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Eminent Domain

Eminent domain is the government’s (federal, state and local governments) authority to require a property owner to sell the property to the government so it can be used for a public purpose. Other selected entities, such as utility compnaies, also have the power of eminent domain. A simple example is a landowner being required to sell the property to the local school district for the construction of a new building.

The U.S. Constitution requires that the entity exercising eminent domain pay the owner a fair market value for the property. The owner and the entity exercising the power of eminent domain will first negotiate the price; if that fails, the entity can initiate a court proceeding (sometimes referred to as a condemnation proceeding) in which a jury will be required to determine the fair market value for the property.

Some private entities, such as power utilities and railroads are granted the power of eminent domain so they are able to acquire the property necessary to provide its services, such as the right to acquire an easement for an electrical transmission line or pipeline, or the right to acquire ownership of the land so a railroad can be constructed.

A recent issue that has recieved national attention is defining the types of projects that qualify as a public purpose. For example, the U.S. Supreme Court in the Kelo case addressed whether economic development would justify the use of eminent domain by a local government. Perhaps the most important statement in that decision was that state legislatures have considerable authority and responsibility in defining the use of eminent domain with their state. Accordingly, numerous efforts have arisen across the nation to clarify state laws on the exercise of eminent domain.

A related topic is inverse condemnation; wherein government action arguably has taken private property; the government has not initiated an eminent domain proceeding nor compensated the impacted property owner; and the property owner is now commmencing a lawsuit against the government seeking compensation or an order requiring the government to discontinue its action.

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Published by Agribusiness and Applied Economics
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