property had zero value after the fire and that damages should be based on its fair market value before the fire. As in many states, Texas defines fair market value as the price a property will bring when offered by a seller under no compulsion to sell and purchased by a buyer with no compulsion to buy. Although the place wasn’t being leased at the time, the owner and his wife testified that it was worth between $600,000 and $650,000. The company cried foul, but the court said that under Texas rules, an owner’s testimony is valid evidence of a property’s fair market value, as long as it’s based on objective evidence. The owner’s testimony in this case was based on previous rentals and wasn’t just speculative. So it was reasonable for the jury to rely on his valuation, the court concluded.  

• Long v. Faenas Transp., L.L.C.: 2021 U.S. App. LEXIS 32753, 2021 WL 5119717