Few governmental powers are as impactful and important as their authority to take away privately owned land without the agreement or consent of the owner. Eminent domain, as this power is called, allows units of government, including municipalities, to “condemn” private land and acquire it for public purposes. May it be for a narrow easement for a utility line, or a large parcel in a blighted area for redevelopment. While vast, this power is not unlimited. While sometimes a property owner can challenge the legitimacy of the government’s claimed basis for condemnation, more frequently, the fight between the property owner and the condemning authority is how much the government must pay the property owner for the real estate they are taking.
It is imperative to understand how the process works, what the government’s obligations are as to “just compensation,” and how property owners can maximize the amount they receive for an undesired taking of their land.
“Just Compensation” Required for a Government Taking
The federal government’s eminent domain rights and obligations are outlined in the Fifth Amendment to the U.S. Constitution, which provides that no private property shall be taken for public use “without just compensation.” Mirroring this, Article X, Section 2 of the Michigan Constitution states, “Private property shall not be taken for public use without just compensation therefore being first made or secured in a manner prescribed by law.”
What Is “Just Compensation?”
Generally, just compensation is based on the market value of the property at issue as of the date of the taking. However, in Michigan, if the condemnation involves an individual’s “principal residence,” the amount of compensation made and determined for that taking “shall be not less than 125% of that property’s fair market value.”
Determining fair market value is at the center of most eminent domain cases. This can be a complicated and contentious issue when the government seeks to take a whole parcel of property, but it becomes even more challenging when only a portion of the property is subject to condemnation. In partial takings, “just compensation” also includes any decrease in value the taking causes to the remainder of the property; just compensation must leave the property owner in as good a position as the owner would have been had the taking never occurred.
Additionally, as part of just compensation, Michigan property owners are entitled to have the condemning authority reimburse them for reasonable attorney’s fees in the condemnation proceeding and for any expert and appraisal costs and fees they incur.
How Is “Just Compensation” Determined?
In most eminent domain proceedings, the government will make an initial offer to the property owner based on an appraisal of the property by an appraiser of its choosing. The property owner is under no obligation to accept the government’s offer and rarely should do so. As with any real estate purchase, the buyer (in this case, the municipality) wants to pay as little as possible, while the seller wants to get the highest price they can. As in private transactions, bridging those two contrary goals involves negotiations. Unlike private transactions, in which the parties can just walk away if they can’t agree on a price, a court will determine the appropriate value for the property the government must pay as just compensation.
The Government Negotiates Takings All the Time. You Don’t.
When countering the government’s offer and appraisal of the property’s fair market value, the owner must come armed with evidence to support a claim that the value is higher than what the government says. This involves the owner retaining their own appraiser and other experts who can assess the property’s value or the impact of a partial taking on the value of any remainder. The owner’s evidence must be strong and credible. The initial goal is to convince the government to increase its offer. But if the parties can’t agree on a price, a judge (or a jury) will do it for them.
Negotiating with the government regarding the amount of fair compensation to be paid is not an endeavor a property owner should undertake alone, just as they shouldn’t attempt to go toe-to-toe with the government if a trial is needed. The municipality, its attorneys, and its appraisers are all well-versed in the law and process of eminent domain proceedings because they handle them regularly. Conversely, most property owners have never dealt with an eminent domain claim before. If they accept the government’s initial offer or even consider it without understanding their rights, they could lose a small (or large) fortune.
That is why it is so important to retain an experienced Michigan eminent domain attorney if a municipality or other governmental entity seeks to take your land in a condemnation proceeding.
If you have questions or concerns about a government taking of your property, please contact Jacob Eccleston at Kreis Enderle today.