Contaminated properties, trespass, and underground rents

Abstract

PurposeThis paper seeks to extend the literature on property damage assessment by incorporating the right of exclusion as a compensable component to damages. The paper aims to go on to illustrate methodologies to estimate as a rent this damage component.Design/methodology/approachThe authors develop a conceptual framework from which to examine the value of underground storage space with special reference to situations in which migrating contamination from commercial operations have invaded private real property. Specifically they view this invasion as a compensable violation of the right of exclusion. This underground storage analysis uses the three approaches common to traditional appraisal (income, sales and cost) to estimate the value of underground storage caused by migrating contamination.FindingsConceptually the paper finds that underground storage can be easily valued with existing appraisal methods. Using contamination scenarios paired with actual market data from the South‐Eastern USA, the paper shows an example of each of the three methods for valuation. It concludes by reconciling the estimated values and supply additional issues to consider when valuing underground storage.Practical implicationsContaminated properties analysis and damages have focused on the right of transfer when estimating damages to real property. Other portions of the bundle of rights also require examination.Originality/valueThis is the first discussion of underground trespass in relation to contaminated property coupled with an empirical example to address the right of exclusion and estimated rents due for use of adjacent properties as a storage facility.