What Is Just Compensation?
The Just Compensation clause of the Fifth Amendment to The Constitution protects landowners when the government takes or condemns land for public use through the eminent domain process. The government cannot take property through this Takings Clause without providing fair and reasonable compensation to the landowner, who is also entitled to due process.
The first step in determining just compensation is to assess the property’s value, measuring the uses for which the property is suitable and market value of the property. If the government’s taking increases the property value, the benefit may be offset from the just compensation amount.
Sometimes, the government may only take a portion of the property. The landowner may be entitled to just compensation for negative impact or decrease in land value to the remainder.
If the government takes property and delays the payment, the landowner is entitled to an additional amount to make up for the delay equivalent to interest. However, if the property owner and the government have a contract and there is no mention of interest, the owner can’t claim it even if payment is delayed.
Importance of Just Compensation in Eminent Domain Cases
Some recent just compensation in eminent domain cases have brought attention to the issue. Some contend property owners are increasingly vulnerable to having their homes or businesses taken for economic development projects.
Some also advocate for increasing compensation for eminent domain. They contend that in many cases of condemnation, the agency or the courts disregard the owner’s business loss.
- Kelo v. City of New London: This landmark case in 2005 involved the city using eminent domain for economic purposes. The Supreme Court ruled in favor of the government, sparking debate and scrutiny over the “public use” requirement of eminent domain.
- Las Vegas Downtown Redev. Agency v. Pappas: The court ruled that an eminent domain proceeding involving the transfer of land from one private individual to another still constitutes a “public use.”
- Toledo v. Kim’s Auto & Truck Serv. Inc.: The City of Toledo, Ohio, evicted many homeowners and businesses for a DaimlerChrysler expansion. Kim’s Auto & Truck Service fought the eviction, but the court found in favor of Toledo. All appeals were refused.
- Puntenney, et al. v. Iowa Utilities Board et al.: In this decision, the Iowa Supreme Court upheld the State Utilities Board’s approval of the construction of a private pipeline and the use of eminent domain for easements for the pipeline along its route.
- Hlavinka v. HSC Pipeline P’ship: The court addressed the valuation of a property condemned for easement in a pipeline situation. The court said that a condemnation should not be a windfall for either party and that fair market sales to establish the property’s highest and best use should be referenced.
In the past, condemnation limited the taking of private property to public uses that will benefit the entire community. Critics argue that the courts are no longer applying this limited definition, especially in the case of economic uses that benefit business interests.
How Is Land Value Determined?
The amount in just compensation that a landowner will receive in a condemnation depends on the uses for which the property is suitable. It’s based on the property’s market value and other established principles.
- Fair market value of the land includes factors such as the size of the property, accessibility, zoning and geographic location, unique characteristics, level of development and current or potential use.
- Fair market value of the improvements, also known as the cost approach, involves the cost of replacing or duplicating the improvements minus depreciation.
- Damages to the remainder typically refers to partial condemnations and involves the costs for damages to remaining land or structures on the property.
- Other damages from the taking involve general damages, such as costs associated with replacing utilities.
- Benefits involve the unlikely situation that the government’s condemnation provides a benefit to your remaining property.
For income-producing properties, an appraiser uses complex calculations to determine the property’s income generation. In all cases, it is recommended to appoint an appraiser to determine the just compensation of a property to be condemned.
Challenges Obtaining Just Compensation
Kelo v City of New London prompted discussion about how much compensation governments should pay homeowners in eminent domain cases. There have been many proposals to increase amounts.
Experts argue that one of the challenges of obtaining just compensation is that the fair market value standard excludes any consequential damages for real but subjective harms a property owner experiences. However, nothing in the Fifth Amendment speaks to full indemnification for all losses.
Some argue that more robust protections for private property would result in higher compensation for those fighting eminent domain cases in the courts. However, financial compensation based on equivalent value rarely puts homeowners in the same position they were before the condemnation, which critics argue is unfair.
Can You Protect Your Property With Just Compensation?
