NOTE: This summary is very simplified, and is provided for informational purposes. Any questions on this topic should be directed to The Office of the Property Rights Ombudsman.
A property owner is entitled to be compensated for any property which is taken for a public use. Just Compensation is satisfied when the property owner is made whole. The compensation should place the owners in as good a position financially as they would have been if the property had not been taken.
The amount of compensation may include any or all of the following factors:
a. The fair market value of the land being taken.
b. The market value of any improvements taken along with the land, such as buildings, landscaping, etc.
c. Severance Damages, or the reduction in the remainder property’s value attributed to the taking action.
d. Offsetting Benefits to severance damages, or a measure of how a property’s value is enhanced by a public project.
e. Project Damages caused by construction.
f. Temporary Use or Occupancy of property during construction.
The fair market value of property and improvements is determined through objective analysis of what a reasonable and well-informed buyer would pay to purchase property from a reasonable and well-informed seller. Market value does not include such things as sentimental value, long-time ownership, or the owner’s unique need or use of the property. The proposed use for the property being taken cannot influence value—either positively or negatively.
When only a portion of the property is taken, the remaining part may be damaged because the portion has been separated, or “severed.” Damages are not always awarded, but only when it is shown that the value of the remainder portion has been reduced because of the effects of the taking.
Severance damages may be reduced by the amount that the property benefits from the public project being built. The fair market value of the land taken, on the other hand, is not reduced by offsetting benefits.
In some circumstances, a property owner may be awarded additional damages because the project causes extraordinary damage, such as loss of access or utility service. However, inconvenience due to construction is usually not grounds for compensation.
It is often necessary to use property temporarily for construction. For example, a small portion of property may be temporarily needed to install concrete forms for a sidewalk, even though the property will not be used for the sidewalk itself. The property owner would be entitled to compensation for the temporary use.
Just Compensation may be established through an appraisal of the property, which is a thorough analysis of the property’s value and the effects of the taking.
Compensation is due when the property is considered taken by the condemning agency. The property owner may sign an agreement transferring ownership and allowing the agency to proceed with construction, even if the owner disputes the amount of compensation, and negotiations between the parties may proceed.
In most cases, a condemning agency will seek to purchase the property before it files an eminent domain action. The price of the property is established through negotiation between the parties. The Ombudsman Office may assist by mediating settlement discussions, or by deciding the value in arbitration.
The Ombudsman may also order an appraisal of the property, to get a “second opinion” on the property’s value. The property owner chooses the appraiser, and the condemning agency pays for the appraisal. The Ombudsman Office arranges for these “second appraisals” when the Office determines that an additional appraisal will help the parties reach a resolution.
If an eminent domain action has been filed, the court determines the compensation that is due. The owner and the condemning agency may present evidence showing how much compensation should be paid.