Where Experience Counts And Results Matter

Eminent Domain Basics

Charles H Barnett III

By – Charles H. Barnett, III

1. What is the power of eminent domain or condemnation?

Eminent domain is the power of a government to acquire private property for public purposes by way of a court proceeding when they are unable to reach an agreement with the owner of property to buy the property. “Condemnation” usually refers to the legal proceeding in which the power of eminent domain is exercised. Often the two terms are used interchangeably. The U.S. Government, the government of the State of Tennessee, and most municipalities and other governmental entities have the power of eminent domain.

2. What is the theory behind eminent domain?

The theory behind eminent domain is that all private ownership of property comes originally from the government and when the government allows private ownership of property, it reserves the right to take property back when necessary for the public good upon payment of “just compensation.”

3. Under what circumstances can they take my property if I do not want them to?

Dating back for many hundreds of years, governments have been able to acquire private property as long as it is for a “public use,” and the owner of the property is awarded “just compensation.” Just compensation for the property is a requirement of both the U.S. Constitution and the Constitution of the State of Tennessee.

4. What is a “public use”?

The definition of a public use is very broad. It can be for roads, highways, dams, lakes, golf courses, power lines, and almost anything else that government might be interested in doing. In certain cases, property can even be condemned and turned over to private developers for example, in cases such as a slum clearance. In those cases, the question of whether a given use is a public use becomes something that can on occasion be controverted in court successfully. In most cases, however, when the use is for an arguable public purpose, there is not a realistic possibility of stopping an eminent domain or condemnation proceeding.

5. What is just compensation?

The Constitution says you are entitled to “just compensation” if the government takes your property. Just compensation has been defined by the courts as the “fair cash market value of the property.” The fair cash market value of the property has been defined as “the price that a willing buyer would pay and a willing seller would accept.” In other words, it is the price that a landowner would accept if the landowner desired to sell but was not forced to, and a price that a buyer would pay if the buyer wanted to buy but did not have to. This is just a way of saying it is the ordinary market price.

6. How does the eminent domain process start?

Usually the governmental entity will decide in some official way that it needs to acquire property for a particular purpose. The government then makes plans and figures out what property they need. The various parcels that are necessary are appraised. The landowner is then approached by a person usually called a “buyer” for the purpose of purchasing the property. The landowner is usually offered the appraised price. Many times there is not much room for a negotiation because the governmental entity is required to meet various regulations that are designed to prevent the government from paying selected landowners more money than the property is actually worth. In some cases, however, negotiation is possible.

7. If I am approached by a governmental “buyer,” do I have to sell?

No, you do not have to sell if you do not believe that the price you are being offered is the fair market value of the property.

8. If I do not sell, will they take my property and leave me with no money for a long period of time?

No. If you do not believe you are being offered fair market value for your property, the government can file a suit and acquire your property in a very short period of time. In order to do that, the government has to make a good faith deposit into court of what it believes is the fair market value of the property, which is usually the amount you were being offered. Once the money is deposited into court, you can petition the court to allow you to withdraw the deposited funds. Under this procedure, the governmental entity can proceed with its project, and you can have your money and contest whether this deposited amount of money was adequate.

9. How do I get the money out of court?

In order to get the money out of court, a motion has to be filed with the court, and the court has to order the deposited funds be given to you. As a part of that order, you will have to agree that if the value of the property is determined by a judge or a jury you have been overpaid, you will pay the excess amount back into the court with interest. On the other hand, if it turns out that you were not adequately compensated, then the government will have to pay you the difference plus interest.

10. Generally, how does the court proceeding start?

If the government is unable to purchase the property it wants, the matter is turned over to the appropriate legal department. In the case of the State of Tennessee, it is turned over to the Attorney General’s office. The government lawyers prepare a paper describing the government’s project, the property they seek, and identifies the owners or people who have an interest in the property they seek. This paper, a Complaint or Petition, is filed with an appropriate court. The court then issues papers which are served on the landowner, which include a copy of the Petition or Complaint.

11. What should I do if condemnation papers are served on me?

Generally speaking, you need the advice of an attorney who is familiar with condemnation procedures if you have not already consulted with one. Theoretically, you could represent yourself but, in most cases, unless you are extremely knowledgeable of eminent domain proceedings, it would be unwise.

