Eminent domain: What homeowners need to know

Eminent domain can be an unsettling topic for any homeowner. While you may know it has something to do with the government taking your property, you might not fully understand what that process actually looks like, or how it could impact you.

The reality is that while eminent domain allows the government to build projects designed to serve the public, the process comes with many guardrails and clear laws to help protect property owners like you. By understanding how the process works, you can better prepare if you’re ever faced with the possibility of your property being taken by the government.

What is eminent domain?

Eminent domain is a process by which the local, state, or federal government takes private property to build things for public use, such as roads or parks. In other words, the government must use the property in a way that benefits the entire community. Even if your property is taken through eminent domain, you still have rights, including the right to be fairly compensated. Under the Fifth Amendment’s Takings Clause, the government must provide what’s known as “just compensation,” which is usually based on the property’s fair market value.

What are ‘takings’ in eminent domain? 

Under the rules of eminent domain, a “taking” is the legal process that allows the government to claim private property for public use. Here are the four primary types of takings:

• Complete or total taking: This happens when the government acquires all of a property owner’s land. For example, if a city needs your entire plot to build a new school, you must sell the whole property to the government.
• Partial taking: This occurs when only part of the property is acquired. For instance, the government may need a strip of your front yard to widen a road or install utility lines, while you keep the rest of your land.
• Permanent taking: Both complete and partial takings can be permanent, meaning the property is taken for good. An example would be the government using your land to build a courthouse or public library. Once taken, it does not revert to the owner.
• Temporary taking: This happens when the government uses the property for a limited period of time. For example, your land may be used as a staging area during highway construction, but once the project is complete, they will return the property to you.

What are the requirements for eminent domain?

Three pillars of eminent domain come together to form the basic legal requirements the government must follow:

• Public use: The property has to benefit the community, such as building roads, schools, or power lines. Courts have interpreted this broadly, sometimes allowing projects aimed at boosting the local economy.
• Just compensation: Property owners must receive fair payment, usually based on the property’s market value. More on this in just a minute, though.
• Due process: Property owners must receive formal notice, an opportunity to be heard, and the right to challenge the taking in court.

What is just compensation?

Since compensation is one of the primary safeguards for property owners, it’s worth taking a closer look. “Just compensation” is the amount the government must pay the property owner. This payment is meant to fairly reimburse you for the loss of your property and is usually based on the property’s fair market value, which the government defines as “what a willing buyer would pay a willing seller” in an open market.

Factors that influence the fair market value include:

• The type of property, like residential, commercial, or agricultural
• The property size, condition, and location  
• Current market conditions like if there are more buyers than sellers and vice versa
• Extra features or structures such as buildings, pools, or upgrades that increase your home’s value
• Restrictions and economic factors such as zoning rules, job market, or environmental concerns such as air pollution

Remember, you don’t have to accept the government’s initial offer. As a property owner, you have the right to dispute the valuation and obtain your own independent appraisal to make sure nothing of value is overlooked. In many cases, taking this step can put you in a stronger position to negotiate for fair compensation.

How does the eminent domain process work?

Since due process is one of the core legal requirements, it’s important to understand how the process works. Generally, it follows these steps:

• Project announced: The government identifies a public project and notifies property owners if their land is needed.
• Appraisal and offer: The property is appraised at fair market value, and the government makes a written offer to purchase the home or land.
• Negotiation: Property owners have the right to negotiate, provide their own appraisal, and challenge the value offered.
• Court case (if needed): If the government and property owner cannot reach an agreement, the government may file a case. At this stage, a judge or jury decides the outcome.
• Payment and transfer: Once a fair compensation amount is determined and paid, the title transfers to the government. In some cases, relocation assistance may also be provided.

Remember, as a homeowner, you're given the right to speak up and challenge the process. By staying proactive, asking questions, and doing your research, you can better protect your interests throughout the process.

What is inverse condemnation?

Inverse condemnation is when the government harms your property or limits how you can use it, without officially taking it or paying you. Unlike a traditional eminent domain case, inverse condemnation places the responsibility on the homeowner to prove that damages or financial loss have occurred.

