Eminent Domain

Eminent domain is a right granted by the Fifth Amendment to the U.S. Constitution, which gives the government the right to take private property for the public good. If you visit your childhood home and find it replaced with a strip mall or widened road, eminent domain may be at work.

The Fifth Amendment declares that private property can be taken for public use if compensated. As long as a fair price is set, roads, courthouses, schools, and utilities can be built on private property. Private commercial development that is considered beneficial to the community can sometimes be built on other people's land as well.

Initially, eminent domain was mostly used for large-scale public works projects. The government's use of the eminent domain to accomplish necessary development for the country's benefit is best illustrated by building the freeway system after World War II.

Even so, the eminent domain issue has remained a thorny one, pitting the individual's rights against those of a government that is, at least theoretically, working for the greater good.

In the early 1980s, the Michigan Supreme Court ruled that more than 1,000 homes and 600 businesses could be torn down to build an auto plant for General Motors. The town where the plant was built did not experience the economic boom developers anticipated. The high court reversed the GM ruling over 20 years after the homes and businesses were demolished, which can only be described as a “too little, too late” decision.

Using eminent domain for schools, roads, and courthouses has given way to developers looking to build condos and outlet malls. A landmark Supreme Court decision in 2005 set the stage for even broader definitions of “public good.”

The process a government agency must follow to obtain your property through a case of eminent domain is usually determined through statutes in your state.

When a government agency is interested in acquiring your property through eminent domain, they will:

• Make initial contact to express an interest in your property
• Arrange for an appraisal of your property

After the appraisal is completed, you will be provided with a copy of the appraisal and an offer to purchase your property.

Condemnation is the legal term for eminent domain. State laws vary, but the basic steps are the same. When the local government needs a parcel of land or a building, it contacts the owner to negotiate a price.

Pro Tanto Award

Usually, after the government has determined that they will take your land via eminent domain, the government will appraise your property. They will then send you a notice with a pro tanto award. A pro tanto award is an offer on your property based on the appraisal. Most people accept the pro tanto award, but you don't have to. Consult a real estate attorney to determine if you should accept or reject a pro tanto award.

What Happens After I Receive an Offer for My Property?

A public hearing is held for the agency to justify why your property must be taken after an offer is made. Usually, the agency must demonstrate:

• Your property is required for a public project
• The greatest benefit to the public will be where your property is at
• They have made an offer to you

When the landowner agrees to the sale and price, the government issues payment, and the landowner relinquishes the deed. This is the easiest route.

Often, the property owner does not agree with the price. The two parties proceed to a hearing to determine what “fair value” is. Attorneys and appraisers are involved, and the property owner can request a jury trial.

Occasionally, the property owner refuses to sell. If that occurs, the government files a court action and posts a notice of the hearing. During the hearing, the government must demonstrate that it tried negotiating the sale and that the takeover is for public benefit. Both sides can appeal the decision.

Land taken by the government is referred to as a taking. Several types of takings exist. A complete taking is when the entire property is taken. Partial takings may be used when only a portion of the property is required. In this case, the owner must be compensated for both the value of the land and the depreciation of the remaining property. A temporary taking is necessary if the property is used for a limited time. Owners are compensated for any losses that result from temporary taking but remain owners throughout. One way to apply for a temporary taking is to use private land adjacent to a public works project.

Right of way or easement taking is the final category. Technically, this refers to the right of someone to use someone else's property for a specific purpose, such as building a road or installing utilities. The land owner retains the use of the land but does not retain ownership.

A business owner evicted from a leased building is entitled to compensation. Normally, the tenant pays the lease value plus any improvements they make. The tenant can also seek payment for lost business.

What Happens After the Hearing Is Complete?

An eminent domain case will be filed in court when it is shown that your property is necessary for a public project. You can be certain of getting the best price for your property through a court proceeding:

• A government agency that wants to take your property will deposit the expected value with the court
• Before your case is heard in court, you and the government will hire appraisers to determine the fair market value of your property
• You will exchange appraisals and have the opportunity to settle
• If you do not settle, a jury will decide the fair market value

How Am I Compensated When a Portion of My Property is Taken?

If a portion of your property is taken by eminent domain, you are entitled to:

• Just compensation for the value of the property taken
• Any damage to your remaining property

Getting Paid

In the event of a settlement or jury verdict, the government agency must pay you within 30 days. The title to your property will then be transferred to the government.

Not Enough Compensation Offered

Government compensation for taking private property needs only to be “just.” According to the Supreme Court, “just” means the property's market value at the time of the compulsory taking. In any case, it may be wise to contest the amount offered since government agencies rarely offer fair market value on the first try. Bartering with the agency may increase the amount offered. The jury may decrease the compensation if the case goes to court.

