Updated September 28, 2026
Metro needs eleven feet off the back of your lot for a rail easement. You didn't offer to sell it, and you don't get to say no. What you get is a condemnation award and a building that now sits on a smaller, differently-shaped parcel — and if you're planning to sell that building, both of those facts follow you into the listing.
A full taking condemns the entire property and ends your ownership. A partial taking condemns a strip, a corner, or a setback and leaves you owning the rest. Rail and transit corridors, road widenings, and utility easements are the common triggers in LA. The government pays "just compensation" for the portion taken and, where the remaining property loses value because of the taking, compensation for that severance damage too. What's taken and what's paid are two separate calculations, and the second one is where owners are most often shortchanged if they don't push back.
Parking count. LA multifamily parking ratios are already tight against code. A lot that loses depth or width to a taking can lose parking spaces it can't easily replace, which affects both current compliance and what a buyer can do with the site later.
Unit count and setbacks. If the taking pushes the remaining structure closer to a new property line than current setback rules allow, the building can become legally nonconforming — still fine to own and operate, but a constraint on what future work is permitted without a variance.
Buildable envelope. A smaller or reshaped lot changes what a buyer's land-use consultant will model for future redevelopment potential, which is part of how sophisticated buyers price a site even when they're not planning to redevelop immediately.
Sellers sometimes treat a completed taking as old news once the compensation check has cleared. It isn't. A buyer's title search and survey will surface the taking regardless, and a seller who discloses it plainly and early avoids the buyer treating it as a surprise found during diligence — which reliably produces a harder renegotiation than a taking disclosed upfront ever does.
A condemnation award is proceeds from an involuntary conversion, which means it can potentially be deferred under a 1033 exchange rather than treated as ordinary taxable gain — a different mechanism from the 1031 exchange most LA owners already know. See what a 1033 exchange is and when it applies for how that works and how it differs from a voluntary sale. If the taking also damaged the structure itself, the same 1033 framework can apply to that portion of the proceeds as well.
Get the compensation calculation reviewed. Just compensation and severance damages are negotiable, and government agencies do not volunteer the higher number. Independent counsel experienced in condemnation, not the agency's appraiser, should size the award before you accept it.
Update your survey and title before marketing. A buyer's lender will require a current survey, and your owner's title policy will need to reflect the new legal description. Do it before you list, not after an accepted offer stalls waiting on it.
Reframe the story for buyers, don't bury it. A building on a lot that lost eleven feet to a rail easement is not a damaged asset — it's a building with a specific, disclosed, and already-compensated change to its footprint. The full sale process, from pricing through close, is covered in how to sell an apartment building in Los Angeles.
A partial taking is a disruption you didn't choose, but it isn't a defect you need to hide, and it isn't a reason to delay a sale once the compensation and the documentation are settled. What sinks a deal isn't the taking itself — it's a seller who treats the check as the end of the story and lets the buyer discover the rest.
Does the government have to pay me for a partial taking, not just the land it takes?
Yes, in principle. Just compensation covers the value of the portion taken, and where the remaining property is worth less because of the taking, severance damages cover that loss too. Both figures are negotiable and worth independent review.
Do I have to tell a buyer about a taking that already happened and was already paid?
Yes. A completed taking shows up in title and survey work regardless, and disclosing it upfront prevents it from being treated as a diligence surprise.
Can I defer tax on a condemnation award the way I would on a 1031 exchange?
Often yes, through a 1033 exchange, which applies to involuntary conversions including condemnation. The mechanics and deadlines differ from a standard 1031 — confirm specifics with your CPA.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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