{"id":46827,"date":"2013-08-12T08:00:40","date_gmt":"2013-08-12T14:00:40","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=46827"},"modified":"2024-05-31T08:29:49","modified_gmt":"2024-05-31T14:29:49","slug":"2013-08-12-eminent-domain-real-estate-investors","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2013-08-12-eminent-domain-real-estate-investors","title":{"rendered":"Eminent Domain: What to Do When the Government Tries to Steal Your House"},"content":{"rendered":"

Did you know that the government has the power to legally take your property from you?<\/p>\n

That power is called “Eminent Domain<\/a>” and it is derived from the Fifth Amendment to the US Constitution which says in part \u201c\u2026nor shall private property be taken for public use without just compensation.\u201d\u00a0 This short clause gives all governments, federal, state and local, the power to take your property through a process called condemnation.\u00a0 However, your property has to be taken for a \u201cpublic purpose\u201d and they have to pay you \u201cjust compensation.\u201d\u00a0 Let’s examine this a little closer.<\/p>\n

Modern Day Eminent Domain<\/h2>\n

The term \u201cpublic purpose\u201d has been greatly expanded in scope in recent years.\u00a0 It used to mean that the government could only take your private property for a truly public purpose, such as building or widening a road, building a school or senior center, utility rights-of-way, things that most would say are traditionally public purposes.\u00a0 The relatively famous Supreme Court Case known as Kelo<\/a> significantly broadened the definition of \u201cpublic purpose.\u201d<\/p>\n

In the Kelo Case, the Supreme Court ruled that \u201ceconomic development\u201d is a public purpose.\u00a0 In other words, increasing the tax base is a public purpose.\u00a0 What does that mean to you?\u00a0 Let’s say you have a single family home that your family has lived in for generations.\u00a0 A developer comes along and wants to build a shopping center, high rise office building, casino or what ever – and needs your land but you do not want to sell.\u00a0 The Kelo ruling means that the government can now take your property and give it to the developer for the so called “public purpose of economic development.”\u00a0 There are variations from state to state, but this is perfectly legal.<\/p>\n

But they have to pay you for it right?\u00a0 That is what that phrase \u201cjust compensation\u201d means, right?\u00a0 Yes, that is correct. The government cannot simply take your land without paying you, but how is \u201cjust compensation\u201d arrived at?\u00a0 It is supposed to be the highest price for the best and most profitable use of the land.\u00a0 But who will decide that?\u00a0 Let’s take the example above.\u00a0 Should \u201cjust compensation\u201d reflect the value of the single family home or should it reflect the value of the new shopping center?\u00a0 Which value do you think the government utilizes?\u00a0 Yep, the single family home value is the one they want to pay.<\/p>\n

And here is the kicker with eminent domain: the government holds all the cards.<\/p>\n

Don\u2019t want to sell?<\/p>\n

Too bad… the property will be taken from you if they really want it.\u00a0 Think you can hide from them by not returning phone calls or responding to letters, think again.\u00a0 Think you can stall them by not agreeing to a price?\u00a0 You may be able to for a while – but here is what will happen:\u00a0 The government will simply record a deed of transfer, place what they feel is just compensation in your bank account or in escrow … and the property is theirs.\u00a0 Next, they will simply forcibly evict you if they have to.\u00a0 What if they did not pay you enough to pay off your loans?\u00a0 What if you do not agree with the price?\u00a0 You still owe the bank the full amount and now to you have to go to court to prove that the \u201cjust compensation\u201d was too low.\u00a0 How many of you are up for that fight?<\/p>\n

How to Deal with Eminent Domain if it Happens to You<\/h2>\n

Thankfully most local governments are not overflowing with cash so this power is not used as much as it could be.\u00a0 However, what if your property becomes a target of eminent domain? What should you do?<\/p>\n

    \n
  1. Take any talk or rumor of eminent domain seriously.\u00a0 Condemnation power is an awesome power and like I said, they hold all the cards.<\/li>\n
  2. Talk to the people in charge of the case for the government.\u00a0 Get all of the facts you can.\u00a0 Who is proposing this?\u00a0 What is the purpose?\u00a0 When do they plan to do it?\u00a0 Why?\u00a0 What are they offering?<\/li>\n
  3. If you want to sell, great.\u00a0 Negotiate the best price you can and cash your check.<\/li>\n
  4. If you do not want to sell or you think the offering price is too low, hire an attorney familiar with condemnation cases.\u00a0 The government will have lawyers working for them and their incentive is to get the property as cheaply as possible.\u00a0 You will need expert help to fight this.<\/li>\n
  5. If you do not want to sell, your options are going to be very limited.\u00a0 You can attempt to voice your concerns with the local legislative body (city council, for example) as they may have final say – but that may have little or no effect.\u00a0 Ultimately, as I said, the government really holds all the cards.\u00a0\u00a0 Again you will need some expert advice to help you.<\/li>\n<\/ol>\n

    Condemnation is an awesome power granted to the government and it begs the question, do you really own the property?\u00a0 That is, however, a question for another post.<\/p>\n

    Have you ever faced condemnation?\u00a0 What were your experiences?\u00a0 Let us know in the comments.<\/p>\n

    Photo: (OvO)<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

    Did you know that the government has the power to legally take your property from you? That power is called “Eminent Domain” and it is derived from the Fifth Amendment […]<\/p>\n","protected":false},"author":726,"featured_media":172731,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4252],"tags":[4854,4853,4855,5971],"class_list":["post-46827","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-deal-analysis","tag-condemnation","tag-eminent-domain","tag-kelo","tag-real-estate-law"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/46827","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/726"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=46827"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/46827\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/172731"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=46827"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=46827"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=46827"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}