UPDATES & ANALYSIS

Lay Landowner Cannot Testify About Specific Comparable Sales to Support the Valuation of His Land Without Expert Testimony, Iowa Supreme Court Rules

by Spencer Cady | May 6, 2022

Iowa has long recognized what is know as “the property owner rule,” which permits a landowner to testify as a non-expert in condemnation cases about the landowner’s opinion of the value of its own property. Iowa has also long recognized that property values can be supported by the prices paid in comparable land sales.

The Iowa Supreme Court confronted the intersection of these two rules in addressing whether a landowner, as a non-expert, can support its opinion on the value of its own land with comparable sales of developed commercial property in Rausch v. City of Marion, Iowa.

In Rausch, the City of Marion condemned part of the landowner’s undeveloped land for a road.  The parties disagreed on just compensation for the taking. At a trial before the district court, the landowner, who was not an appraiser or valuation expert, testified about his opinion of the value of the subject property and attempted to support his valuation with three specific other land sales that he claimed were comparable.

The district court excluded the landowner’s testimony about the other land sales on the basis that the landowner lacked personal knowledge of the other sales and that the testimony was hearsay. The Iowa Court of Appeals affirmed on the ground that the landowner lacked personal knowledge of the comparable sales.

Although the Iowa Supreme Court disagreed that the testimony was inadmissible for lack of personal knowledge and hearsay, the Court affirmed the district court’s exclusion of the landowner’s testimony on the basis that the landowner was not qualified to testify that the other sales were comparable. The Court noted that real estate sales records are public and are readily admissible through an exception to the hearsay rule. The Court found the landowner in this case had sufficient personal knowledge of the land sales through his personal review of public land records and by personally visiting the properties. The Iowa Supreme Court, however, ruled that landowner’s testimony on whether the other land sales were comparable was inadmissible because he was not qualified as an expert. The determination of whether developed commercial property was comparable required various adjustments for valuation purposes, which required expert knowledge, said the Court. The landowner, a former restaurant manager with limited commercial real estate experience, was not qualified to testify about whether specific sales of developed commercial property were comparable to the property at issue in the case.

The Court did not, however, establish a definitive rule prohibiting all landowners from using comparable sales to support the valuation of their own land. The Court noted that a landowner could potentially provide testimony about comparable sales if technical or specialized knowledge is not required – but such determination must be made on a case-by-case basis, the Court ruled.