Eminent Domain, Fifth Amendment Taking, Just Compensation

Eminent Domain is a process whereby any governmental entity can take private property for a public use.

A Governmental entity can be the Federal, State, County or City government.

Can the government take my property by Eminent Domain?

Yes if they pay you just compensation.

The 5th Amendment to the US Constitution says “No person shall…be deprived of private property without due process of law, nor shall private property be taken for public use, without just compensation.”

There are four specific factors that the 5th Amendment says must come together in a case of Eminent Domain.

They are:

It must involve private property
It must be taken
For public use
There must be just compensation paid for the private property

The following article will look at the history and current status of Eminent Domain and what the future trends appear at this time to be.

History Of Eminent Domain

The recorded history of eminent domain goes all the way back into biblical times.

1 Kings chapter 21 tells the story of King Ahab of Samaria offering Naboth compensation for Naboth’s vineyard which was next to King Ahab’s palace.

The origins of modern eminent domain can be traced to the Magna Carta in 1215 England.

Article 39 prohibited the King from taking the land of any freeman without due process of law.

Article 28 of the Magna Carta required the King to pay for any personal property taken from a subject.

This later was expanded to include payment for real property taken by the King.

In 1763 William Pitt, Earl of Chatham, gave a speech in the House of Lords in England to rally support against a Excise Bill:

“The poorest man may in his cottage bid defiance to all the force of the Crown. It may be frail; its roof may shake; the wind may blow through it; the storms may enter, the rain may enter – but the King of England cannot enter; all his forces dare not cross the threshold of the ruined tenement.”

Pitt’s sentiments were noble, but they were not factual with regard to Eminent Domain in England.

The 1780 Massachusetts Declaration of Rights stated, “Whenever the public exigencies require that the property of any individual should be appropriated to public uses, he shall receive reasonable compensation therefore.”

In 1789 the French Declaration of the Rights of Man had a provision which said, “Property being an inviolable and sacred right no one can be deprived of it, unless the public necessity plainly demands it, and upon condition of a just and previous indemnity.”

In 1791 the Bill of Rights also known as the first 10 Amendments to the United States Constitution was ratified.

A portion of the 5th amendment stated, “…nor shall private property be taken for public use, without just compensation.”

This provision of the 5th amendment has become known as the Takings Clause.

Prior to the establishment of the United States of America after the Revolutionary War, the American Colonies by colonial statutes and English Common Law recognized the concept of Eminent Domain.

From this brief history we can see that the concept of Eminent Domain is an ancient concept.

Understanding Eminent Domain

Eminent Domain’s legal process is called condemnation.

The way the process is done can vary from State to State.

In the typical case, the government decides it needs a parcel of land or a building and the owner is contacted.

The government offers a price for taking of the property.

Thus the process of Eminent Domain may be referred to as a taking.

At this point there are 3 main directions the process can go:

If the property owner agrees to the sale and price, he is paid and gives the government a deed. This is the simplest process but also the process that is used the least.
If the property owner does not agree with the sales price, the owner and government go to a court hearing to establish fair value. This involves Lawyers and Appraisers and in many States the property owner can ask for a jury to determine fair value.
The property owner can refuse to sell. The government will go to court where they have to prove they tried to negotiate for a sale and the taking is for public use. If the government wins, an appraiser says what fair market value of the property is. The owner is paid and then evicted from the property. Each side can appeal the courts decision.

There can be several types of takings:

In a Complete Taking the entire property is bought.
In a Partial Taking only a portion of the property is bought. The owner must be paid the value of the land taken plus what the remaining property is devalued because of the taking.
If it is a Temporary Taking the property is only used for a limited period of time. The owner is paid for any losses resulting from the taking but keeps the land. One example of this is using private land to access a public project.
Then there is a Right of Way or Easement Taking. The usual case is for building a road or installing public utilities. The owner has the use of the land but not the ownership of the land. Payment is made for the owner’s losses but at a reduced amount since the owner retains the right to some use of the right of way or easement.

Using Eminent Domain, any governmental entity has the the power to take anything they deem is needed for a public purpose.

All they have to do is prove the property is needed for a public purpose and pay fair market value for it.

Eminent Domain’s Elements Or Factors

Private Property; is land, things attached to the land or attached to buildings on the land, leases, options, stocks and other items such as personal belongings of people.
Taking; property taken can be the entire property, a portion of the property or a reduction in the value of the property. Value can be reduced by noise, lack of access and taking of dirt, rock or timber from the property. A Taking can be restricting the property’s usage such that the economic value of the property is reduced or completely vanishes.
Public Use; the property must be taken and used to benefit the public and not specific individuals. (See Kelo below).
Just Compensation; basically fairness to both the private property owner and government as discussed below.

