Eminent domain is the government’s authority to take control of a private property for public use, with payment of compensation. The law authorizes various government bodies, such as the local municipal body, government subdivisions and authorized third parties, to take a private property and devote it to public use such as constructing government facilities and buildings, public utilities, highways, and railroads. In return, the property owner has the right to receive a “just compensation”. Apart from taking tangible real estate, the government can also claim intangible assets, such as contract rights, patents, trade secrets, and copyrights. Though the eminent domain law has been in existence for decades, most property owners have limited knowledge about the peculiarities of the law. To clear the smokescreen, this blog post discusses the finer lines of the law.
What Constitutes a “Just Compensation”?
The Fifth Amendment to the US Constitution defines just compensation as the highest price a buyer would pay to acquire the property in question, also known as the ‘Fair Market Value’, or FMV for short. The property’s market value also depends on its best (most profitable) current and future uses.
The “Takings” Clause
The “Takings” clause of the Fifth Amendment governs the eminent law. The clause only applies to private properties and the government is not liable to pay any additional compensation in case it decides to change the use of an acquired public asset. For instance, the government is not obliged to pay any compensation to visitors in case it decides to build a public bus stop on a park. The neighboring landowners however, can file a lawsuit if they believe the new use infringes their rights.
Condemnation and Inverse Condemnation
Condemnation is the step-by-step process the government follows while acquiring a private property. The property owner can file a reverse condemnation suit against the government if it fails to pay compensation according to the 5th Amendment. The owner can also file a case if the government engages in certain conducts, such as constructing an airstrip next to the property or polluting the water flow to the property or any other act that violates the property owner’s rights.
State laws determine the entities or bodies that decide the compensation amount. In most cases, a commission comprising of local real estate experts performs this role. That said, the decision of the decision is not binding. The property owner believes they haven’t been granted a “just compensation”, they can challenge the commission’s decision.
The process starts by the government finalizing a property that it can use for public utility. Next, the government offers a price to the owner. If there is a deadlock, the government may initiate the condemnation process. However, before the acquiring body initiates the process, it has to send a notice to the property owner.
Owners are entitled to receive extra compensation if the acquisition leaves the remaining property in violation of zoning regulations. Owners can also file for added compensation if the acquisition has a negative impact or restricts access to the property. In addition, owners whose business interests take a hit due to eminent domain can also file for extra compensation, even if the real estate prices go down. For instance, if the owner has to relocate their property due to eminent domain, the relocation cost must be covered by the acquiring authority.
Just Compensation for Rented Properties
Tenants renting the property are eligible to receive compensation to offset any damage to business goodwill, fixtures and equipment and the relocation costs. If the lease includes a condemnation clause, the renter is required to share the compensation with the property owner, according to the terms and conditions of the contract.
Property Possession before the FMV is Determined
To gain the possession of the property before the valuing committee arrives at a fair market value, the acquiring body can submit a notice in a court of law of its intent. The body will then send a notice to the owner, informing about the hearing date. The judge base the decision to grant possession after balancing the hardships of the parties and other dynamics involved.
Eminent domain law has numerous clauses and subclauses. Therefore it’s important that you work with a reputable attorney who can help protect your interests. At Evertson & Sanchez, PC, we follow transparent rules and policies and work towards securing client interests. Whether you need legal help on interpreting Texas Property Tax Code, relevant case law, or are looking for consultation services to understand public law issues, we’re here to help. To learn more, call us at (512) 323-0797, or fill out our contact form and we’ll get back to you, shortly.