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 to the US Constitution which says in part “…nor shall private property be taken for public use without just compensation.” This short clause gives all governments, federal, state and local, the power to take your property through a process called condemnation. However, your property has to be taken for a “public purpose” and they have to pay you “just compensation.” Let’s examine this a little closer.
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Modern Day Eminent Domain
The term “public purpose” has been greatly expanded in scope in recent years. 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. The relatively famous Supreme Court Case known as Kelo significantly broadened the definition of “public purpose.”
In the Kelo Case, the Supreme Court ruled that “economic development” is a public purpose. In other words, increasing the tax base is a public purpose. What does that mean to you? Let’s say you have a single family home that your family has lived in for generations. 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. 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.” There are variations from state to state, but this is perfectly legal.
But they have to pay you for it right? That is what that phrase “just compensation” means, right? Yes, that is correct. The government cannot simply take your land without paying you, but how is “just compensation” arrived at? It is supposed to be the highest price for the best and most profitable use of the land. But who will decide that? Let’s take the example above. Should “just compensation” reflect the value of the single family home or should it reflect the value of the new shopping center? Which value do you think the government utilizes? Yep, the single family home value is the one they want to pay.
And here is the kicker with eminent domain: the government holds all the cards.
Don’t want to sell?
Too bad… the property will be taken from you if they really want it. Think you can hide from them by not returning phone calls or responding to letters, think again. Think you can stall them by not agreeing to a price? You may be able to for a while – but here is what will happen: 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. Next, they will simply forcibly evict you if they have to. What if they did not pay you enough to pay off your loans? What if you do not agree with the price? You still owe the bank the full amount and now to you have to go to court to prove that the “just compensation” was too low. How many of you are up for that fight?
How to Deal with Eminent Domain if it Happens to You
Thankfully most local governments are not overflowing with cash so this power is not used as much as it could be. However, what if your property becomes a target of eminent domain? What should you do?
- Take any talk or rumor of eminent domain seriously. Condemnation power is an awesome power and like I said, they hold all the cards.
- Talk to the people in charge of the case for the government. Get all of the facts you can. Who is proposing this? What is the purpose? When do they plan to do it? Why? What are they offering?
- If you want to sell, great. Negotiate the best price you can and cash your check.
- If you do not want to sell or you think the offering price is too low, hire an attorney familiar with condemnation cases. The government will have lawyers working for them and their incentive is to get the property as cheaply as possible. You will need expert help to fight this.
- If you do not want to sell, your options are going to be very limited. 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. Ultimately, as I said, the government really holds all the cards. Again you will need some expert advice to help you.
Condemnation is an awesome power granted to the government and it begs the question, do you really own the property? That is, however, a question for another post.
Have you ever faced condemnation? What were your experiences? Let us know in the comments.