Eminent Domain, Defined And Explained

You might not know what eminent domain is, but this government power could force you to sell your home and the land on which it sits.

How? Let’s say you buy a home on a large chunk of land. Years later, your local government decides this land would make an excellent home for a public park, or there is an expansion of a state highway and they need your land for those new lanes.

Eminent domain is the right of your local and state government to seize private land for public use, with compensation in return. It's essential for homeowners to understand how eminent domain works and what rights they have when the government wants their land.

Let’s take a look at the history of eminent domain and prominent eminent domain examples to learn from.

Eminent Domain Definition

Federal, state and local governments have the power to take your property for public use. This is known as the government's power of eminent domain.

But as a property owner, you have property rights. The government can't simply take your home and land. It must offer you just compensation for your property. This can get complicated, but it means that the government must make a fair offer – usually by offering to buy your private property for a specific sum of money – before it can take it through eminent domain.

This might seem like an awfully strong power for governments to have, but eminent domain traces its origins to the Bill of Rights of the U.S. Constitution, which contains an implicit reference to the ability. The federal government, along with state and local governments, all possess the power of eminent domain.

How Eminent Domain Works In Real Estate

If you own property, how might eminent domain impact you? What steps will the government take if it wants to claim your property for a public project?

There’s a process to eminent domain. The government won’t show up and say they’re taking your land tomorrow; they must follow a series of steps.

Let’s say the government wants to expand a highway to relieve traffic congestion. To make that plan work, it needs to purchase your residence and demolish it.

What usually happens is that the governmental authority that wants your land will offer to buy your property at a specific price. If you accept the offer, the sale goes forward and you can use the proceeds to find a new place to live. If you don’t like the offer, you can negotiate for more money.

If you don’t wish to sell under any circumstance or can’t come to an agreement on a price, these differences are resolved in a condemnation proceeding.

Takings

It’s been long established that governments can use eminent domain to take property, while offering just compensation, for something that they’re going to own and operate. However, public use can also mean a government taking property from a private entity on the theory that the project is going to benefit the public.

The test for whether something is beneficial to the public, though, is open to interpretation and there’s no shortage of controversy.

There are different types of taking, too:

• Complete taking: The government takes an entire parcel of land. Typically, governments are required to pay the property's owner the market value of the property under its highest and best use.
• Partial taking: The government body will only take a portion of a property owned by a private individual or entity. The government, for instance, might need just a slice of a property owner's land to expand a highway, but not the entire parcel.

There are also different time restrictions for these takings:

• Permanent taking: This is the most common form of eminent domain. In a permanent taking, the property that the government acquires never goes back to its previous owner.
• Temporary taking: This occurs when a governmental body takes a piece of property for just a set period before returning it to its owner. This could happen if a government is building a new road and needs a portion of private property for a construction easement. Once the construction project is done, the government will return the land it acquired to its owner.

State and local laws differ across the country, so the legal landscape in your community might look different than it does in another. But it's important to note that certain private businesses that operate under strict governmental regulations, like utility companies, can also be granted the power to exercise eminent domain where necessary.

Just Compensation

Compensation is considered just when the government taking a property offers a fair value for it, whether in the form of money or equivalent property. However, that’s the challenge: Property owners and the government must come to some decision as to what constitutes as fair.

This can be complicated because people often have an emotional investment in their homes, whether it be a starter or forever home. Courts generally rely on a fair market value for the property to determine just compensation. However, it’s often difficult to determine a fair market value.

Let's say a city wants to widen an existing road. To do this, the city government can use eminent domain to claim 10 feet at the front of a commercial property. However, if you were selling something, you would never sell just those 10 feet. Because there’s no existing market, it’s difficult, if not impossible, to determine a true fair market value for this type of government acquisition.

Public Use

The preamble to the U.S. Constitution states that the federal government should promote the general welfare of the people.

To help achieve this goal, courts have generally given wide latitude in terms of what constitutes public use under eminent domain.

