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What Is Fair Eminent Domain Compensation?

What Is Fair Eminent Domain Compensation?

Eminent domain refers to the power governments have to take private land to accomplish a public use. If the state of Connecticut needs your property to build a new freeway, they can get it. Stopping an eminent domain seizure is extremely difficult, though not impossible. Where a landowner has a much better chance is a fight over what is fair eminent domain compensation for their property.

While the law clearly grants governments the right to exercise eminent domain, the law is no less clear in insisting that the original owner receive compensation that is fair and just. This is a right protected by the Fifth Amendment to the United States Constitution and further enshrined in Article 1, Section 11 of our own state constitution in Connecticut.

Court cases over the past 60 years have strengthened the hand of the original property owner. These three are particularly notable…

  • Colaluca v. Ives (1963) said that fair and just compensation was to be defined as “fair equivalent in money for the property taken from the condemnee as nearly as its nature will permit”. In other words, the original owner must receive fair market value for the compensation to be just.
  • Gray Line Bus Co vs. Greater Bridgeport Transport District (1982) said that fair compensation should be based on the most advantageous use of the land. In other words, authorities cannot lowball someone by failing to consider all the means by which the land would generate wealth.
  • City of Norwich v Styx Investors in Norwich, LLC (2004) said that just compensation was to be based on the property’s value to the original owner, not to the state. Depending on the particulars of each individual case, who this favors will vary. But property owners can still take heart from the fact that the law says that their interest in the land is considered primary when considering fair market value.

How Eminent Domain Begins

The state makes the first move in working toward an eminent domain settlement. PerChapter 835 of the Connecticut code, the government will file a petition with the clerk of court with their assessment of fair market value. The money for this total will be immediately deposited. If the landowner accepts, the matter is over. If not, fair market value will be determined by either ongoing negotiation between the landowner and the government, or by going to court. Be aware that the sum deposited based on the state’s initial assessment does not accrue interest, so landowners have no incentive to draw out the process for that reason.

Three Methods of Determining Fair & Just Compensation

Property can serve a wide range of purposes. Perhaps the property in question is your residence. Or it could be a building that you own and rent out space in. Maybe it’s land or commercial real estate that you haven’t developed yet. The method of settling fair market value will depend on your property’s purpose.

The Market Approach: This is most common for residential eminent domain seizures. The value of your home can be assessed by looking at the value of homes in your neighborhood, particularly those that have sold recently.

But even this fairly straightforward approach is filled with variables. The typical house in Waterbury lists for a little less than $200,000. Let’s say that three recent sales in your neighborhood averaged out to $250,000. The state feels very reasonable in making that figure the initial settlement offer.

What the state hasn’t considered is that you just put on a deck and remodeled your kitchen. Or maybe they haven’t considered that those houses averaged 3 bedrooms/2 baths, while you have 4 bedrooms and 2 baths. You know this significantly impacts the real estate value of your house. And you have every right to challenge the settlement figure on this basis.

The Income Approach: Common for rental properties, the income approach will consider value based on the income you might have expected to receive. The court rulings referenced above require that the state base their settlement on the most profitable use of the land. A fair settlement will consider your net operating income, the typical number of vacancies that can be expected at any given time and your annual operating costs. A multiplier will then be used to determine the final value.

Essentially, the income approach is best used for property where the biggest value from ownership is still in the future. Expert witness testimony from market analysts might serve to strengthen your case.

The Cost Approach: This valuation method looks at the cost it would take to replicate the property being seized. It can be applied when any unique structures or developments have already been undertaken. It may be determined that the only way for the landowner to be made whole is for them to essentially rebuild the structure.

If that determination is made, the state must consider the value of purchasing an equivalent piece of property that is vacant, and then calculate the cost of reconstructing the unique part of the property. Add that up, and you’ve got your settlement figure.

Other Eminent Domain Questions

Does an emotional connection to my home count for anything? A lot of us are deeply attached to our homes, especially if it was a first purchase, we raised kids there, have a lot of nearby friends, or it was passed on through the family. But the harsh reality is that eminent domain does not consider anything beyond the raw economic value of the property.

What if adjacent property is damaged? It’s very possible that the government might not need all your property. Perhaps you own lots–be they residential or commercial–that are side-by-side. The value of the property not being seized will be damaged. It may even be physically damaged. You are entitled to fair compensation for this loss, in addition to the value of the original property being seized.

Can the government give my land to a private developer? Perhaps your municipality found an eminent domain for a new shopping mall that will be built on your land. But the government isn’t doing the developing. In that case, they are giving your land to another private entity. And the reality is that they can do this, thanks to a court case (Kelo v. New London, 2005) that authorized it.

Will the government pay my attorney’s fees? In some civil cases, a judge can order attorney fees be covered for the party that won the case. But in eminent domain, even if the final settlement ends up closer to your estimation than the state’s original deposit, the government cannot be ordered to pay attorney fees. The only exception would be if the state abandoned its eminent domain plans midway through the process.

There’s an old saying “You can’t fight City Hall.” That’s actually not true. You can fight City Hall, so long as you fight on the right grounds, with the right evidence and with the right legal team that won’t back down. Fitzpatrick Santos Sousa Perugini P.C. is that tough legal team you need. We have a knowledgeable staff of experienced attorneys and legal professionals that can bring the fight on your behalf. If you’ve been targeted by eminent domain, we’ll work with you to get the settlement you deserve. Call us today at (203) 583-8299 or get in touch here online and let us hear your story.