What Is Eminent Domain?

When the government wants to build a new courthouse or park, expand a highway, or open a school, it tries first to buy the target land by making an offer to the owner. If the owner refuses to sell, the government can exercise its authority of eminent domain by having the court condemn the property in favor of the government. The rules of eminent domain also can apply when government activity interferes with a person’s use of his or her property. For example, a government-run shooting range near residential property, airport traffic over a chicken farm, or other such disturbances can lead to takings. The Fifth Amendment places two requirements on the government when using this authority. First, the property to be acquired must be “for public use.” Second, the government must pay “just compensation” to the owner of their property.

Who Has the Power of Eminent Domain?

The Fifth Amendment grants the federal government the power of eminent domain, and the Fourteenth Amendment extends it to local and state governments. Government agencies like public works, the Department of Transportation, or the U.S. Forest Service also have the right to eminent domain property. Some private companies (e.g. oil and gas, railroads, utility) or individuals may be granted the authority to complete certain projects intended to benefit the public.

The Eminent Domain Definition of Public Use

For the government to legally take someone’s property, the purpose must be for “public use.” Common examples include expanding roads, building schools or libraries, correcting drainage issues, and constructing fire stations, police stations, or other government facilities. Over time, courts have expanded the definition of public use to include projects that benefit the public more generally. For example, developments that encourage economic growth in a community, perhaps by removing or replacing blighted structures and bringing in new commerce. Governments use eminent domain to acquire land to clear abandoned, dilapidated structures or to develop shopping centers, housing communities, stadiums, and arenas.

The Eminent Domain Definition of Just Compensation

“Just compensation” indicates the government must pay the property owner a fair price for land or real estate taken through eminent domain. Most commonly, this is based on fair market value or the amount a seller could reasonably expect to receive on the open market. Sometimes the government takes land containing specific resources, or only needs it for a limited time, which makes the valuation more complex.

There are exceptions to the rule of just compensation. For example, if a preponderance of the evidence proves the property was used for criminal activity, the government generally may take possession without paying compensation.

Can a Property Owner Dispute Eminent Domain?

Property owners don’t always want to sell. Some feel a personal connection with their property. They may have invested time or money in improvements not reflected in the government’s initial offer. For these and other reasons, eminent domain cases are often disputed and sometimes heavily contested. In a public-use development where eminent domain could apply, planners determine which private parcels of land may be affected. They then work with their appraisers to determine the fair market value of each piece. The government uses that value in an offer to purchase the property from the owners. If the owners agree, the transaction proceeds and is fairly straightforward. If the parties are unable to come to terms, however, the dispute moves to condemnation proceedings. Once in condemnation, the property owner and his team (i.e., attorney, appraiser) offer their property valuation. Other challenges are brought to condemnation proceedings as well, including the project’s validity and whether it serves the public. However, property value is the most common dispute.

Prominent Eminent Domain Cases

  • Kohl v. United States (1875) was the first U.S. Supreme Court case to assess the federal government’s eminent domain powers. The government took land in Cincinnati, Ohio, to build a post office, customs office, and other government facilities. The petitioners alleged that the court did not have jurisdiction in the state, and the government could not acquire the land without proper state legislation. The court ruled in favor of the government. Justice William Strong emphasized that the federal government’s eminent domain power was “essential to its independent existence and perpetuity.”

  • Berman v. Parker (1954), the plaintiff, Berman, owned a department store in an area designated as “blighted” and authorized by Congress for seizure and redevelopment. Berman sued on the basis that the District of Columbia Redevelopment Act and its seizure of his land to build housing violated his right to due process. The court found that the seizure of Berman’s property was not a violation of his Fifth Amendment right. This unanimous decision expanded the definition of “public use” to include “public purpose”—in this specific case, low-income housing.

  • Kelo v. City of New London (2005) This narrow 5-4 decision by the U.S. Supreme Court rippled out across the country in the form of new legislation in 44 states. In Kelo v. City of New London (2005), the city of New London, Connecticut, wanted to revitalize its ailing and distressed economy. As part of a specific development plan designed to benefit the public, the city council allowed a private, nonprofit entity to exercise eminent domain in the city’s name. Susette Kelo and others in the area had refused to sell their private property, so the city condemned it to force them to accept compensation. Kelo alleged that the seizure of her property was a violation of the “public use” element of the Fifth Amendment takings clause because the government intended to use the land for economic development, which is not solely public. Kelo’s property was not “blighted,” yet it was being transferred to a private firm for development.The court ruled that redistributing the land was part of a detailed economic plan that included public use. Even though the transfer was from one private party to another, the goal of economic development served a definitive public purpose. Interestingly, it also held that state and local governments should be allowed to determine for themselves “what public needs justify the use of the takings power.” At the end of the opinion, the court added, “We emphasize that nothing, in our opinion, precludes any State from placing further restrictions on its exercise of the takings power.” Since that decision, 44 states have reformed their eminent domain laws. A dozen states have amended their state constitutions to stop eminent domain for private gain. In nine states, courts either rejected the Kelo ruling or strengthened protections for property owners.

Summary

The founders of the United States understood the importance of limits on government power. The government or its authorized entity may take property against an owner’s will, but only for “public use” and after providing “just compensation.” The courts continue to refine the acceptable parameters for this government power.

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Related terms
Offer
An offer is when a buyer puts in a price offer on a home that the seller can accept or counter.
Title Insurance
Every title insurance policy covers either a homeowner or the lender that financed the mortgage for the property. Lenders require you to pay for lender's title insurance as part of your mortgage closing costs. Homeowner's title insurance is mostly optional and is paid for by the seller or the buyer of the property.
For Sale By Owner (FSBO)
For sale by owner is a process by which a homeowner sells their home directly instead of going through a brokerage firm to sell the property. The benefit to the seller is that there is no commission to pay out at the end of the selling process.