12. What are the first steps my attorney should do once I have been served with condemnation papers?

Usually the first step is for the attorney to respond to the filing of the Complaint or Petition by filing an “Answer.” The Answer is a document or pleading in which you respond to the allegations contained in the Complaint or Petition. In the Answer, the landowner says that they do or do not agree with various aspects of the Petition or Complaint. In most cases, the only disagreement will be with the amount that has been deposited with the court as “just compensation.”

In some cases, however, the landowner may dispute that the taking is for a public purpose. In other cases, there may be a dispute as to who the owners of the property are or what the interest of the various owners of the property is.

13. What happens in the court proceeding after an Answer is filed on behalf of the landowner?

In most cases, the right to “take” is not challenged, and an order is entered granting the governmental entity possession of the property they seek. In addition, an order is usually entered disbursing the deposited funds to the landowner. The case then goes into the “discovery” phase.

14. What is the “discovery” phase in a condemnation law suit?

Before the case is tried, each side, the government and landowner, is given the opportunity to seek information about what the other side plans to present as evidence at trial. This information can be gathered by several procedures. The main procedures are lists of questions that the other side has to answer, called “interrogatories”; a list of documents that the other side has to produce; and recorded question and answer sessions called “depositions: of anyone who is a potential witness or has information about the case.

15. What is the purpose of an eminent domain or condemnation trial?

Usually the main purpose of an eminent domain or condemnation trial is to determine “just compensation” due the owner of the property for the property or property rights that the government has acquired. In other words, the trial is to determine what amount of money is due the property owner for their property. Just compensation is defined as the fair cash market value of the property acquired by the government.

16. How is the fair market value of property determined?

The fair market value of property is determined by the evidence. Fair market value of real estate is almost always an “opinion.” Therefore, there market value is determined by the opinions of value that come from the witnesses who testify at trial.

17. Who are the witnesses at trial?

Not everyone is allowed to give their opinion of fair market value. In order for a witness to give their opinion of fair market value at trial, they must have some special qualifications. They can be an expert real estate appraiser, or a lay witness who is especially familiar with land values. There is also a provision that allows a landowner to give their opinion of value just based on the fact that they are the owner of the property.

18. Who decides the fair market value of the property?

In most cases, it will be a jury. The jury hears the testimony of witnesses, which consist of their opinions concerning the fair market value of the property. The jury weighs the evidence they hear and decide what they believe is the fair market value of the property. They render their opinion in the form of a verdict.

19. What happens if they take only part of my property?

Many times, government will only need to acquire a portion of a landowners property. This is frequently the case when the project is the construction or improvement of a highway or a road. In such cases, under Tennessee law the landowner is due not only the fair market value of the property acquired, but “incidental damages” to the remaining portion of the property if there are any. Under federal law, the landowner is entitled simply to the difference between the before and after fair market value of the property.

20. What are incidental damages?

If there is a partial take, the difference in the before and after value of the remaining property is called “incidental damages.” For example, a commercial building that lost many of its parking spaces and no longer had adequate parking could suffer significant incidental damages. Likewise, if a large portion of the front lawn of a residential property were taken and the highway was moved close to the residence, the fair market value of the remaining residence may well be significantly reduced.

21. What are incidental benefits?

If only a part of a landowner’s property is taken, the remaining part may actually go up in value because of specific benefits from the project. A good example is if a small portion of a tract of land were taken for the construction of a recreational reservoir, the balance of the land might skyrocket in value. Another example would be if a new road were constructed and a portion of the property was taken for the road but the landowner was left with new additional road frontage, the balance of the property might increase in value.

22. What is the relationship between incidental benefits and incidental damages?

First, both incidental damages and incidental benefits have to be specific to the property. They cannot just be due to the general effect of the construction of the project. Under Tennessee state law, the only significance of incidental benefits is that they can be used by the government to offset incidental damages. In other words, if the remaining tract were benefitted in some ways and damaged in some ways, those two effects would be offset against each other so that the landowner would be entitled to the difference. If there are no incidental damages, under Tennessee law, incidental benefits are irrelevant.

23. What does the judge do at the trial?

The judge presides over the trial, and if neither party wants a jury, the judge will decide the fair market value of the property. In most cases, however, the judge acts in effect as a referee and screens the evidence. The judge decides who is or is not qualified to testify, and decides what information goes to the jury. The judge makes his rulings on the evidence based on the statutory and case law of the jurisdiction.

