The Real Deal - April 2011
Basics of Condemnation
by Thomas C. Beach III
Condemnation, or eminent domain, involves the governmental taking of private property for a "public use" within the meaning of the Takings Clause of the Fifth Amendment to the U.S. Constitution. The power of eminent domain vests at all levels of government, both state and federal, but the procedures vary depending on the ultimate purpose for which the property is being taken.
Any discussion of condemnation or eminent domain must begin with a reference to the case of Kelo, et al. v. The City of New London, 545 U.S. 469 (2005). In that case, approximately 15 privately owned properties were targeted for condemnation by the City of New London pursuant to a broad redevelopment plan that the City wished to implement. The redevelopment would ultimately include the construction of business/manufacturing facilities and residential properties. The 15 petitioners were the owners of residential properties and were unwilling to negotiate an arms' length transfer of their respective properties to the City of New London. A condemnation proceeding ensued, the City of New London was ultimately successful up through the Supreme Court of Connecticut, and the United States Supreme Court was asked to address whether the City's decision to take the property for the purpose of economic development satisfies the "public use" requirement of the Fifth Amendment.
After much discussion, the Supreme Court affirmed the taking, and concluded that the "public use" requirement is satisfied when there is an ultimate economic benefit generally to the public which will result from the broad redevelopment plan, which would ultimately produce additional tax revenues, and which would upgrade an area showing signs of age and some deterioration. It is of particular note that this area was not deemed to be a "blighted area," but one whose manufacturing and residential base was diminishing.
Typically, condemnation falls into two categories: first, the quick take condemnation; and second, the slower straight condemnation proceeding initiated by a state, subdivision or other governmental entity (for example the Maryland Stadium Authority). Quick take situations are limited to more or less emergency situations such as road construction projects, but must be specifically authorized by statute and/or by constitutional amendment. Certain jurisdictions in Maryland have quick take authority while others do not. When quick take authority is absent, the condemning authority must first file suit, set forth the public use for which the property is required, and state that, although it has attempted to acquire the property through negotiation, it has been unsuccessful.
All condemnation is usually preceded by an attempt to negotiate an arms-length transfer of all or a part of one's private property. The condemning authority usually approaches the property owner with an appraisal in hand, either performed internally (such as by a State Highway Administration land appraiser) or by an outside appraisal company. The legal requirement is that the owner be paid the "fair market value" of the property taken. In the event of a partial take, the condemnor must pay not only the fair market value of the part taken, but also the value of the damage done to the remainder of the property by reason of the take and by reason of the future use by the condemnor or the public of the part taken.
When a property owner is notified that a condemning authority wishes to take all or part of the subject property, the owner would be well advised to listen attentively to the condemnor's representative and to secure as much documentation from the condemning authority as is available, especially a copy of the condemning authority's initial appraisal. Under no circumstances should the property owner elicit his own independent appraisal until he or she has received the advice of counsel.
When appraising property that is the subject of a condemnation it is not enough to simply secure a real estate agent's opinion of the value of the property, but involves a thorough evaluation and investigation of all pertinent facts for the property and a careful investigation into the property's full use potential. The term "highest and best use" means the highest and best use to which the property can potentially be put, not the particular use to which it is presently being put. This includes the reasonable possibility of rezoning.
Only after a full investigation of the maximum potential for the subject property (for example, its redevelopment), usually with the assistance of a civil engineer, can an experienced real estate appraiser then evaluate the full fair market value for the subject property. Since all prior appraisals of the subject property are subject to production during discovery, any off-the-cuff appraisal obtained in haste, without a thorough examination, can be very damaging to your case. It will most likely be admissible in evidence before the jury that will ultimately determine the full fair market value of the property.
Partial take cases are even more involved than total take cases because of the two additional items which must be included in the valuation process: damage done to the remainder by reason of the take and damage caused by reason of the future use by the condemnor of the part taken.