Eminent Domain
Eminent domain in common law legal systems is the inherent power of the state to seize a citizen's private property, expropriate property, or rights in property, without the owner's consent. The property is taken either for government use or by delegation to third parties who will devote it to "public use." The most common uses of property taken by eminent domain are public utilities, highways, and railroads. Some states require that the government body offer to purchase the property before resorting to the use of eminent domain. The exercise of eminent domain is not limited to real property. Governments may also condemn personal property, such as supplies for the military in wartime, franchises, as well as intangible property such as contracts, patents, trade secrets, and copyrights.
The term expropriation as used in the law of eminent domain is not to be confused with situations in which private property is seized by revolutionary governments from its former owners and confiscated without payment. It should also be differentiated from forfeiture which is an uncompensated seizure of contraband from criminals and its confiscation by the government.
Condemnation
The term condemnation is used to describe the act of a government exercising its power of eminent domain to transfer title to private property from its rightful owner to itself. It is not to be confused with the same term that describes a declaration that real property, generally a building, has become so dilapidated as to be legally unfit for human habitation due to its physical defects. This type of condemnation of buildings (on grounds of health and safety hazards or gross zoning violation) usually does not deprive the owners of the title to the property condemned but requires them to rectify the offending situation or have the government do it for them and bill them for the cost.
Condemnation via eminent domain indicates the government is taking the property or an interest in it, such as an easement. In most cases the only thing that remains to be decided when a condemnation action is filed is the amount of just compensation, although in some cases the right to take may be challenged by the property owner on the grounds that the attempted taking is not for a public use, or has not been authorized by the legislature, or because the condemnor has not followed the proper procedure required by law.
Fifth Amendment - Takings Clause
The Fifth Amendment to the United States Constitution requires that just compensation be paid when the power of eminent domain is used, and requires that the property be taken for "public use". These requirements are sometimes called the takings clause.
The original judicial construction of "public use" was relatively strict: it required that the land be used by the public, the common example being military installations, government buildings and public roads, as well as railroads and public utility facilities. The term "public use" became interpreted more expansively in Berman v. Parker (1954), in which the U.S. Supreme Court reviewed an effort by the District of Columbia to raze properties that were primarily--but not entirely--blighted, in order to transfer their sites to private redevelopers who would construct condos, private office buildings and a shopping center. The Supreme Court ruled against the owners of non-blighted properties within the area sought to be seized on the grounds that the project should be judged on its plans as a whole, not on a parcel by parcel basis. The Court held that the term "public use" encompassed a broader notion of public benefit than simply providing government facilities, railways and other utilities commonly used by the public. The elimination of blight was held to be such a clear responsibility of government, that it justified the use of the eminent domain power. Hawaii Housing Authority v. Midkiff (1984) arose from the Hawaii legislature's determination that private ownership of land on the Island of Oahu was concentrated in so few hands as to form an oligopoly, causing the private market in land to malfunction. In response, the Hawaiian government proposed to increase the number of owners by, among other things, granting full ownership rights to those who previously used land as a tenancy. Again, while on its surface the case involved a transfer of land from one private party to another, the Court held that the elimination of an oligopolistic market in land was a sufficient public benefit justifying the redistributional takings.
The Supreme Court has largely given the public use requirement an expansive interpretation and has allowed takings of private property for reconveyance to other private parties, or in some cases by private parties directly, on the theory that the new owners will put the taken land to more lucrative uses that are likely to generate more tax revenues. This is known as "economic redevelopment." It uses eminent domain to enable acquitre and then convey land to commercial development or redevelopment to increase tax revenues. The Supreme Court's decision in Kelo v. City of New London, 545 U.S. 469 (2005), affirmed the majority decision of the Connecticut Supreme Court and allowed such takings, was heavily publicized in the media. This increased awareness of eminent domain post-Kelo, inspired a great public outcry. Several states have enacted or are considering state legislation that would drastically restrict the state's own power of eminent domain. The Supreme Courts of Illinois, Michigan (County of Wayne v. Hathcock)(2004)[1], and Ohio (Norwood, Ohio v. Horney)(2006) have recently ruled to disallow such takings under their state constitutions.
The protesters maintain that the Kelo judicial approach favors wealthy redevelopers at the expense of lower middle class individual home owners, and encourages profligate municipal expenditures in support of dubious private projects that sometimes fail to achieve the promised public benefits.
Most courts have held the fair market value of the condemned property to be the constitutionally required "just compensation." Its determination is a judicial question, and it is usually determined in a trial by jury, on the basis of the parties' appraisal testimony. Some states (Connecticut, New York, and Rhode Island) do not use juries. There, condemnation awards are made by judges. Critics contend this damages personal property rights.