Just Compensation in Eminent Domain Matters

According to the Constitution, the government cannot take your land, or a part of it, without just compensation. To receive “just compensation,” the government must pay you “the market value of the property at the time of compulsory taking” for the land they take from you and use for public purposes. Following a seizure of a person's property by the government, they usually appraise the property taken and notify the owner of the compensation they will receive.

Fair Market Value for the Property

If the government compensates someone for property taken, they will give the fair market value at the time of the taking. Appraisals determine fair market value. Comparative properties that were previously sold in the area will be compared to the property to be taken. In addition, the court will consider the following:

• The history of economic development in the area
• The proximity of the taken property to other properties with similar uses
• The existence of specific plans for the use of the land

The court will also consider location, frontage, depth, improvements, and previous prices for similar parcels. In addition, various federal, state, and local statutes help establish the property's fair market value. 

Severance Damages

Severance damages are compensation for damage caused by the severing of your property. As a general rule, severance damages are the amount of damage to the remainder of your land when you lose a portion. Damages can include:

• Loss or reduction of access to your remaining land
• Construction, maintenance, and use of the land taken, which reduce the value of your remaining land
• The aesthetic value of your remaining land is reduced because of the taking

Eligibility for Severance Damages

You are entitled to severance damages if taking your land reduces the value of your remaining land. Nevertheless, you may not receive severance damages if the value of your remaining land remains the same or increases due to the taking. You cannot speculate or factor in future value when calculating severance damages.

Alternatives to Eminent Domain

Local governments, developers, and landowners have found alternatives to eminent domain throughout the United States. Examples include:

• Negotiated Purchases: The private parties may meet and contract a sale of the property in question without the intervention of any government agencies. Hiring an experienced eminent domain lawyer is highly recommended for this type of transaction.

• Leases: The private parties may meet and agree to a lease where the existing landowner rents the property to the other party without the intervention of any government agencies.

• Joint Ventures: A joint venture allows the landowner to make a greater profit by participating as a co-developer. This can be completed without the intervention of any government agencies.

• Land Swaps: The developer can purchase another property that the landowner expresses interest in and then swap the properties. No government involvement is required.

Public Use

Private property can only be taken under eminent domain if the government can show that it will be used for a public purpose. Generally, the government is given a lot of latitude when it comes to determining what constitutes a public purpose. Likewise, courts are usually unwilling to question the reason the government cites for taking your land. For example, the government will seize someone's property to build a government building. In this case, this would be considered a government taking, and the government must provide the owner with compensation.

The government may only take property if it is used to serve the public's needs. The most common example is highways. Schools are another possibility.

In recent decades, however, there has been a shift in the definition of “public use.” In 2005, the federal Supreme Court broadened the definition of “public use” to include private companies such as oil companies, gas companies, and retail giants. The shift has not been without controversy.

Residents in Lakewood, Ohio, fought back when their government attempted to take away their homes to build expensive riverfront condominiums. Lakewood's mayor argued that the community couldn't survive without a stronger tax base. Any home without three bedrooms, two baths, central air conditioning, and an attached two-car garage was considered “blighted” by the government.

A total of 55 homes, four apartment buildings, and 12 businesses were threatened with demolition. Residents were outraged. 60 Minutes investigated and discovered that even the mayor's home was deemed “blighted.” The town rejected the development unanimously and was able to remove the mayor.

The Government Took My House, and a Shopping Mall was Built Over it by a Private Company. Is This Legal?

In 2005, the Federal Supreme Court ruled 5 to 4 that it was “public use” for governments to take property from one owner and give it to another. However, the decision proved immensely unpopular, and many states have passed laws or constitutional amendments restricting the use of eminent domain. In 2006, President Bush issued an executive order restricting the federal government's eminent domain powers to public use.

Property Damaged or Confiscated By the Police

The destruction or confiscation of property by the police during an investigation or pursuit of a criminal falls under the government's police powers, not its eminent domain powers. Yet, most states have policies requiring compensation for third parties whose property was damaged, destroyed, or taken by police.

Distinguishing Civil Forfeitures/Condemnation

If the police have reason to believe that you have committed a criminal activity on your property, they may have the right to seize your property. This seizure of property related to a criminal offense is called a civil forfeiture or condemnation.

The government may seize your property if they have reason to believe that the property was:

• Used during the commission of a crime; or
• Purchased with the proceeds from a crime or criminal activity.

Can the Police Seize My Property Through a Civil Forfeiture?

You need not be convicted of a crime to have your property seized by the police. For example, if a tenant or roommate has used your property in the commission of on-going drug sales or trafficking, your house may be seized. In a civil forfeiture, the government is not required to compensate the owner for taking the property.

Innocent Owner

The law provides an innocent owner with a defense to the property seizure. To prove that you are an innocent owner, you must show that your property was seized, but you had no knowledge that the property was being used for a criminal activity.