Under a process called eminent
domain, the government can take
possession and ownership of private property for public use. Typically,
the acquired property is used to build or
widen roads or to install public utilities
like water, sewer, gas or electric lines.
“An experienced condemnation lawyer
will be able to identify things that you
might not think of as you evaluate the
offer, such as what your future plans for
the property are and what effects the
‘taking’ might have on your continued
ability to comply with things like zoning
ordinances,” says Thomas Schultz, partner at Secrest Wardle.
Smart Business spoke with Schultz
about eminent domain, how property is
valued and the importance of fully
understanding a proposed project.
What is eminent domain, and how might it
affect one’s business?
Eminent domain is the right of a governmental entity to acquire property
from its owner even if the owner is
unwilling to sell that property voluntarily, subject to the payment of just compensation to the owner. The agency can
only acquire the property if it intends to
put it to a ‘public use,’ though exactly
what that means can depend on a number of variables, not the least of which is
the specific agency that is acquiring the
property and the property’s location.
Here in Michigan, there are fairly stringent rules about what ‘public use’
means, so property cannot be taken for
what has been called ‘economic development’ purposes or for turning the
property over to other private property
owners to put to a different ‘private use’
that the government might like better.
What should a company do if contacted by
a condemning agency seeking to acquire
some or all of its property?
First, consult a lawyer. Even if you
don’t object to the proposed project or
improvement, you should know what your rights are and what the obligations
or responsibilities are of the condemning agency. Second, you may also need
to contact a real estate appraiser, who
can help you understand the value of the
land proposed to be taken.
Third, find out all you can about the
project and the reason why the agency
wants some of your land for this project.
The agency will usually explain the project as part of its initial contact with a
business, but if the information you get
doesn’t seem like it is complete or you
don’t think you’re being told everything,
there are plenty of places to get additional information. Your local town or
city planning department is often a good
place to start.
Any other advice for business owners?
Think about what the loss of the property might do to your business, not just
right now but years from now. Will it
adversely affect accessibility or visibility or expansion plans or the future marketability of the land? Consider whether
the offer from the government has taken
into consideration all of the information that you have about your property and
your business. If not, make sure that
such information is properly conveyed
to the agency. Make sure you understand the project and that your voice is
heard on whether it should go forward.
If you do object, object early in the
process to protect your rights as best
you can. Also, it is important to pay
attention to deadlines contained in
paperwork from the condemning agencies. Missing a deadline can have serious consequences on the right to
receive proper compensation.
How is property valued in an eminent
domain case?
Before contacting a business, a condemning agency is required to come up
with a value for the property it intends to
acquire, and it has to share that analysis
with the property owner. Often, that
evaluation process includes a formal
real estate appraisal. The agency will at
some point make a formal offer to
acquire the property and negotiations
can then occur. If you reach an agreement on the value of the property, the
agency will then usually prepare the necessary paperwork to document the
transfer of the property upon payment of
that amount.
What type of litigation is typically involved?
If the parties can’t reach an agreement,
the agency can then file a lawsuit.
Assuming you have no argument that
the property isn’t in fact going to be put
to a ‘public use’ or shouldn’t be taken
from you because it is not necessary to
do so, then the agency will usually get
the title to the property early in the litigation. After that, the focus of the litigation will usually be the amount of compensation that is owed, the fair market
value and/or any damages that might be
suffered by a business as a result of the
‘taking.’
THOMAS SCHULTZ is a partner at Secrest Wardle. Reach him at (248) 539-2847 or [email protected].