Regulatory Takings
Regulatory taking refers to a situation in which a government regulates a property to such a degree that the regulation effectively amounts to an exercise of the government's eminent domain power without actually divesting the property's owner of title to the property.
In common law jurisdictions, governments traditionally enjoy the police power, under which a governments may regulate a variety of aspects of the lives of its subjects. Under American law, however, this power does not extend to the outright divestiture of title to private property, nor to the de facto equivalent of it. Instead, the power of eminent domain is a separate and distinct power which allows a government to divest a property owner of title to such property for public use, and with just compensation. This power is limited in the Fifth Amendment to the United States Constitution, and extends to the states under the Due Process Clause of the Fourteenth Amendment. (The Fifth Amendment prohibits the federal government from taking property for public use without "just compensation," which American courts have interpreted in the usual case to mean "fair market value." This prohibition is deemed incorporated in the Due Process Clause of the Fourteenth Amendment (which bars state governments from depriving people of their property without dues process of law.)
The issue of regulatory takings arises from the interaction between exercise of the traditional police power and exercise of eminent domain. The police power is the inherent government power, usually exercised by the legislature, to do what is reasonably necessary to promote and protect public health, safety, welfare and morals. But that power can be applied so broadly that it conflicts with the Constitution. To take a common example, the application of the police power to regulation of obscenity often comes into conflict with the First Amendment's freedom of speech, typically in regulations of adult businesses. The same is true of regulations of land -- they can conflict with constitutional provisions. That is, a government action effects a regulatory taking when it burdens property to such a degree that it cannot be justified under the police power, but instead impinges on the rights of the owner so harshly as to become a de facto exercise of the power of eminent domain. When a government regulation effects a taking of private property by such excessive regulation, the owner may initiate inverse condemnation proceedings to recover the value of the taken property .
The United States Supreme Court has established a number of tests under which a state regulation constitutes a taking per se. These are physical invasion, denial of all economically viable private property uses, or requiring the owners to dedicate some of their property to the government without a justifying reason for so doing. For example, when the owners' proposed land use will result in a significant increase in traffic they may be required to dedicate a strip of their land to improve an adjacent road. But when an action does not fall into a category addressed by one of these tests, the Court avoids relies primarily on an ad hoc inquiry into the specifics of such individual case. This approach has been the subject of much criticism because of its unpredictability.
Diminution-of-value test
The Supreme Court first held that state regulations may effect a taking in the 1922 case of Pennsylvania Coal Co. v. Mahon. There, Justice Holmes wrote for the majority that "[t]he general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking."
In Penn Central Transportation Co. v. New York City, the court denied the Penn Central Company the right to build an office building on top of the Grand Central terminal in New York City, and identified the following as being of particular importance in the determination of whether a regulatory taking has occurred: (1) The economic impact of the regulation on the property owner, (2) the extent to which the regulation interferes with the owner’s reasonable investment-backed expectations, and (3) the character of the regulation. When inquiring into the character of the regulation, the court will look to the magnitude of the regulation, how the regulation distributes the burdens and benefits among property owners, and whether it violates any of the owner’s essential attributes of property ownership, such as the right to exclude.
Physical Invasion Test
In Kaiser Aetna v. United States, the Supreme Court held that a Corps of Engineers' regulation requiring the owners of a private marina to admit members of the public was a taking of property.
In Loretto v. Teleprompter Manhattan CATV Corp., the Supreme Court ruled that a regulation is generally considered a per se taking when it forces land owners to endure a permanent physical occupation on their land, such as the permanent physical presence of cable lines on a residential building. The Court argued that any permanent physical presence destroyed the property owner's right to exclude, long recognized as one of the key rights in the "bundle of rights" commonly characterized as property.
Total Takings Test
In Lucas v. South Carolina Coastal Council, the Supreme Court ruled that a regulation that forbade construction on the owner's land thus depriving him of all economically beneficial uses constituted a per se taking unless the proscribed use interests were not part of the title to begin with. In other words, a law or decree with the effect of depriving all economically beneficial use must do no more than duplicate the result that could have been achieved in the courts under the law of nuisance.
The Denominator Problem
In the Penn Central Case, the Supreme Court ruled out of the blue that taking law does not divide property into discrete segments and therefore a taking occurs only when an owner's entire ownership is excessiveluy regulated, and the owners are therefore not entitled to compensation where a part of their land remains economically viable. This gave rise to the question of what is the "denominator" of the ownership fraction; i.e., what is the larger ownership whose part is being subjected to confiscatory regulation, since the regulatory taking of a part of it (the "numerator") is not compensable.
