Eminent Domain (Condemnation)
Although the
government's power to condemn private property is expansive and even
expanding, the property owner is not without tools with which to contest
the condemnation or maximize the "just compensation" to which the owner
is due.
“. . . nor shall private property
be taken for public use
without just compensation.”
U.S. Const. amend. V
Eminent Domain
is the power of the government to seize and take private property for
public use without the owner’s consent, but for which the owner is
entitled to “just compensation.”
Historically,
the power of eminent domain (also known as “condemnation”) has been
exercised by federal, state and local governments to construct large
public projects such as roads, dams, airports, drainage systems, and
military installations. More recently, governments have broadened
their power of eminent domain to acquire property not just for “public
use” but also for “public benefit.”
For example, in Kelo v. City of New London, the United States
Supreme Court established that a city could seize private property to
further the City’s economic development, the “public benefit.” Upholding
the City’s decision to condemn a neighborhood so that a new mall could
be built, the Kelo Court found that the proposed economic
project constituted a proper public use because it would create new
jobs, increase tax and other city revenues, and revitalize a blighted
urban area.
Challenging the “Taking” Decision
Cases like Kelo notwithstanding,
the courts recognize that this extraordinary power of the state must
comply with and be subordinate to the constitutional rights of the
landowner.
The
owner of private property targeted for condemnation can attack the
condemnation in two ways. First, the owner can challenge the
condemning authority’s “taking” decision. This may be done by
showing that the proposed project does not qualify as “public use,” or
by showing that the subject property is not “necessary” for that
use. As discussed above, “public use” is broadly defined and now
includes the concept of “public benefit.” If the condemning
authority can articulate the public use or benefit and its authority for
the taking, most courts will give the authority wide leeway to
proceed. The second way to defeat the taking is by showing that
the condemning authority failed to act appropriately in its
pre-litigation actions, or delay the project to the point that the
public use benefit is diminished.
“Fair and Just Compensation”
Upon a finding that the taking is a legitimate exercise of authority,
the condemning authority must still pay the landowner “fair and just
compensation.” The amount of just compensation to which the owner
is constitutionally entitled is often and generally measured in terms of
the fair market value of the property.
“Fair market value” is determined by looking at a variety of
factors: the cost of replacing the property being taken; its
income-producing capacity; or the price paid for a comparable property
in the market place. Importantly, the owner is entitled to “just
compensation” based upon the highest and most profitable use for which
the property is suited (whether or not the property is currently being
used for that purpose).
For example, a residence located at a busy intersection may have a
“highest and best use” as commercial property; the fair market value of
the property should then be determined based upon this potential use if
there is a reasonable possibility that the property can be rezoned for
that use. For this reason, alternate uses to which a property may
be adapted should be carefully reviewed in a condemnation proceeding.
In a condemnation proceeding, the determination of “fair market value”
frequently involves a “battle of experts” involving real estate
appraisers or others. The owner may also testify and express his
or her opinion as to the fair market value of the property.
North Carolina Procedure
In North Carolina, state agencies, municipalities, school districts,
utility companies and airport authorities all use condemnation to
acquire the lands necessary for their public use
projects. When a governmental branch decides it needs
to acquire property for a public project, a "right-of-way agent,” or a
real estate appraiser hired by the government, typically contacts the
owner of the subject property. The right-of-way agent will make an
offer to purchase the property based on the government’s
appraisal. The property owner may accept the initial offer or
reject the offer in favor of negotiating a better price -- the property
almost always has a greater fair market value than stated in the
government's initial appraisal.
If the parties cannot reach an acceptable negotiated settlement, the
government can, in most cases, acquire the property by filing a lawsuit
and depositing with the clerk of court the amount the government
estimates to be just compensation. The property owner can then
withdraw this deposit without forfeiting the right to claim additional
compensation. Moreover, if the property owner is displaced by the
public project, the owner may be entitled to receive relocation benefits
including moving and other related expenses.
The condemnation of one’s property can be an emotional and highly
stressful process that may take years to resolve. And like
property itself, each condemnation is unique. Retaining an
experienced eminent domain attorney to assist in the negotiations and
condemnation process is almost a prerequisite. The attorney will
be able to advise the owner as to the viability of contesting the taking
altogether, or maximizing the “just compensation” the owner receives in
the process, by attending to the myriad issues involved in a
condemnation.
At Marshall Roth & Gregory our lawyers have been on both sides of
the condemnation litigation process. When faced with a potential
eminent domain event, we strongly urge you to contact a lawyer of your
own choosing who is well versed in condemnation.
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