Imagine finding the perfect home, buying it and then having the government say a year later that it was going to take it away from you. That’s what happened to Susette Kelo, who spent seven years fighting a condemnation order and lost before the Supreme Court in the landmark case Kelo v. City of New London.
“The government is given the power to acquire property as long as they are using it for a public use and providing compensation for it,” says Robin Thornton, an attorney and partner with law firm Wendel Rosen in Oakland, California.
That power comes from the Fifth Amendment of the U.S. Constitution which states, in part, “nor shall private property be taken for public use, without just compensation.”
“The key is that it has to be for a public purpose,” says Arthur Feldman, partner in the law firm Farrell Fritz in Uniondale, New York.
However, with the ruling in the Kelo v. New London case, the definition of public purpose was determined to include economic development. That opened the door for properties to be condemned and handed over to private entities if it was decided a different use of the property was in the best interest of the public.
Many state governments took action to strengthen property owner rights in the wake of Kelo v. New London, but condemnation and eminent domain remain a legal method to take property if it is deemed to be in the interests of the greater good.
[Read: 5 First-Time Homebuyer Mistakes]
Basics of Eminent Domain and Condemnation
Eminent domain and condemnation go hand in hand. While eminent domain refers to the ability of the government to take private property for a public use, condemnation is the process by which that happens.
“Condemnation is a forced sale,” explains Jennifer Polovetsky, co-chair of the eminent domain practice with New York City law firm Herrick, Feinstein LLP. In many cases, the government will try to negotiate a sale in lieu of condemnation to avoid going to court. However, if an agreement can’t be reached, a petition for condemnation is filed with the court and that forces the sale if the petition is granted.
While eminent domain is often thought to result in an owner losing their entire property, that isn’t always the case. “It can be an easement that’s literally a sliver of your property to put in a utility line or a well,” says Jennifer Rimmer, senior vice president of the USA Government and Public Sector practice for global construction consulting firm Turner & Townsend.
In cases of subways or tunnel systems, eminent domain might be used to access land deep underground. That was what happened in New York state during one deep water tunnel project, according to Rimmer. “The owners living at the surface never saw or felt the project as it was being built,” she says. “But their property rights extended all the way down, and the government agency determined that the water tunnel was vital for the health and security of the population.”
Why Property Can Be Condemned
The power to use eminent domain varies by state, but it can be very broad. “It’s almost anything,” Polovetsky says, “anything that benefits the public.”
Infrastructure is a common reason for using eminent domain, but condemnation doesn’t just occur for highways, railways and utility lines. Under Kelo v. New London, the justification for eminent domain has been expanded.
“Say you have an area that is blighted,” Thornton says. “(The government could say) we’re going to come in here and put in fresh new condos.”
That is, so long as state or local rules don’t prohibit handing over property to a private entity. “California recognized that you can’t do that,” according to Thornton. The state’s code of civil procedure stipulates that eminent domain can only be used to acquire property for public use.
Most states passed reforms after the Kelo decision, but some still allow for eminent domain to be used to revitalize blighted areas. Most recently, the case Eychaner v. City of Chicago challenged Illinois’ law that allowed eminent domain to be exercised in cases in which a property could become blighted in the future. That challenge failed when the U.S. Supreme Court declined to take up the case.
[Read: How Does Selling a House As-Is Work?]
Overview of the Condemnation Process
Usually, property owners will have some indication in advance that their property is identified for condemnation. “There’s going to be some warning signs,” Feldman says. In most states, there will be a public hearing at the start of the process and affected property owners will be notified.
“There’s a line between project planning and acquisition,” Thornton says. Eminent domain can only be used once that line has been crossed and a project is ready to proceed.
At that point, the government agency involved in the project may work to negotiate with property owners for a private sale. If an agreement cannot be made, the agency will file a petition with the court to condemn the property under eminent domain. As part of the court proceedings, a property owner may argue that the taking doesn’t meet the requirements of eminent domain — such as that it is not needed for a public use — or that the amount offered for the property is too low.
“You are entitled to what is just compensation,” Feldman says. That isn’t necessarily based on the current use of a property, but rather its highest and best use. For instance, a vacant lot may be zoned in such a way that a big box retailer could be built there or a residential lot could be used for apartments.
“They’re not just taking that plot of land, but they are taking your development rights,” according to Feldman. And by law, you need to be paid for the highest valued use of the property.
The process for negotiating payments can vary by state. “In New York, they can take your property and pay you later,” Polovetsky says. “In other states, they have to pay you before.”
Regardless of the state, condemning a property can be a drawn-out affair. “In cases where it goes to court, it can take years,” Rimmer says.
What Is Inverse Condemnation?
On occasion, a government agency takes action that can negatively impact a property, but they haven’t exercised their right to eminent domain.
“They have done something that rises to the level of taking the property,” Thornton says. For instance, a government project may result in land flooding or perhaps it cuts off access to a property. In these cases, property owners may make a claim of inverse condemnation and seek compensation.
“Inverse condemnation is very hard to prove,” Polovetsky says. In many cases, the agency involved may take some action to minimize negative impacts but will not pay for the entire value of a property. For instance, if a development such as a railway is built near a home, “They will mitigate your damages by giving you soundproof windows,” Polovestsky uses as an example.
[READ: Is Soundproof Insulation Worth the Cost?]
Legal Counsel for Property Owners Facing Eminent Domain
For property owners facing a claim of eminent domain, finding a qualified lawyer is key, Polovetsky says. “It’s a very specific, niche practice,” she explains.
There are eminent domain lawyers practicing in every state. What’s more, property owners need an appraiser who has experience in eminent domain cases. Since property must be valued at its best and highest use, a regular appraisal could leave money on the table.
“Generally, most of the attorneys who work on condemnation cases work on a contingency basis,” Feldman says. “You don’t owe them money unless they are successful.”
As for when to hire an attorney, Polovetsky says finding a lawyer before the initial public hearing can ensure everything possible is done to achieve a positive outcome for a property owner. “It’s stressful, (and) it’s scary,” Polovetsky says. But having the right lawyer by your side can smooth the road for those facing a claim of eminent domain.
More from U.S. News
15 Secrets to Selling Your Home Faster
10 Interior Design Trends for 2022
The 25 Fastest-Growing Places in the U.S.
What Is Condemnation in Real Estate? originally appeared on usnews.com