The question thus arises: What is the "denominator" of the regulated parcel? For example: in Pennsylvania Coal Co. v. Mahon, Pennsylvania Coal owned the mineral rights in a property (as well as the right to surface support inder Pennsylvania law), and Mahon owned the surface rights of that land. Reling on Pennsylvania statutory law, the surfacte owners wanted mining under their [surface] land stopped to prevent subsidence. The court agreed with the coal company and held that the state statute forbidding such mining was a taking of the coal company's property.
Thus, the Pennsylvania Coal Company suffered a 100% taking, because all of its property (the underground coal deposits) had been effectively extinguished by the regulation. It could no longer extract its own coal. On the other hand, under the more recent Penn Central approach, if one defines the "denominator" as the total property rights in a particular parcel (i.e., both surface and mineral rights), then there would be only a partial taking, because the mineral rights were only a part of the total rights in the property (even if those rights were distributed between two owners). This theory was more recently applied by the U S Court of Appeals in Whitney Benefits v. United States, holding that a federal regulation frbidding strip mining of large coal deposits in Wyoming, took the owners' property, requiring payment of compensation which, with interest and attorneys' fees, came to $200 million
In his dissent to Pennsylvania Coal Justice Brandeis argued that inasmuch as the police power regulation promoted public safety, the state statute forbidding mining under inhabited land trumped the coal company's property right to its coal. That theory has gained acceptance in the Supreme Court case of Keystone Bituminous Coal Association v. DeBenedictis, but only to the extent that the prohibition of mining was partial, not total.
Public Use
The current Supreme Court understanding dates back to 1984 when Sandra Day O'Connor held in Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984) that Hawaii's redistribution of land was constitutional. One must understand what the High Court had held as "public"; for local government in zoning cases as in Village of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365 (1926) and in city urban renewal projects like in Berman v. Parker, 348 U.S. 26 (1954) public use was quite expansive. O'Connor tried to craft an opinion which, allowing for the state's actions, tried to limit incentives for expansive views of public use.
The current rule on public use upholding the eminent domain power of state government was generally affirmed by Kelo v. City of New London, 125 S. Ct. 2655 (2005), though the justices recognized that the several states have the authority to pass statutes or state constitutional amendments further restricting eminent domain by either defining public use narrowly in their states or by granting property owners more rights than the federal Constitution if they so chose. Many have taken up the challenge, with Alabama, New Hampshire, and several other states passing temporary statutes as well as constitutional amendments to restrict eminent domain strictly to uses in which the property will be owned by a government entity. One such amendment was approved in Florida's 2006 statewide elections.
Economic Argument of Hold Outs
Supporters contend that seizures of private property are necessary to the improvement of communities when transaction costs prevent private parties from agreeing on the most efficient use of land. Opponents point out that, over a period of 200 years, American city-dwellers created large land assemblages and major structures without the coercive power of eminent domain, which they never got to use for urban redevelopment until the 1950s. Critics also point out that even successful redevelopment revives only limited areas (such as downtowns), leaving other city areas in decline. Moreover, with the ongoing migration of the past half-century from cities to suburbs, it is inevitable that cities lose population and jobs, resulting in blighted areas that cannot be revived by taking more low- and moderate-cost city housing, thus driving more people out to the suburbs.
Eminent domain has driven the development of railroads and defense infrastructure, permitting the construction of many otherwise impossible connections. In the 20th century, it was used to construct World War II and Cold War defense installations. From the early 1950s on, more than 42,000 miles of roadways were acquired by eminent domain to build the Interstate Highway System. Ports, airports, and government buildings have also been constructed on land appropriated through eminent domain.
More recently, eminent domain has come to be used for private purposes (such as shopping malls), which has led to the current controversy. In some cases, the non-government entities using eminent domain have been community groups trying to take control of planning and development. Such is the case of the Dudley Street Initiative, a community group in Boston, Massachusetts, which attained the right to eminent domain and has used it to claim vacant properties for the purpose of "positive community development". In other cases, well connected firms persuade local governments to take property (sometimes that of their competitors) and turn it over to them.
Just Compensation
Just Compensation is required to be paid by the Fifth Amendment to the U.S. Constitution (and counterpart state constitutions) when private property is taken (or in some states, damaged) for public use. For reasons of expedience, courts have been generally using fair market value as the measure of just compensation, reasoning that this is the amount that a willing seller would accept in a voluntary sales transaction and therefore it should also be payable in an involuntary one. Market value is not the exclusive measure of just compensation, and in unusual cases other measures of compensation can be used. United States v. Pewee Coal Co., 341 U.S. 114 (1951) (increased operational loss of a coal company during its temporary seizure by the government deemed to be the measure of compensation). The legal definition of market value is defined as the most probable price that would be paid by a willing but unpressured buyer to a willing but unpressured seller, both being fully informed as to the property's attributes and its good and bad features, including its highest and best use. This formulation assumes that the property has been exposed for sale in the market for a reasonable period of time.
