A Brief Intro to Eminent Domain

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If there’s one thing the government could do that would really get in the way of your business, what would it be? The most obvious, and scary, answer is just two words: eminent domain.

It’s by its very nature the nightmare of a real estate professional, since you might view the central point of this law as “all the real estate you deal with, manage, own, broker, etc. is essentially, when it comes down to it, belonging to the state.” And the state could hypothetically come at any time and take it back for keeps. The top five challenges that landlords face does not include eminent domain day-to-day, but it’s a beast of a challenge to overcome if it would ever happen to your business. That’s why we decided to explain it in layman’s terms here.

The idea of eminent domain involves situations where government entities, like utility companies, need to pursue a project for the greater public good, but in the process have to affect the private property of some citizens. For the greater convenience and good of the public, the water supplier of your town may decide your property is the exact place where pipes need to be installed for the new town supply project. Or maybe the new highway really needs to run through the country trail where your rentals are hiding. These are a few hypothetical examples of when eminent domain would come into play.

It’s actually under the Fifth Amendment of the Constitution that eminent domain rights are discussed. You know, that famous amendment where defendants in courtroom TV programs dramatically get to “take the fifth” and keep mum about their wheelings and dealings. Similar to that situation, there are some rights for property owners in eminent domain cases. In the Fifth Amendment, the government or subgovernment entity that declares eminent domain over the property is required to compensate the owner at fair market value. The owner could also choose not to sell in order to participate in a court proceeding where the justice system decides whether the government entity has the right or not to take the property. The court could also decide how much the value of the property would be if the government would have the right. After this, either side can still appeal the decision.

This is a very brief and simple introduction to eminent domain, so those who want to learn more can consult legal resources for further reading. Eminent domain is certainly an interesting caveat to property ownership that all real estate and rental professionals should be aware of.