24. What are comparable sales?

Witnesses who testify as to their opinion to the value of property often use “comparable sales” of similar property to support their opinions. In order to qualify as a comparable sale, the sale must be similar to the property acquired or taken in most respects. In other words, it must be of a similar type, size, location and date of sale. For example, if the property taken was a building lot in a subdivision, then the sale price of several similar lots in the subdivision would be good comparable sales. The sale of a lot that was of a different size, in a different location, and in a different time frame would not be a good comparable sale.

25. Do I have to employ an expert real estate appraiser as a witness for my case?

Many times it is advisable to hire an expert real estate appraiser to use as a witness. It is, however, not always necessary to do so. By law, the landowner can testify as to their opinion of the “fair cash market value” of the property, simply because they are the landowner. Sometimes the landowner himself makes the very best witness and it is not necessary to have a real estate appraiser. In other cases, it may be very important to have a real estate appraiser. Each case has to be analyzed and dealt with individually in terms of what the best evidence is of the value of the property.

26. What are the methods that a real estate appraiser uses to value property?

There are generally three accepted methods for the valuation of property. They are not, location, location, location. The methods are (1) market data; (2) income; and (3) replacement. Many times a real estate appraiser will use or attempt to use all three methods in evaluating a property, but will generally rely upon the one that is most appropriate.

27. Can I introduce into evidence offers that people have made to me for the purchase of my property?

No, generally not. Offers to purchase or to sell are generally not admissible. The reason is that an offer is not a market transaction. Because the transaction never took place, the courts do not consider the offers to be reliable enough to go into evidence.

28. Can I put into evidence what the government paid someone else for their property in this project?

Generally not. The purchase of property under the threat of eminent domain is not considered to be a market transaction. It is, therefore, not admissible either by the government or the landowner to prove value in an eminent domain proceeding.

29. Can I get paid for inconvenience loss of use or loss of business during the period of time that the project is being constructed?

Generally, no. It is true that many people suffer inconvenience and loss of business during the process of construction takes. For example, the construction or improvement of a highway not only do adjacent landowners suffer inconvenience and problems, but many people throughout the community to likewise. This temporary loss of business or inconvenience is not legally compensable, it is considered to be a part of the police power of the government. On the other hand, if a project permanently changes something that permanently effects the value of the property, then the landowner is due compensation. For example, if the construction of a road changes the landowner’s access to the property in such a way as to diminish its fair market value, then the landowner would be entitled to compensation even if none of the landowner’s property was permanently taken.

30. If the government takes a building in which I operate a business, do I get paid for the building and the business as well?

Generally, no. According to the law, the landowner is entitled only to the fair cash market value of the property rights actually taken. The theory is that real estate is separate and different from the business that is operated in the building. A given building may have businesses that are very successful or businesses that are not so successful. This generally does not change the value of the building. If a building has a special location or other feature that makes it valuable in terms of its fair cash market value, then the landowner is entitled to that value. For example, the fact that a lot is located at a busy commercial intersection would, of course, increase its fair market value.

31. Can I get compensated if my property is diminished in value by a governmental project, even if they do not take any of my property?

Yes you can in some situations. If there has been a “taking” of your actual specific property rights, you can be compensated. For example, if the right of access to your property has been damaged, even though none of your property has been taken, then you can be compensated. If something special and direct has diminished the utility of your property in some cases, you can be compensated. For example, if a runway is built adjacent to your property in such a way as it is no longer useable, possibly you can be compensated. In other cases, the law may not provide for you to be compensated, even though the property may diminish in value because of a governmental action. For example, if a new road is built around a town, the value of property may decline in other areas. This would not be a compensable taking because the landowner did not have any specific rights taken.

32. If my property has been undervalued, what are the chances that I will succeed in court?

If your property has been taken and you have not been provided just compensation as defined by the law, i.e., fair market value, then your chances of succeeding in court are very good. Generally, condemnation cases are heard by local juries who are unbiased and are generally willing to listen to reasonable arguments concerning the value of the property. This does not mean, however, that a jury is going to give the landowner anything that they want. Generally speaking, the jury is going to try to follow the law in evidence and award the landowner “just compensation.”