Residential Real Estate:

Eminent Domain

What is Eminent Domain:

Eminent domain is the power possessed by the state over all property within the state, specifically its power to take property for public use. In most countries, including the United States under the Fifth Amendment to the Constitution, the owner of any land that was taken is entitled to reasonable compensation, usually defined as the fair market value of the property. Proceedings to take land under eminent domain are typically referred to as "condemnation" proceedings.

Eminent domain law and legal procedures vary, sometimes significantly, between jurisdictions. Usually, when a unit of government wishes to acquire privately held land, the following steps (or a similar procedure) are followed:

  • The government attempts to negotiate 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 to the government's claims.

  • 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.

There are several types of takings which can occur through eminent domain:

Complete Taking: In a complete taking, all of the property at issue is appropriated.

Partial Taking: If the taking is of part of a piece of property, such as the condemnation of a strip of land to expand a road, the owner should be compensated both for the value of the strip of land and for any effect the condemnation of that strip has on the value of the owner's remaining property.

Temporary Taking: Part or all of the property is appropriated for a limited period of time. The property owner retains title, is compensated for any losses associated with the taking, and regains complete possession of the property at the conclusion of the taking. For example, it may be necessary to temporarily use a portion of an adjacent parcel of property to complete a construction or highway project.

Easments and Rights of Way: It is also possible to bring an eminent domain action to obtain an easement or right of way. For example, a utility company may obtain an easement over private land install and maintain power lines. The property owner remains free to use the property for any purpose which does interfere with the right of way or easement.

Fair value is usually considered to be the fair market value, meaning that it is the highest price somebody would pay for the property, if it were in the hands of a willing seller. The date upon which the value is assessed will vary, depending on the governing law. If the parties do not agree on the value, they will generally utilize appraisers to assist in the negotiation process. If the case is litigated, both sides will ordinarily present expert testimony from appraisers as to the fair market value of the property.