For example, your city might approve a noisy airport expansion next door to your property, causing your home to shake throughout the day. Or the government may declare your land “blighted,” which means it’s labeled as run-down, unsafe, or a barrier to neighborhood growth. Both situations may lower the value of your property and could make it harder to sell or rent out. In such cases, you may have legal grounds for an inverse condemnation claim. While the government hasn’t directly taken your property, its actions still cause financial loss and limit how you can use your property.

If this happens, you can take legal action by filing a lawsuit to show that a “taking” has occurred without payment of just compensation. If the court agrees with your claim, the government is then required to pay you for the damages caused. The government may hire strong legal counsel to avoid compensating you for your property, especially when multiple property owners are involved. That’s why it’s important to build a strong, well-supported case with solid evidence.

Can you refuse eminent domain?

Unfortunately, you cannot refuse eminent domain outright. Under the Fifth Amendment to the U.S. Constitution, the government has the authority to seize private land for a public project, provided fair payment is made to the owner. However, as a property owner, you do have the right to challenge the government’s actions.

You may contest whether:

• The project truly qualifies as a public use
• The compensation is a fair amount
• The legal process is being properly followed 

Because these challenges tend to require strong legal arguments, working with an experienced attorney is essential to protecting your property rights and improving the odds of winning your case.

Notable eminent domain cases

Court rulings over time have helped shape what eminent domain means. Here are a few notable cases that have made a lasting impact:

• Berman v. Parker (1954): The court ruled that the government could take neglected property in Washington, D.C., to improve the area and make it safer and more appealing.
• Hawaii Housing Authority v. Midkiff (1984): The court allowed Hawaii to use eminent domain to break up large landholdings and redistribute property, reinforcing that “public use” can include more extensive public purposes.
• Kelo v. City of New London (2005): In a split decision, the court upheld the city’s plan to take private property for redevelopment, which expanded the term “public use” to include economic benefits. The ruling was highly controversial and prompted over 40 states to limit similar practices.
• Eychaner v. City of Chicago (2021): The court decided not to review the Kelo decision, so that ruling still stands, even though some justices disagreed with the choice.

Recent cases show how the courts have continued to stretch the definition of “public use” from traditional government projects to broader community and economic purposes. This shift has also fueled skepticism and controversy, leading states to pass tighter restrictions on eminent domain.

FAQ

What is the difference between eminent domain and condemnation?

Eminent domain lets the government to take ownership of private property when they deem that it's needed for public use, like building a school. But by law, they are required to fairly pay the owner of the property. Condemnation, on the other hand, is the legal process the government uses to make that happen.

For example, if your state’s Department of Transportation needs part of your land to build a new road, it would use its eminent domain power and then file a condemnation case in court to officially take the property. Remember, the steps may vary depending on the state, who is taking the land, and why it’s being taken.

How long does the eminent domain process take?

The timeline ultimately depends on state laws, the exact steps in the condemnation process, and how complicated the case is. Simple cases may be resolved in just a few months, while more complex cases can take a year or longer, especially if litigation is required.

Can eminent domain be used for private development?

This topic has resulted in many debates over the years. In Kelo v. City of New London (2005), the Supreme Court ruled that the government could take private property and give it to a developer if the project was meant to help the community by creating jobs or raising tax revenue. Because the decision was extremely unpopular and sparked considerable controversy, many states have passed laws that restrict the use of eminent domain for private development.

What happens if I have a mortgage on the property?

If you still owe money on your mortgage, the bank gets paid first from the money the government gives you. If the payment isn’t enough to cover what you still owe, you could still be responsible for the remaining balance. In some cases, you may be able to ask for more compensation to make sure you’re not left owing money.

Are there tax implications from eminent domain compensation?

Yes. Just like when you sell a property, your compensation from eminent domain is treated as a sale for tax purposes. In other words, if the payment you receive is more than what you originally paid for the property, you may owe capital gains taxes on the profit.

The bottom line: Know your eminent domain rights

Facing eminent domain can be highly stressful, since it gives the government the authority to take your private property for public use. The best way to protect yourself is by knowing your rights, staying proactive, and seeking legal counsel if needed. With the right information and support, you can make sure you're compensated fairly for your property and that you’re treated justly throughout the process.