Public use could be for a property that the government operates and maintains such as a road or park. But what about a new industrial park that'll provide hundreds or thousands of jobs to the community? That could also be considered public use. The key is for the government to prove that a project will benefit the public.

Condemnation Proceedings

What happens when you and the government can’t come to an agreement on what your property is worth? Typically, the government will file a lawsuit against you called a condemnation proceeding. During this action, the government will present its case about the project, how it’ll benefit the public and the value of your property and land.

As the defendant, you can challenge the legal authority of the government to take your property. The challenge? Governments have broad latitude in terms of what constitutes public use. Winning an eminent domain case, then, could be challenging.

Your other option is the more common occurrence: You’ll challenge the value the government has assigned to your property. You could end up with a battle of the appraisers – the real estate professionals who determine the value of your land and property – with the court deciding who is correct on your property's valuation: you or the government.

Appraisers can come up with different valuations for properties depending on how highly they value new additions and improvements to a property and which nearby properties they consider when looking for comparable sales.

Inverse Condemnation

There's an action related to eminent domain known as inverse condemnation.

This is when the modifications on a property taken by the government damage or hurt the value of nearby properties still owned by private individuals.

Say the government takes property and builds an oil refinery on it. The fumes from this refinery might lower the property values of nearby homes. Location and desirability are two notable priorities for home buyers; therefore, this can create an issue in the localized market.

The owners of these properties can file lawsuits against the government that took the property. If the owners win, the government must compensate them for the damages done to their properties.

History Of Eminent Domain

Eminent domain isn't new, and it isn't limited to the United States. You can trace the origins of this legal power to 17th century English common law.

The Founding Fathers of the United States also recognized the need to give the government the power to control land in the best interests of all citizens. They understood, too, that the government needed to provide property owners with fair compensation when taking their property. The Founding Fathers included eminent domain in the U.S. Constitution to resolve this.

The Fifth Amendment is better known for protecting those who are accused of crimes from having to give testimony against themselves in a courtroom. The amendment, though, also lays the ground rules for eminent domain with this statement: "[...] nor shall private property be taken for public use without just compensation."

This guarantee of just compensation was later given to the states in court interpretations of the 14th Amendment. The principles of just compensation and due process are intended to balance the competing forces of public and private interests.

7 Eminent Domain Examples

To understand how the right of eminent domain works, it’s best to see it in action. Check out some of the most prominent examples of eminent domain in United States history below.

1. PennEast Pipeline Co. v. New Jersey (2021)

In this case, the U.S. Supreme Court confirmed the right of a pipeline company to use eminent domain powers under the Natural Gas Act to use state-owned lands for private development. The Natural Gas Act permits private companies to exercise eminent domain to take property.

This ruling restated that states cannot actively acquire land to block interstate pipeline projects. The state of New Jersey argued that the 11th Amendment prevented the pipeline company from condemning state-owned state or conservation easements.

2. Puntenney v. Iowa Utilities Board (2019)

In more recent eminent domain cases, issues over pipeline constructions have been more prevalent. In this case, the petitioners believed the construction of the Dakota Access Pipeline over easements did not meet the constitutional definition of “public use” under both the Fifth Amendment of the U.S. Constitution and the Iowa Constitution.

The other argument was the possible climate change effects caused by the construction of the Dakota Access Pipeline. However, the Iowa Supreme Court approved the construction of the pipeline, as it met the characteristics of public use under the Iowa and United States Constitutions.

3. Kelo v. City of New London (2005)

In this pipeline case, the city of New London, Connecticut was granted through the right of eminent domain to seize several private properties and transfer ownership to New London Development Corporation, a private developer.

The plaintiffs refused to sell their property, which caused the city to condemn the properties and forced the plaintiffs to accept compensation. The plaintiffs, including Suzette Kelo, argued this was a violation of the “public use” element, as the land would be used for economic development rather than for public purposes.