Some Examples Of Takings

There are property rights that are Constitutionally protected such as Water Rights.

An example of this would be waterfront property that a portion is taken to construct a highway along the shoreline.

The former waterfront property owners are compensated for the loss of waterfront property.

The right to reasonable freedom of interference of the space above private land is often litigated.

When aircraft flights over private land become a nuisance because they fly so low and so frequently that they disturb the quiet enjoyment of the land.

In some instances the aircraft flights can be determined to be a taking and compensation received by the land owner.

A taking could be when the presence of toxic fumes impair the air over a private property.

It is usually not considered to be a taking when public improvements such as streets, highways, and public work projects do not take a portion of private land.

Even if they hinder or reduce the sale price of land in the area.

Another area of government regulation not usually considered a taking is regulating property usage under the State’s police power.

The State’s police power is commonly defined as the ability of government to regulate the health, safety, welfare and morals of it’s citizens.

An example of a regulation under police powers would include health regulations such as the requirement that a property successfully pass a percolation test, (perc test), to get a permit to install a septic system.

If the property does not pass the perc test, that is not considered to be a taking by government that the property owner can receive compensation for.

It is not the government’s fault the property does not perc!

That is just one reason why I never recommend anyone purchase raw land without knowing that it can pass a perc test before Closing on the sale of that property!

If it doesn’t perc it is useless as land to live on unless the county will approve the use of composting toilets.

In that case the value of the land is still reduced below the value if the land had passed a perc test.

What Constitutes Public Use?

Whether a use is considered public is a question for the courts unless the State legislature has set out specifications regarding public use.

In those cases the courts recognize the legislative intent.

What is public use initially was defined as use by a broad segment of the public.

This definition was broadened to include those things which could benefit the public such as trade centers, municipal civic centers and airport expansions.

The U.S. Supreme Court even broadened the definition of public use to include condemning private property to beautify a community.

In 2005 the U.S. Supreme Court approved the condemning of private property to benefit private corporations if there was an economic benefit to the government.

For more information see Kelo and its aftermath later in this article.

State Courts can also define what is a public use.

The Michigan Supreme Court approved the condemnation of private property so General Motors could build a new plant.

The theory was that the General Motors plant would bring economic benefits to the community. (Poletown Neighborhood Council v. City of Detroit, 410 Mich. 616, 304 N.W. 2d. 455 [1981]).

What Is The Definition Of Just Compensation?

Fair Market Value is the usual method of determining Just Compensation.

Fair Market Value is defined as the price that a willing Seller and a willing Buyer would agree to for a sale of real property.

However, an Eminent Domain process does not usually involve a willing Seller whose property is on the market.

In addition there is a Buyer – a governmental entity – who has the ability to use coercion or force to get the Property Owner to sell the property being condemned.

Since the property being condemned is not on the market for sale, the owner can be easily put at a disadvantage in negotiating with the governmental agency.

This often results in a court battle over the property’s Fair Market Value.

This court battle can end up being a battle between the government’s appraiser and the property owner’s appraiser.

When this happens the property owner usually comes out ahead by requesting that a jury make the determination of Fair Market Value if a jury is allowed under the State’s Constitution or Laws.

Sadly, there are instances where the government discounts the appraisal they obtained on the property.

The price they offer the land owner is less than just compensation or fair market value.

The government’s attorney may try to keep the appraisal the government obtained out of the court record by claiming it is a part of the Attorney’s Work Product.

Attorney’s Work Product is normally exempt from court disclosure.

In one case I know about, the land owner happened to hire the same appraiser the government had hired.

That appraiser’s office mistakenly sent the property owner a copy of the same appraisal they gave the government.

The property owner’s attorney was delighted to learn that the appraisal form said it was the appraisal paid for and sent to the governmental entity.

That appraisal was for several thousand dollars higher than the amount that the government had offered the land owner.

The property owner ended up getting the amount on the appraisal sent to the government instead of what the government offered.

How Is Just Compensation Determined?

In 1890 the U.S. Supreme Court held that the Fifth Amendment requires the compensation for Eminent Domain Takings must be fair to both the public and the property owner. (Searl v. School District No. 2 of Lake County, 133 U.S. 553, 10 S. Ct. 374, 33 L.. Ed. 740)

There is no exact formula for determining just compensation.

The value should be determined by the reasonable uses the property is suited for.

The following should be considered:

History and general character of the area
The suitability of the land for future buildings
Government’s reason for the taking

The best use of land is normally considered to be the use at the time the government condemned it.