As a property owner, you have rights. In addition to asking questions about how eminent domain will affect you and your land, you have the right to know how the acquiring agency calculated the compensation for your property and to request a copy of the appraisal report. You also have the right to accompany the appraiser on their inspection of your property.
You have the right to negotiate with the acquiring agency or government and provide evidence supporting your position as part of your right to due process. You do not have to accept the first offer made if you do not believe it is fair.
It’s a good idea to work with an experienced eminent domain lawyer who can determine whether the government has a public purpose for taking your property and whether they are taking more land than is required, and to ensure you receive the highest compensation that you are entitled to.
14 Cited Research Articles
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- State of Utah Office of the Property Rights Ombudsman. (2022, August). Your Guide to Just Compensation. Retrieved from https://propertyrights.utah.gov/wp-content/uploads/2021/10/Just-Comp.pdf
- Supreme Court of the United States. (2020, January 6). Brief in Opposition for Respondent Dakota Access, LLC. Retrieved from https://www.supremecourt.gov/DocketPDF/19/19-447/127590/20200106130155297_Puntenney%20Brief%20in%20Opposition%20TO%20FILE.pdf
- Gruber-Miller, S. (2019, May 31). Dakota Access pipeline was justified in using eminent domain, Iowa Supreme Court rules. Retrieved from https://www.desmoinesregister.com/story/news/crime-and-courts/2019/05/31/iowa-supreme-court-dakota-access-pipeline-iowa-utilities-board-sierra-club-lawsuit-appeal/1286508001/
- Fegan, M. (2018, October). Just Compensation Standards and Eminent Domain Injustices: An Underexamined Connection and Opportunity for Reform. Retrieved from https://cpilj.law.uconn.edu/wp-content/uploads/sites/2515/2018/10/6.2-Just-Compensation-Standards-and-Eminent-Domain-Injustices-An-Underexamined-Connection-and-Opportunity-for-Reform-by-Marisa-Fegan.pdf
- U.S. Commission on Civil Rights. (2014, June). The Civil Rights Implications of Eminent Domain Abuse. Retrieved from https://www.usccr.gov/files/pubs/docs/FINAL_FY14_Eminent-Domain-Report.pdf
- Food and Agriculture Organization of the United Nations. (2008). Compulsory acquisition of land and compensation. Retrieved from https://www.fao.org/3/i0506e/i0506e00.pdf
- National Center for Public Policy Research. (2007, June 27). City Destroys One Auto Business To Make Landscaping For Another. Retrieved from https://nationalcenter.org/ncppr/2007/06/27/blog-city-destroys-one-auto-business-to-make-landscaping-for-another/
- Wyman, K. (2007). The Measure of Just Compensation. Retrieved from https://lawreview.law.ucdavis.edu/issues/41/1/articles/davisvol41no1_wyman.pdf
- United States Government Accountability Office. (2006). Eminent Domain: Information about its uses and effect on property owners and communities is limited. Retrieved from https://www.gao.gov/assets/gao-07-28.pdf
- Vanderbilt University Law School. (2005). The Meaning of Value: Assessing Just Compensation for Regulatory Takings. Retrieved from https://scholarship.law.vanderbilt.edu/cgi/viewcontent.cgi?article=1465&context=faculty-publications
- University of Las Vegas William S. Boyd School of Law. (2003, January 1). Summary of Las Vegas Downtown Redev. Agency v. Pappas. Retrieved from https://scholars.law.unlv.edu/cgi/viewcontent.cgi?article=1735&context=nvscs
- Oyez. (n.d.) Kelo v. New London. Retrieved from https://www.oyez.org/cases/2004/04-108
- Equality and Human Rights Commission. (n.d.) Article 5: Right to liberty and security. Retrieved from https://www.equalityhumanrights.com/en/human-rights-act/article-5-right-liberty-and-security
- Constitution Annotated. (n.d.) Amdt 5.9.10 Enforcing Right to Just Compensation. Retrieved from https://constitution.congress.gov/browse/essay/amdt5-9-10/ALDE_00013289/