An Introduction To Eminent Domain. By Barry A. Ross, Esq.

Introduction
The government's right to use eminent domain is found in the United States Constitution and the California Constitution.   These provisions have been there since the constitutions were created.   There are two primary restrictions.   First, the government must provide "just compensation."   This means "fair market value."   Such is the main area of dispute in eminent domain actions.   Second, the property can only be taken for a "public use."   This is a controversial area.   Frequently, the government will take one person's business so that another person can conduct a business at the same location.   Sometimes the businesses themselves are the same or similar.

Eminent Domain Defined
Eminent domain is a procedure whereby the government acquires all or a portion of property for a public use upon paying just compensation.The government may be the U.S. government, the State of California, the County of Orange, a city, a water district, a redevelopment agency, or any other government agency. There has been much publicity in Orange County lately about eminent domain because of Cal Trans widening the various freeways. Eminent domain is not limited to freeway widening projects. It may include projects as diverse as a new city hall, a shopping center, an office building, a bicycle path or a golf course.  

Inverse Condemnation
Inverse condemnation is the opposite of eminent domain.   Inverse condemnation occurs when the government engages in some activity which diminishes the usefulness and value of the property.   The property or business owner requests the government to compensate for the loss of use and loss of value of the property or business.   Inverse condemnation can arise in a variety of situations.   The government constructs an airport next to the home, and airplanes fly over the home causing the home to shake and the occupants' nerves to rattle.   The government realigns the streets in such a way that business patrons are not able to access the business as easily as before.   The government makes repeated announcements year after year that it is planning to condemn the property or business and then fails to do so.   The repeated announcements depress the value of the property or business.   No one wants to buy the property or business because of these announcements.  

Or the government changes the zoning of the property from single family residential to agricultural.   The property owner may use the property to grow vegetables, but the property owner cannot construct a residence.   This is called downzoning.   There has been much litigation over downzoning.   The usual problem with inverse condemnation is that the government does not consider that it damaged the property or business.

The government contends that it is simply regulating the use of the property or business. The property or business owner must convince the government and especially the judge or jury that the government's action with regard to the property or business is unreasonable.

The Disclosure Requirements
Current law requires that sellers and brokers disclose to prospective buyers any material facts that may affect the value of the property.   The requirements for commercial and industrial property are not as strict as the requirements for residential property.   Suppose the property owner knows that a government agency has expressed an intent to condemn the property.   Is the property owner required to disclose to the prospective buyer the possibility of eminent domain?   The answer is uncertain.  

Relocation Benefits
In connection with eminent domain, there is often a relocation of the occupants of the property.   The occupants may be owners or tenants.   The occupant is usually entitled to relocation benefits.   Relocation benefits include moving costs, storage costs, replacement advertising costs, replacement housing costs, and physical improvements to the new location.   In the case of a business, the business owner is entitled to be compensated for loss of goodwill, i.e., loss of customers because of the move.   The government representative will probably offer the relocatee the low end of eligible relocation benefits.   Sometimes, the government's representative will not even disclose to the relocatee that he or she is eligible for certain benefits.  

Severance Damages
Sometimes, the government does not want to acquire all of the property because it does not need it all.   The government does not want to pay for what it does not need.   This is referred to as a "partial take."   When the government takes a portion of the property, this may have an impact on the remainder of the property.   In other words, the remainder of the property may not be as valuable as it was prior to the "partial take."   The damages associated with this situation are referred to as "severance damages."   For example, if there is a bowling alley with a parking lot, with no other nearby parking and the government initiates a partial take of just the parking lot, the bowling alley is not as valuable as it was before the taking because the customers have no place to park their cars.   The business will decline dramatically because of the lack of parking.

The Special Problems Created By Leases
Eminent domain is very important in connection with leases.   Leases usually have provisions that relate to eminent domain.   These are provisions that few read until there is an eminent domain lawsuit.  ...Go to NEXT PAGE