This is true even if the government has different plans for the land’s future use.

Other factors relating to the value of the land are to be taken into consideration.

These include:

Crops growing on the property
Trees on the property
Minerals on or under the property
Rental Income, if any, from the property
Any other item of factor that would help in determining the property’s value

The proper measure of compensation is the owner’s loss instead of the government’s gain.

The owner should be placed in the same position, financially, as he would be if the property had not been taken. (Monongahela Navigation Company v. United States, 148 U.S. 312, 13 S. Ct. 622, 37 L. Ed. 463 [1893])

The owner should be paid in cash with the amount based on the value of the property on the date it is deeded to the government or other entity.

Until that date, interest should be paid on the court determined value of the land.

Kelo v. City Of New London

New London, Connecticut is a seaport city on the northeast coast of the United States.

Named after London, England this Connecticut city is even located on a river named the Thames River after the river that flows by London, England.

In 1996 the population of New London was 28,000 people.

The area was negatively affected when the Naval Undersea Warfare Center closed down and transferred some 1,000 employees and their family to Newport, Rhode Island.

In January 1998, the State of Connecticut issued bonds to be used for economic development of New London’s Ft. Trumbull neighborhood.

This was an area near the 1800’s Ft. Trumbull and it overlooked the Thames River.

In February 1998, the Pfizer Pharmaceutical Company said it would open a research facility in New London.

A private company, the New London Development Corporation (NLDC) that is the development agency for the city began considering a new development for the city.

In 2000, the State of Connecticut and the New London City Council approved NLDC’s plan. NLDC proposed a development on 90 acres of adjoining land that contained 115 privately owned homes and lots.

This area was known as the Ft. Trumbull neighborhood.

In November NLDC started condemnation procedures in the Ft. Trumbull Neighborhood.

NLDC’s plans were to convert the 115 privately owned homes and lots into 7 new parcels to contain a hotel and convention center, upscale residences, office space, parking and new marinas on the Thames River.

These new developments would not be government developments, but private company developments.

Developments made possible by a government taking of private land for the benefit of private developers who could not take private land by Eminent Domain for themselves!

The NLDC reasoning was that this new development would benefit the public with increased tax revenue, more jobs and better usage of the Thames River waterfront.

In June 2001, Pfizer opened its new research facility.

The Ft. Trumbull residents realized that they would have to bring a law suit if they wanted to save their homes.

What was brewing turned out to be one of the most watched court battles in the history of Private Property Rights versus Government’s Eminent Domain Rights in U.S. History.

Background To Round One Of The Battle

The New London City Council considered NLDC’s plan in 1998.

In 2000 the necessary Connecticut state agencies and the City of New London approved a Municipal Development Plan (MDP) authorizing the NLDC to start acquiring properties.

The NLDC voted to use the authority granted it by the city to use Eminent Domain against those residents of the Ft. Trumbull neighborhood who would not sell their property.

In November 2000 the NDLC started condemnation actions to acquire several properties from their private owners.

Homeowners objected to the condemnation for various reasons:

Some had invested considerable work in their property
Others lived in homes that had been in the family for generations
Susette Kelo, an Emergency Medical Technician, loved her pink house and enjoyed the view of the Thames River

None of the Ft. Trumbull residents were opposed to economic development but they were not convinced that the taking of their property was necessary under the NLDC plans.

Round One, The Battle In State Court

Ft. Trumbull residents filed a law suit against the City of New London asking for a permanent injunction barring the city from condemning their homes.

This resulted in a 7 day bench trial (no jury, just a judge to make a decision) in the Superior Court of Connecticut in 2002.

The judge spoke of the “conflicting dreams” of the land owners and the city. The private property owners wanted to:

“Live out the typical American dream of abiding and owning in peace homes and property that they had chosen.”
“Any threat to that dream is understandably forcefully and emotionally opposed as it should be in a free society.”

The judge also recognized that the city’s desire was “to improve the city’s economic and social well-being.”

The trial judge gave a split decision.

Ruling some of the NLDC proposals were valid under Connecticut’s constitution and laws and some were “too vague and uncertain to allow the court to conclude the takings are necessary and would not be unreasonable.”

Both the private land owners and the city appealed the trial court’s decision to the Connecticut Supreme Court.

Round Two, The Battle In Connecticut Supreme Court

State Supreme Court decisions are arrived at differently than lower court’s decisions.

Typically there is time limited oral argument by attorneys for either side and the paper record from the lower court is reviewed to see if the judge handled it appropriately.

The points of law argued by each side are reviewed and then the State Supreme Court Justices give their opinion.

