California’s Eminent Domain Law — unlike the laws of most other states — provides that a business owner may be entitled to any loss of business “goodwill” caused by the taking of property on which the business is located. Business “goodwill” is defined in the Eminent Domain Law as:
“The benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in the probable retention of old or acquisition of new patronage.”
Generally, goodwill is valued based on the sustainable income flow generated by the business. How that income translates into goodwill value is determined through experienced eminent domain business appraisers. Generally, value varies based upon factors such as length of time in business, nature of the industry, customer base, economic conditions, reputation, security of occupancy, nature of the business’ fixed assets, and risk associated with the business. Some businesses possess no goodwill value. Others may possess thousands or even millions of dollars of goodwill value.
It is very important in eminent domain cases to work with business appraisers who are experienced in eminent domain valuations. Experienced eminent domain counsel, such as California Eminent Domain Law Group, can refer the business owner to these appraisers with whom they work on a regular basis. Hiring inexperienced eminent domain counsel or an appraiser inexperienced in eminent domain matters can be a very costly mistake.