“The government must pay ‘Just Compensation’ for taking my property, it’s my constitutional right! But what is it, really?”
By David Paavola
When the government takes your property by eminent domain (or condemnation), it must pay just compensation. Just compensation is a constitutional requirement. The just compensation clause is tucked away at the end of the Fifth Amendment to the Constitution, following more well-known rights such as the prohibition of double jeopardy, the right against self-incrimination, and due process. It says, simply, “nor shall private property be taken for public use, without just compensation.”
As in beauty, just compensation often rests in the eye of the beholder. I see a patch of dirt, overgrowth, and sparse trees. Developer Jones sees convenient highway access, good drainage, and a future anchor tenant with outparcels. Who is right? Well, it depends.
Just compensation has been described as the property’s fair market value. Fair market value, in turn, has been described as that value a willing buyer will pay and a willing seller accept, where neither party is under compulsion to enter the transaction. Slightly clearer.
Now add to the mix that a landowner is not stuck valuing the property at its current use, but is instead entitled to receive fair market value based on the property’s highest and best use. Highest and best use is the most productive use of the land that is physically possible, legally permissible, and financially feasible. This brings to mind the cartoon scene of the holdout house situated amongst skyscrapers. The value of the holdout house, or rather the land underneath the house once you knock it down, is not residential but skyscraper land, presumably much more valuable.
The equation gets even more complicated when only a portion of your property is taken and the question is not only the highest and best use of the property taken, but also the negative impact of the lost property on your remaining land. Today, the best use of my land is development into a gas station. If after the government widens the road and takes a portion of my property, a gas station will no longer fit and next best use is less valuable, then I’ve lost market value and need to be compensated for this loss.
Even when the government and landowner agree on the highest and best use of a property, their values can vary widely. For example, if the government takes a strip of land along the roadway and changes the property’s road access from full access to right-in right-out but does not attribute any lost value to this change of access, its valuation may greatly understate the true market value impact. Transforming your convenience store into an inconvenience store will certainly have a market value impact beyond simply the loss of a few feet of land along the roadway. A landowner needs to capture the full amount of lost market value in its valuation.
To sum it up, just compensation equates to the fair market value of the land taken plus impact to the remaining land. Fair market value is based on the property’s highest and best use. Preparing and presenting your position on fair market value is the key to making the most out of the difficult position the government put you in when it decided to take your property for the public good.
When the government takes your property by eminent domain, you are entitled to receive its fair market value. The complexity comes in understanding the property’s true market value, grasping the full impact of the public project on your property’s highest and best use, and then in preparing a thoughtful presentation to the jury who will ultimately decide how much to award you as just compensation.
These complexities show why it is important to team up with experienced and knowledgeable legal counsel that can help you navigate the condemnation process. Attorneys at Lewis Babcock have years of condemnation experience and are here to help.