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.