What Is Just Compensation in An Eminent Domain Case?
In California, eminent domain gives public authorities the power to take privately held property, even where the owner of the property doesn’t want to sell. The Fifth Amendment has made it mandatory for eminent domain to be employed only for “public use,” such as for bridges, roads, schools, and hospitals among others. The government is required to pay the property owner “just compensation.”
It will take an experienced real estate attorney to evaluate the circumstances surrounding your case and ensure you are getting just compensation.
Just Compensation in California
Just compensation in a situation where there is the total taking of the property is simply the present value of the entire property. In a partial taking scenario, just compensation can be calculated as the difference between the property value before the taking and after the taking.
This means the difference between the before and after the value of a property. This difference is the total amount of just compensation due.
The standard for determining just compensation is to basically place the property owner in the exact same economic position as they would have been if the government had not taken the property. This generally involves a battle of expert appraisers for determining the best use of the property. There may be a disagreement between the property owner and these experts regarding the taking value.
The court will ultimately decide the value at trial after extensive pre-trial procedures if common ground cannot be attained by the court. This will include ascertaining a mandatory settlement offer from the taking authority, which the property owner will need to accept.
The typical issue in an eminent domain case is the infringement on an owner’s right to obtain just compensation for the property being possessed. The State and Federal law of eminent domain allow the court to calculate just compensation for taking real property wherever the owner of the property contests the compensation amount.
Factors Involved in Calculating Just Compensation in California
Fair Market Value of Land
This is the price the property owner will receive if they were willing and not forced to sell the land. This can be used for determining the fair market value of the land. For instance, the sale price the landowner will receive if they were to auction their property can be considered as fair market value.
Fair Market Value of Land Improvement
Land improvement refers to those structures, which enhance the value of the seized land. This can be barns, detached dwellings, and separate garages. Intangible land improvements need to be taken into consideration as well. For instance, land near a scenic area or one with natural resources can be considered a land improvement.
This is a relevant factor in partial land takings. Just compensation needs to include the fair market value of the part being seized along with any decrease in the sale value of the remaining land. It’s also vital to consider whether the residual property can still be put to its best and highest use. There are several factors that can damage the value of the remaining property.
These are ancillary damages that are again related to partial taking. These ancillary damages include the costs associated with replacing utilities servicing structures on the remaining land. For instance, if the property seizure removed a buried oil tank that serviced a dwelling, the property owner will need to pay the costs of installing a new one. Such costs should be factored in determining just compensation.
It is important to understand that the government can also deduct the value of any enhancements made by the condemnation to the remaining property. This deduction will be made in the form of a benefit from the total eminent domain payment made.
Methods of Eminent Domain Property Valuation
These are the three commonly used methods of valuing a property during eminent domain:
The seized property is compared to the sale value of a property recently sold with similar characteristics. This type of valuation is usually used for appraising residential properties.
This is best used for properties that generate income. The operating income of the property needs to be determined first. Capitalization rate and income are then used to arrive at the value.
This approach considers a very specific and unique structure of the property that the owner will need on any future property. In such an approach, the cost of replacing the new structure minus any depreciation on the structure is added to the value of the empty land.
You should understand that the government’s offer is not always “just compensation”. You don’t need to accept the offer only because you receive a Notice of Condemnation supported by a written appraisal. You have important rights under California law to ensure you are fairly compensated for your property.
Choose an Experienced Real Estate Lawyer to Pursue a Viable Legal Strategy
The seasoned attorneys at Peterson, Martin & Reynolds LLP have experience with public agencies looking to use eminent domain to seize property without paying fair compensation. Our attorneys work hard to ensure that our client’s rights are protected and that they obtain just compensation. To request your free, no-obligation consultation, call us at (415) 849-2564 or complete this online form.