Real Estate Articles
Eminent Domain
Written by Brent Pace for Gaebler Ventures
Before getting into the real estate game, it is important to understand the concept of eminent domain. This piece of constitutional law could impact your property if the government deems it necessary to take it from you. Here's a look at the history of eminent domain and its uses.
Eminent domain is a concept that is quite old.
In England the concept was known as compulsory purchase. The basic concept is that the government is allowed to take property from individuals if it deems it necessary for the public good. This means that the government can take your property without your consent, although you must be compensated for it.
The 5th Amendment to the Constitution
Eminent domain in the United States has a long history beginning with its inclusion at the end of the 5th Amendment. Here's the full text of the 5th Amendment:
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. (Emphasis added)
What It Means
Basically, eminent domain means that the government has power to take your property on two basic conditions: First, it has to be taken for a use that benefits the public or is in the public good; second, the government has to give you just compensation for it.
Examples of Eminent Domain in Action
There are literally hundreds of examples of eminent domain in action every year. Although it was described in the Constitution, the power of eminent domain is often used by local government entities. For example, let's suppose that your local city needs to expand its main thoroughfare through town in order to accommodate growth. City planners have determined that an additional twelve feet on each side of the road is necessary to add the lanes required. If you live on that road, there is a fair chance that the government could use eminent domain to take a chunk of your front yard from you.
Highway building on the State level is also a frequent user of eminent domain. Let's say that your metropolitan area is growing and the state decides that your area needs a new highway to loop around the city. Where do they get the land? They typically use purchase negotiations as a first option, and eminent domain as their backup option.
Regulatory Takings
The latest spin on eminent domain has to do with zoning regulations. Many people feel that if their zoning is changed in a way that constricts their land-use options, that constitutes a taking and that the government should compensate them for the value they have lost. These cases are working themselves through the courts all the time, so stay up to date on them as they may impact your property holdings.
What You Should Know
As an entrepreneur you should make sure you thoroughly research a property before purchase. Make sure you look at your city, county, and state long term master plans to ensure that there are no highways or major utility corridors slated to be put through your property. In addition, if you own a property and the local authorities attempt to use eminent domain to take it, be sure to get a fair valuation so that you can be compensated for your loss. Even taking a three foot piece off the front of your property can impact its value, so be sure you get fair compensation for it.
Brent Pace is currently an MBA candidate at University of California at Berkeley. Originally from Salt Lake City, Brent's experience is in commercial real estate development and management. Brent will have tips for small business owners as they negotiate their real estate needs.
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