Eminent Domain
Eminent domain refers to the power possessed by the state over all property within the state, specifically its power to appropriate property for a public use. In some jurisdictions, the state delegates eminent domain power to certain public and private companies, typically utilities, such that they can bring eminent domain actions to run telephone, power, water, or gas lines. The Fifth Amendment to the United States Constitution allows the government to take private property if the taking is for a public use and the owner is "justly compensated" (usually, paid fair market value) for his or her loss. A public use is virtually anything that is sanctioned by a federal or state legislative body, but such uses may include roads, parks, reservoirs, schools, hospitals or other public buildings. This is sometimes called condemnation, taking or expropriation.
Steps Taken
- Negotiation of the purchase of the property for fair value.
- If the owner does not wish to sell, the government files a court action to exercise eminent domain, and serves or publishes notice of the hearing as required by law.
- A hearing is scheduled, at which the government must demonstrate that it engaged in good faith negotiations to purchase the property, but that no agreement was reached. The government must also demonstrate that the taking of the property is for a public use, as defined by law. The property owner is given the opportunity to respond.
- If the government is successful in its petition, proceedings are held to establish the fair market value of the property. Any payment to the owner is first used to satisfy any mortgages, liens and encumbrances on the property, with any remaining balance paid to the owner. The government obtains title.
- If the government is not successful, or if the property owner is not satisfied with the outcome, either side may appeal the decision.
Eminent Domain can involve the complete taking, partial taking, temporary taking or the taking for easements/right of way. Fair value is usually considered to be the fair market value - that is, the highest price somebody would pay for the property, were it in the hands of a willing seller. If the case is litigated, both sides will ordinarily present expert testimony from appraisers as to the fair market value of the property.
At times, fair value includes more than the price of an item of property or parcel of real estate. If a business is operating from the condemned real estate, the owner is ordinarily entitled to compensation for the loss or disruption of the business resulting from the condemnation. In a minority of jurisdictions, the owner may also be entitled to compensation for loss of "goodwill", the value of the business in excess of fair market value due to such factors as its location, reputation, or good customer relations.
Ordinarily, a government can exercise eminent domain only if its taking will be for a "public use" - which may be expansively defined along the lines of public "safety, health, interest, or convenience". Perhaps the most common example of a "public use" is the taking of land to build or expand a public road or highway. Public use could also include the taking of land to build a school or municipal building, for a public park, or to redevelop a "blighted" property or neighborhood.
In recent decades there has been growing concern about the manner in which some states and units of government exercise their power of eminent domain. Some governments appear inclined to exercise eminent domain for the benefit of developers or commercial interests, on the basis that anything that increases the value of a given tract of land is a sufficient public use. Critics respond that this is absurd, and that there are few properties, no matter how upscale, which could not be made more valuable if developed in a different manner. They also note that if a developer is unable to purchase the property on the open market, it is unlikely that the landowners will truly be offered the value of the property through condemnation proceedings. The governmental response to that point is that the law of eminent domain arose from the experience that some property owners are unwilling to negotiate a reasonable sale price, and such unreasonableness should not provide a basis to extort an above-market price or to prevent the completion of a public project.