The court ruled the development plans for the properties included public use, therefore serving a public purpose. The ruling allowed the transfer of ownership of the properties, as the wording “public use” isn’t confined to its literal meaning, but rather a general public benefit.

4. Berman v. Parker (1954)

In this case, Congress allowed the District of Columbia Redevelopment Land Agency to rebuild a district under the right of eminent domain. A department store owner in the housing district sued the agency with the argument that the seizure of the district violated his rights.

The court found no violation of his Fifth Amendment right, as the land agency planned on turning the land into low-income housing, which falls under the “taking” clause.

5. Chicago, Burlington & Quincy Railroad Co. v. City of Chicago (1897)

This case established eminent domain powers used by the state. Before this case, eminent domain powers were unregulated by the Fifth Amendment, which meant states could seize property for public use without compensation.

In the late 1890s, the city of Chicago wanted to connect a section of a road, which needed to cut across private property. Chicago condemned the land through a city petition and paid compensation to the property owner. The Quincy Railroad Company also owned part of the land and was awarded only a dollar, which provoked them to appeal.

The court ruled the state could take the land using eminent domain power if the original owners were awarded any form of compensation. The seizing of the land didn’t prevent any of the company’s use, including railroad tracks.

6. United States v. Gettysburg Electric Railway Co. (1896)

In 1896, Congress actioned eminent domain to remove the Gettysburg Battlefield from the Gettysburg Railway Company. The owners of the railroad company sued the government with the notion that the condemnation violated their Fifth Amendment rights.

The majority of the court ruled as long as the railroad company was compensated fairly, the condemnation was legal.

7. Kohl v. The United States (1875)

This was the first U.S. Supreme Court case pertaining to the federal government’s rights to eminent domain. In this case, the federal government acquired private land to build a customs office, post office and other government facilities in Cincinnati, Ohio, without providing compensation to the petitioners.

The petitioners claimed the government didn’t have jurisdiction to do so without proper legislation. They believed the government should’ve rather accepted an independent assessment of the land’s value before compensating.

The court ruled in favor of the government, supporting the government’s right to take the land under eminent domain rights.

Eminent Domain FAQs

We’ve answered questions about the limitations of eminent domain, how it’s used today and how it can affect you below.

What are the limits of eminent domain?

The government can only take property for a project that’ll benefit the public. The government must also make a fair monetary offer for the property it’s taking.

Can I refuse eminent domain?

Yes. If you do, though, the government that wants your land or property will file a condemnation proceeding against you.

What happens in a condemnation proceeding?

In a condemnation proceeding, you can argue before a court that the government has no right to take your property or that it’s not offering you a fair value for your land and property. The court will determine if the government is legally entitled to take your property and is making a fair offer for it.

What Is public use?

A government is only allowed to take private property for projects that’ll benefit the public. Governments typically have wide latitude in what constitutes a beneficial “public use.” Public use can be a city park or a public school.

How Is eminent domain used today?

The government’s use of eminent domain isn’t seen much, as it’s often contested by the public. Recent eminent domain cases have dealt with private pipeline projects and energy companies that use fossil fuels, as seen in the PennEast Pipeline Co. v. New Jersey et al. discussed earlier.

Cases involving regulatory takings have become more popular. These occur when the government has encroached a landowner’s property rights so much that the owner claims deprivation from economic benefits.

What are the four elements of eminent domain?

To exercise the government right of eminent domain, the four elements in the Fifth Amendment must be present: (1) private property (2) must be taken (3) for public use and (4) with just compensation.

The Bottom Line

The purpose of eminent domain is to give the government the power to launch projects that’ll benefit an entire community. This public use outweighs private property rights. Homeowners and property owners, though, are entitled to just compensation when the government wants to take their land.

Though eminent domain can happen to any homeowner, the benefits of owning a home far outweigh the risks. Take action and start your mortgage application with the Home Loan Experts at Rocket Mortgage^®.