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One possible
challenge to the government's right to
take can be raised where the project for
which the property is being taken is not
for a "public use." The
Fifth Amendment of the United States
Constitution allow private property
to be taken by eminent domain only for a "public
use."
The term
"public use" has been
interpreted very broadly by the Courts.
The project need not be actually open to
the public to constitute a public use.
Instead, generally only a public benefit
is required. Elimination of
blight through redevelopment projects,
for example, is a public benefit which
courts have held satisfies the
"public use" requirement of the
Federal Constitution. This is true
even though the property will typically be
transferred to a private redeveloper
and may never be open to the general
public. It usually doesn't
matter if the redeveloper may be doing
nothing more than building a new mall or a
complex of movie theaters.
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BOOK:
Takings:
Private Property and the Power of Eminent
Domain |
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BOOK:
Private
Property and the Constitution - a
good read - explores the social and
economics of Eminent Domain. What is
"for the good of
mankind...". Are we robbing land
from one to give to another - more mighty,
more powerful? Who has a right to their
land?
Take a "look inside" this book and
read some excerpts-
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When a buyer and a seller
negotiate a price for property, they often
discuss the prices similar properties have
sold for in the recent past. Similarly,
appraisers use sales of similar properties
that have taken place at or near the date of
value to help arrive at an opinion of value
for the subject property. These similar
properties have been referred to as
"comparables." Frequently, there
are disagreements over whether these
"comparable" sales involved
property that is really equivalent to the
property whose price is being negotiating.
When each expert witness gave you his or her
opinion as to the fair market value of the
property in this case, he or she based his
or her opinion largely on the prices
actually paid in sales of other properties.
You must decide the usefulness of the
evidence of each sale in determining the
market value of the property taken in this
case. [For example, if an expert based
his or her opinion on prices paid for other
properties that you do not think are similar
to this property, and the expert did not
properly account for such differences in his
or her analysis, his or her opinion of the
fair market value should not be given much
weight in your deliberations.]
Here are some of the
questions you may consider in deciding if
the sale price of other property is helpful.
1) Is
the other property of similar size?
2) Does
the other property have a similar location?
3) How
close to the date of taking was the other
sale?
4) Were
both the buyer and seller negotiating
freely?
The experts have
mentioned other factors to show the
similarity or dissimilarity of other sales.
It is up to you to
sort out the differences with what you think
a buyer and seller, freely negotiating at
arm's length, would consider in arriving at
a sale price for the property taken in this
case. Give the evidence on each of those
other sales whatever weight you think it
deserves in determining the market value of
this property
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C. Income Approach
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People often buy
property as income-producing investments and
the property's income stream is another way
of measuring a property's fair market value.
Another way to look at it is to see what an
investor would pay for a piece of property
in order to get income over time. For
instance, suppose he or she decides to
invest in real estate and knows that he or
she could generally expect a seven percent
per year return from such an investment.
That means that on an investment of one
hundred dollars he or she could expect to
receive income of seven dollars per year. If
he or she invests one hundred thousand
dollars, he or she could expect to receive
seven thousand dollars income every year.
Suppose he or she is considering the
purchase of a piece of property that
provides seven thousand dollars a year in
rental income after all expenses. He or she
should be willing to pay one hundred
thousand dollars for that property because
that is the amount necessary to invest in
order to get an annual income of seven
thousand dollars.
The expert witnesses
have referred to this way of arriving at the
property's value as the “capitalization of
income” formula because it gives you the
amount of money or capital that should be
invested to purchase the property in order
to receive the income which the property
produces.
As
you have heard, experts can differ as to [indicate
here as appropriate: the rate of return; the
property's potential or anticipated net
income on the date of taking, i.e., the
income that could have been expected if the
property were available for lease on the
date of Experts can even disagree as to
the importance of the capitalization
approach in arriving at a fair market value
of the property.
[Discuss contentions of
parties here]
When you consider
evidence concerning the income produced by
the property, you should only consider it as
it affects the market value of the property.
[Insert name of property owner(s) here]
is not entitled to be paid extra for losing
income after the date of taking, because he
or she will be fully compensated for his r
her lost income by receiving the property's
fair market value.
D. Cost Approach The
market value of the property may be
influenced by the value of the structures on
it. The value of the structure(s) is a
factor that may affect market value. You
must determine the value of the land as
enhanced by the value of the structures on
it. Suppose that the highest and
best use of farm land might be to develop it
into residential building lots. In that
case, a barn would not enhance the value of
the land at all. In fact, it might even
reduce the value of the land because of the
expense necessary to tear it down so that
houses could be constructed.
Suppose, however,
that someone interested in buying property
wants to use it for a home and the property
already has a house on it. It is logical to
assume that such a house would enhance the
value of the property; certainly, the buyer
would want to know how much the house itself
is worth; that is, the reproduction cost of
the building -- how much it would cost to
build one like it, less the wear and tear,
or depreciation, the building has suffered |
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| What
is Eminent Domain? Can your property simply be
taken from you? |
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| "Eminent
domain" (also called
"condemnation") is
the power of government agencies to
acquire property for "public
use" so long as the government pays
"just compensation." Recognized
public uses for which the power of eminent
domain may be used include, among other
things, schools, parks, roads, highways,
subways, fire and police stations, public
buildings, and the elimination of
blight through redevelopment (as in
Asbury Park - or not?) A key attribute of
eminent domain is that the government can
exercise its power of eminent domain even
if the owner does not wish to sell his or
her property. |
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Even though the vast majority of
government agencies possess the power of
eminent domain, on occasion, a successful
challenge to the government's right to
take a particular property for a
particular project can be made. You should
be cautioned, however, that such
challenges are the exception, not the
rule, and usually result only in a delay,
rather than outright prevention of the
government's right to take.
Typical challenges to the right to take
are for failure of the government to
follow the proper procedural steps towards
eminent domain. If the government fails to
follow the proper procedures, a right to
take challenge is sometimes possible.
Again, however, it must be remembered that
the circumstances allowing a successful
challenge to the right to take are rare.
Each case must be evaluated on its own
facts and experienced eminent domain
counsel should be consulted. Seeking
compensation for the taking, rather than
challenging the government's right to
take, will be the property owner's usual
remedy.
Also see: Our Commercial
Real Estate Glossary
and our
Appraisal
Guide |
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Every