Eminent Domain: Can the Government Come and Take Your Property for no Reason?
Updated: Aug 6, 2020
Somewhere in the world as you are reading this there is a knock on the door and a family is being thrown out of their home because their government wants it. The reason isn’t important, they just want it.
Thankfully we live in the United States under the rule of law and here the reason is important.
This was on the minds of the founders and they crafted the Bill of Rights in 1791. It was important enough to be included in the Fifth Amendment.
The relevant portion of the text reads, “private property (shall not) be taken for public use, without just compensation”.
‘Eminent domain’ is the term we use for the government’s power to take private property for public use.
The government has taken private property for many reasons. The most often in recent years the government uses eminent domain for a road, infrastructure or school project. Of course, there are many other reasons, some of which have been denied by the Courts.
In 2005 the United States Supreme Court (Kelo v. City of New London) took up the question of whether a city wanting to take the property to redevelop it into a more favorable area, one that would bring more taxes, was a good enough reason to take private property.
A year later the Ohio Supreme Court took up the question in the case City of Norwood v. Horney. The elected officials in nearby Norwood wanted to take about seventy homes and businesses to turn these properties over to other private entities to build houses, offices and different businesses. The Court ruled that economic development alone was not a good enough reason to take these properties.
Often the property owners are willing to sell but disagree with the government on what is just compensation. Sometimes like in a case I remember growing up in and around Atlantic City a person was not willing to sell at any price and a new casino had to build around their property.
The Haunted House Case
Most of the time the issues are similar to a recent case from Delaware, Ohio. In 2013 a married couple bought a 2-story Victorian house at sheriff’s sale for $11,000. They invested $60,000 in improvements and converted the building into a haunted house (which is a Halloween-themed attraction). One year they grossed nearly $300,000 from 8,000 visitors.
Their suburban school district wanted the property for a school bus “turnaround” area.
The haunted house owners did not disagree with the ‘public use’ rationale of the proposed taking — the district was building a new elementary school and needed the bus ‘turnaround’ loop for safety. But the owners objected to the school district’s original $100,000 offer. The homeowners wanted $350,000.
In condemnation cases, experts (appraisers) must prove valuation. In this case, the landowners felt they were being ‘lowballed’, that $100,000 was unfair because the school district used comparisons from other unimproved, non-descript local properties. The haunted house owners’ expert testified about the renovations and the haunted house’s popularity as a business. The case went to trial, where the jury awarded the homeowners $229,000 — splitting the parties’ differing figures down the middle.
When the government “needs” a property here are questions that parties need to sort out regarding eminent domain, is the government’s reason legitimate? What is fair market value? These issues often find their way to a Courthouse. It is good to know that the next knock on the door is probably not someone telling you the government wants your house and you have to leave.