Market value does not include incidental losses (e.g., cost of moving, loss of business goodwill, etc.), but some of these losses are made compensable by statutes, such as the federal Uniform Relocation Assistance Act and its state counterparts. The judicial denial of compensation for business losses suffered when a business conducted on the taken land is destroyed by the taking, has been the subject of much controversy and severe criticism by legal commentators. Nonetheless, only one state (Alaska) allows their recovery and so do a few others where it is impossible for the affected business to relocate. Some states allow recovery of business losses by statute.
Likewise, the property owner's attorneys' and appraisers' fees are not included in just compensation (except in Florida where they are awarded in all cases under the state courts' interpretation of the Florida Constitution).
The controversy is further fired up by the courts defining the "just compensation" promised by the Constitution so narrowly that displaced home-owners and businesses are not fully compensated for their demonstrable economic losses, which are sometimes deemed "noncompensable". This is particularly controversial in cases where business properties are taken, the owners are not compensated for lost business, and the taken land is turned over to another business at no cost.
Back in 1798, Justice Samuel Chase in Calder v. Bull (3 U.S. 386) held that it was preposterous for the government to take one person's property with no restriction and give it to another private party for their own profit. Indeed, it was this very lack of restrictions on Donald Trump's use of the land that he sought in Coking vs. C.R.D.A that caused New Jersey Superior Court Judge Richard Williams to rule against Trump and Atlantic City. But journalists in the Coking case referred to this as a victory on a "technicality", rather than one of principle, and while today, many still adhere to this traditional view, which they see as morally sound, most courts have not lent much support to it.
Safeguards Against Government Action
The Fifth Amendment to the U.S. Constitution requires that property may only be taken for "public use", and upon payment of "just compensation". But the U.S. Supreme Court has diluted the meaning of "public use" to such an extent that virtually anything that a local condemning authority declares to be "public use" will be accepted by the Supreme Court and the lower federal courts. Some state courts disagree and in recent years the courts of Illinois, Michigan, Oklahoma, South Carolina and Pennsylvania have taken the position that the taking of private land for so-called "economic redevelopment" -- i.e., for re conveyance of the taken land to private companies for the construction of private, profit-making enterprises such as shopping malls, factories, office buildings and even gambling casinos does not meet the "public use" limitation under the state Constitution.
Property-rights advocates contend that abuses of the exercise of these powers in the past require substantial additional safeguards to protect the people from having their homes and businesses taken for what are obviously private, not public, uses.
Federal statutes (and their state counterparts) require relocation assistance programs to be administered by the various states in order to receive Federal participation in the costs of the improvements (often 80%), and further require full certification that the public process and benefits were offered to the claimants and that the benefits were actually paid to the correct claimants and displacees. However, the benefits payable under the Act provide only partial compensation to the displaced loaners (for example $20,000 is the maximum payable under the Act for the destruction of a business), and the Act does not allow the owners to sue to enforce its provisions.
The use of eminent domain has slowed nationwide as the full build-out of the Interstate System approaches and reflects the fact that needs in the future will be for mostly projects of a local nature such as schools, roads, and other local improvements. The extensive use of eminent domain for such purposes as economic development are currently under attack in many jurisdictions and there is a movement to pass state statutes to limit this use. Seven out of nine states that had such initiatives on the ballot in the 2006 election, have adopted laws or state constitutional amendments limiting or eliminating the use of eminent domain for "economic redevelopment" that does not eliminate slums or blight, and only finances redevelopment by private profit-making entities.
As of January 2007, 34 states had enacted some kind of legislation reforming eminent domain laws, while 13 had failed to enact any legislation regarding eminent domain (three state legislatures did not hold sessions in 2006). Seventeen of those thirty-four states either prohibited the use of eminent domain for private development purposes or substantially strengthened their definitions of blight, while the other seventeen increased eminent domain protections.
Governor Richardson of New Mexico became the first governor to veto eminent domain reform legislation resulting from this recent surge in public interest.
Bush Executive Order
On June 23, 2006 - on the one-year anniversary of the Kelo decision (see above), President George W. Bush issued an executive order stating in Section I that the Federal Government must limit its use of taking private property for "public use" with "just compensation", which is also stated in the constitution, for the "purpose of benefiting the general public." He limits this use by stating that it may not be used "for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken."
