Eminent Domain: Meaning and Types

About Eminent Domain:

Eminent domain is the power of the government to take private property and put it to public use, following the payment of just compensation. This is a practice that occurs in the United States and in many different countries under different names. It may not seem fair to the owners of the property, and eminent domain lawsuits, especially when the owner feels they are not justly compensated, are fairly common.

KEY TAKEAWAYS:
  • Eminent domain is the right of governments like the United States to usurp private property for public use, following fair compensation.
  • Everything from airspace, land, and contract rights to intellectual property is subject to eminent domain if a case can be made for its public use.
  • The legal debate surrounding unfair invoking of eminent domain, such as when property owners are not fairly compensated, is called inverse condemnation.
  • Both an entire property and a partial property can be seized, as well as the potential for a temporary seizure.
  • There have been some instances where a private party has used eminent domain seizures under the guise of public improvements.

Understanding Eminent Domain:

Eminent domain is a right granted under the Fifth Amendment of the Constitution.1 Similar powers are found in most common law nations. Called “expropriation” in Canada, “compulsory acquisition” in Australia, in the U.K., New Zealand, and Ireland, eminent domain is known as “compulsory purchase.”

Private property is taken through condemnation proceedings, in which owners can challenge the legality of the seizure and settle the matter of fair market value used for compensation.2 The most straightforward examples of condemnation involve land and buildings seized to make way for a public project. It may include airspace, water, dirt, timber, and rock appropriated from private land for the construction of roads.

Eminent domain can include leases, stocks, and investment funds. In 2013, municipalities began to consider using eminent domain laws to refinance underwater mortgages by seizing them from investors at their current market value and reselling them at more reasonable rates.3 Congress passed a law prohibiting the Federal Housing Administration from financing mortgages seized by eminent domain as part of the FY 2015 budget.

Types of Taking:

The government decides what use it has of your property. Each category of use is taken, used, and compensated differently. Unfortunately, property owners find they do not have much say in which manner their property is seized, and are hesitant to enter into lengthy legal battles against the government.

Complete Taking:

Complete taking, also known as total taking, is when the entire piece of land is seized. Despite the amount of just compensation being the highest market value, many do not feel they are being fairly compensated. When large construction projects or utilities need the entire parcel in order to function, complete taking is usually the resulting type of condemnation.

Partial Taking:

Partial taking under eminent domain is exactly what it sounds like—a partial piece of the property is taken. This is slightly more complicated than a complete taking since it is much easier to value a piece as a whole than it is to assign fair value to each individual part. the government realizes that the seizure of one aspect of the property may decrease the value of the remainder, which is why there are two components considered when a property is partially taken. The first is the value of the property that was acquired, and the second is the loss of value to the property remaining, called the remainder.5

Temporary Taking:

The taking of a property for a set period of time is known as temporary taking. Many owners consider this type of eminent domain a form of leasing, and for some, it can be a breath of fresh air. A common example is when a construction project requires easement of the property. The easement is paid out based on the rental value of the land and can provide some owners with a steady stream of income for a piece of property they may not have been able to lease under other circumstances.

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