When the State condemns private property pursuant to eminent domain, it must pay the property’s owner “just compensation,”1 and if the “property sought to be condemned constitutes only a part of a larger parcel,” the State must include severance damages in the “just compensation”2 owed. Until recently, it was unclear whether the State had to pay severance damages if “the property sought to be condemned” was a nonpossessory property right in the land being condemned, such as an easement,3 rather than physical real property. However, in January, the Arizona Supreme Court clarified the issue in State of Arizona, et al. v. Foothills Reserve Master Owners Association, Inc.,4 holding the State must pay severance damages when it condemns appurtenant easements and certain other nonpossessory property rights.5

Case Summary

Foothills Reserve arose from the State’s 2017 condemnation of certain common areas and easements owned by the master-planned Foothills Reserve Community in Phoenix, Arizona (“Community”). The Community’s homeowners association, the Foothills Reserve Master Owners Association (“HOA”), owned and maintained the common areas for the Community’s homeowners’ use, which included two desert parcels that the homeowners could enjoy. Accordingly, the Community’s Declaration of Covenants, Conditions, Restrictions and Easements granted the homeowners both positive and negative easements6 in the common areas. Specifically, the negative easement in the common areas restricted the property’s use to undevelopable open space.

After the State sued to condemn the common areas and easements to construct the Loop 202 South Mountain Freeway in 2017, the parties stipulated to condemnation of the common areas in exchange for $6.5 million paid to the HOA. However, the parties continued to litigate the compensation issue because the State disputed the homeowners’ entitlement to additional compensation for losses in home value caused by the homes’ proximity to the new freeway.7 In 2022, the Maricopa County Superior Court granted judgment to the HOA on behalf of the homeowners for $18 million, plus interest in costs. However, in December 2023, the Arizona Court of Appeals reversed the decision of the Superior Court and excised the $12 million that was at issue in the appeal.8 The HOA then petitioned the Arizona Supreme Court for review, and on January 28, 2025, the Supreme Court vacated the Court of Appeals’ opinion and ruled in favor of the HOA and the homeowners in Foothills Reserve.

The Court’s Ruling

The Supreme Court’s judgment centered on its interpretation of A.R.S. § 12-1122(A)(2), the statute that requires the State to pay severance damages if “the property sought to be condemned constitutes only a part of a larger parcel.”

In reaching its judgment for the homeowners and HOA, the Court made several conclusions. First, nonpossessory interests in land, including easements like the homeowners’, can form “part of a larger parcel” of land. Second, appurtenant easements, like the homeowners’, are part of a larger estate and are therefore severed from “a larger parcel” when condemned, whereas easements “in gross”9 are neither part of a larger estate nor severed from a “larger parcel.” And third, although the homeowners’ appurtenant easements were not related to ingress or egress, no language within A.R.S. § 12-1122(A)(2) limits recovery of severance damages to easements related to ingress and egress.

The Court also created a new two-part test for determining whether a property owner is entitled to severance damages:

  1. First, it must consider whether the condemned property (1) constitutes a portion of a single parcel, or (2) forms part of a “larger parcel” with a separate, distinct parcel owned by the property owner, considering the “unities of use, ownership, and contiguity” between the condemned property and the separate, distinct parcel owned by the property owner.
    1. If the answer to both (1) and (2) is no, the inquiry ends and the property owner is not entitled to severance damages.
  2. However, if the answer to either (1) or (2) is yes, the court must consider whether the condemnation or any improvements built on the  condemned property injured the remaining portion of the parcel of land.
    1. If the answer is yes, the property owner is entitled to severance damages.
    2. If the answer is no, the property is not entitled to severance damages.

Consequently, after Foothills Reserve, property owners can receive severance damages for condemned land or nonpossessory property rights if the following elements are met: (1) the land or nonpossessory property rights constitute “a portion of a single parcel” or “part of a ‘larger parcel’ with a separate, distinct parcel owned by the same owner; and (2) “the condemnation or any improvements built on the condemned property injured the remaining portion of the parcel of land.”

Key Takeaways

  1. Foothills Reserve provides a new test for determining whether a property owner is entitled to severance damages for property condemned by the State;
  2. Property owners can receive severance damages for condemned nonpossessory property rights, not just condemned land;
  3. Although owners of condemned, appurtenant easements may be entitled to severance damages, owners of condemned easements “in gross” are never entitled to severance damages;
  4. Entitlement to severance damages is not limited to easements for ingress and egress; and
  5. If there are “unities of use, ownership, and contiguity” between the condemned property and” a separate, distinct parcel owned by the same property owner,” the property owner may still be entitled to severance damages even though the condemned property is not part of a single parcel.

____________________________

1 See Ariz. Const. art. 2, § 17; A.R.S. § 12-1122(A)(2).
2 “Severance damages compensate an owner whose property has been taken for any reduction in the fair market value of remaining property not taken.” Catalina Foothills Unified Sch. Dist. No. 16 v. La Paloma Prop. Owners Ass’n, Inc., 238 Ariz. 510, 516, ¶ 21 (App. 2015).
3 An “easement” is “[a]n interest in land owned by another person, consisting in the right to use or control the land, or an area above or below it, for a specific limited purpose (such as to cross it for access to a public road).” See Easement, Black’s Law Dictionary (12th ed. 2024).
4 State of Arizona, et al. v. Foothills Reserve Master Owners Ass’n, Inc., ___ Ariz. ___, 562 P.3d 866 (2025) (slip copy), https://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2025/CV230292PR.pdf (last accessed Feb. 23, 2025) [hereinafter, “Foothills Reserve”]
5 An “appurtenant easement” involves two parcels of land: a “servient estate,” which is burdened by the easement, and a “dominant estate,” which benefits from the easement.” See Foothills Reserve, 563 P.3d at 876, ¶ 38. “Appurtenant easements are created to benefit the dominant estate owners’ use of their land” and “run with the land.” See id.
6 A positive easement creates “a nonpossessory right to enter and use land in the possession of another and obligates the possessor not to interfere with the uses authorized by the easement.” See Restatement (Third) of Property (Servitudes) § 1.2 (2000). A negative easement “limits permissible uses of land.” Id. at § 1.3(3).
7 This compensation is known as “proximity damages,” which is a category of severance damages. See Foothills Reserve, 562 P.3d at 871, ¶ 13 (“[P]roximity damages [] occur[] when the remaining property is in close proximity to a newly built improvement on the condemned property,” like the freeway in Foothills Reserve).
8 The superior court required the State to pay $6 million immediately regardless of the outcome of the State’s appeal. See id. at 870, ¶ 7; see also State v. Foothills Reserve Master Owners Ass’n, Inc., 256 Ariz. 476 (App. 2023), vacated by Foothills Reserve, 562 P.3d 866.
9 “An easement in gross is a personal privilege that grants the holder the right to use s

By using this site, you agree to our updated Privacy Policy.