Determining a property’s value under eminent domain

There are many issues landowners can and do face when it comes to their real estate. Zoning impediments, restrictive covenants and easements are all potential interruptions to the use and enjoyment of their land. Eminent domain is another possibility.

Under the Takings Clause of the 5th amendment to the U.S. constitution and other laws, a government or authorized entity can take private land for public use in exchange for "just" compensation, or fair market value. The expansion of a bridge, sewer or power line are a few situations when the power of eminent domain has been exercised.

The basic process

The eminent domain process involves notice of intent and an offer. The entity provides notice of intent to take the land to the property owner and, after conducting its own appraisal, also provides an offer based on what it believes is an appropriate value for the property interest. If the landowner agrees that the offer is fair, the landowner accepts the offer and basically hands over the property.

However, in other instances, there may be differences in opinion as to the value of the property or taking. When the parties cannot agree, a formal condemnation process commences to determine its worth.

Determining a property's value

Determining the value of the property or taking for purposes of eminent domain often hinges on many different factors. They can include but are not be limited to:

  • The size of the parcel
  • How the parcel is zoned
  • Nearby land uses
  • Whether leaseholders are involved
  • Whether the property represents the owner's livelihood
  • Whether the acquisition is full or partial

Since each parcel is distinct with unique situations, value estimates will always vary. Even the date of the valuation can determine the price since real estate property prices fluctuate frequently.

Many types of professionals and experts are often utilized to sort out the issues.

Inverse condemnation

In some instances, a condemnation proceeding commences not because of a dispute over the price of the property but whether a taking has even occurred.

The property itself may not be physically acquired but a landowner could argue that a taking still has occurred. An entity may, for instance, build a busy highway directly next to the property or pass a law that prohibits certain activity the landowner planned to engage in.

When this occurs, the landowner files what's known as an inverse condemnation proceeding.

The steps involved in this instance are similar and just as complex as the traditional condemnation process, if not more so since the burden is up to the landowner to prove a taking as happened and he or she is entitled to fair market compensation.