By a 4-3 decision, the State Supreme Court ruled against every argument of the private land owners and ruled in favor of every argument of the City of New London. (Kelo v. City of New London, 268 Conn. 1, 843 A. 2nd 500 [Conn. 2004])

The private land owners filed a petition asking the U.S. Supreme Court to hear the case and the U.S. Supreme Court granted the request on September 28, 2004.

Others Join The Private Property Owners

Legal commentators felt the Supreme Court’s decision “will determine whether private ownership has any meaning left or whether we really live in a command economy, like the old Soviet Union, where government can expropriate property whenever it is profitable to do so.”

Previous Supreme Court rulings had given municipalities a wide latitude with which to say the taking was necessary.

Twenty-five friend of the court briefs were filed in support of the private land owners.

These briefs came from organizations such as the National Association for the Advancement of Colored People (NAACP), the American Association of Retired Persons, the Cato Institute and the Pacific Legal Foundation.

These briefs expressed concern that property owned by churches and minorities could be taken by condemnation with no one to restrain government’s power.

Round Three, The Battle In The U.S. Supreme Court

In 2005 the U.S. Supreme Court affirmed the Connecticut Supreme Court’s decision.

A governmental entity could take private land and give it to private parties, private corporations, who could not condemn land and take it themselves, if the land was used for a public purpose!

The majority, 5-4 decision, was written by Justice John Paul Stevens.

The Court applied the term “public purpose” broadly so it could cover a plan that would add jobs and revenue to the city even if much of the property taken would not be open to the general public.

In the minority opinion written by Justice Sandra Day O’Connor, she pointed out that the Court had turned its back on long-established rulings that government can not take property from one private owner and give it to a private person or corporation.

O’Connor said, “under the banner of economic development all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded-i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public-in the process.”

As a result of the U.S. Supreme Court ruling, Susette Kelo lost her pink house and view of the Thames River and all other property owners in the Ft. Trumbull neighborhood lost their homes, also.

Some that had been in the family for generations.

Round Four, Several States To The Rescue?

Prior to the Kelo decision, 8 States had laws forbidding Eminent Domain takings of private property for economic development. (Arkansas, Florida, Illinois, Kentucky, Maine, Montana, South Carolina and Washington).

On August 3, 2005 Alabama became the ninth State to restrict the use of Eminent Domain for private economic development.

The Institute For Justice has identified some 10,000 cases in a five year period where local governments used or threatened to use Eminent Domain to take private land and homes and give it to another private party or entity!

Polls taken after the Kelo decision show that 80-95% of all people polled opposed the U.S. Supreme Court’s decision.

This included people from all across the political, gender and racial spectrum.

Legislators from 47 States introduced over 325 measures to protect private property from Eminent Domain seizure by April 2006.

Congress passed a law (Pub. L. No. 109-115, 119 Stat. 2369 (2005)) prohibiting private developers from obtaining land by Eminent Domain receiving transportation funds.

But when it all shook out, only 14 States passed laws that gave a real increase in the protection of private property rights!

Texas passed legislation forbidding the use of Eminent Domain for economic development but allowing the use of Eminent Domain for community development”, terms used interchangeably meaning the law has no teeth!

Other States allow Eminent Domain takings for blight.

A term that has been used to describe downtown Las Vegas as well as Times Square in New York City.

States such as Pennsylvania and Minnesota passed very effective reforms against Eminent Domain abuses, only to exempt the largest population areas in each State from those reforms!

The most effective results have been in States where the voters considered referendum measures to ban or curtail private property condemnation to facilitate economic development.

Referendums in 10 of 12 States were worded strong enough to provide real protection for property owners.

The Ft. Trumbull Neighborhood In New London, Connecticut 13 Years Later

Thirteen years later the former Ft. Trumbull Neighborhood land is a vacant urban prairie.

After the U.S. Supreme Court’s ruling the original development deal fell apart and there has not been a developer found who is interested in the land.

Instead of a new economic development there are 90 acres of land where 115 plots of private land and homes used to be.

In 2008 the construction company that was to develop the land backed out – insufficient funds to do the development.

In 2009 Pfizer left New London and sold its building to a submarine builder in 2010.

A new plan floated in 2010 also failed to materialize.

As of 2018 New London, Connecticut’s Ft. Trumbull neighborhood is still empty.

But there is one reminder left of what used to be.

“Before it could be demolished, Susette Kelo’s little pink house was purchased by a local preservationist and moved to another New London neighborhood, about a mile away from Fort Trumbull.” (Today in Connecticut History, June 23, 2018).