Smith, Welch,
Webb & White
Eminent domain, sometimes called condemnation, is the power of local governments (and sometimes private or public utility companies) to take private property for a public purpose. The most common uses of property taken by eminent domain are for roads, power lines, gas lines, economic development, water and sewage easements, government buildings (such as city halls or schools), and parks.
If you have been approached regarding the acquisition of all or part of your property for a public benefit, you are not alone. In certain circumstances, public uses can also damage adjoining private property- even though no formal condemnation action has been, or will be, filed. This can sometimes mean that a property owner is entitled to compensation as well.
01. General Information
So the government has come to take your land. Now what?
Property owners typically face a steep learning curve when it comes to eminent domain. The condemning authority already has a head-start in analyzing the potential impacts and liabilities associated with a particular acquisition. It is also assisted by trained professionals. Meanwhile, most property owners are unfamiliar with the process unless they have been involved in it before. Some of the terminology used can be archaic as well.
All of this can lead to a property owner feeling overwhelmed or pressured to make a quick decision with lasting implications. The good news is that help is available. Moreover, it does not take very much to become relatively versed in the applicable terminology.
Condemnation
Condemnation means the exercise the power of eminent domain power. It is interchangeable with ’eminent domain’. Yet, a property owner is more likely to hear the process referred to as ‘condemnation’. The important thing to keep in mind is that, whatever term is used, it means the same thing: private property will be taken for a public purpose. As a result, the property owner is entitled to just and adequate compensation.
Just and adequate compensation
“Just and adequate compensation” means the amount of money necessary to provide the property owner with the ‘actual value’ of its loss. While ‘actual value’ normally means ‘fair market value,’ the property owner is nevertheless entitled to receive compensation that reflects the ‘actual value’ of its loss. Accordingly, the yardstick used to measure just and adequate compensation is the value of the property an owner has lost, not the value of the property a condemning authority has gained.
Property
Property is very broad. It encompasses virtually anything of value. For example, it normally includes land and buildings. But, it also includes any other improvements as well, such as an existing driveway, sprinkler systems, fence, sign, etc. Often it can also include other rights, such as the ability to enlarge a building or install a driveway, sprinkler system, fence, sign, etc. In certain circumstances, it can also include business losses.
Consequential damages
“Consequential damages” is very important. Under the Georgia Constitution, property owners are entitled to compensation for any property interests that are both taken or damaged. This means that the property does not have to be actually taken in order to require payment of just and adequate compensation. Rather, any impact on the remaining property’s value that is caused by the taking may be compensable.
Relocation expenses in condemnation
If the government takes or damages your property and you can no longer continue to occupy the premises, you are entitled to additional damages on account of being displaced by the condemnation.
This is a separate administrative process and provides funds in addition to just and adequate compensation due under the Georgia Constitution. If you operate an impacted business, it is also possible to forgo the administrative process and seek damages as part of the condemnation action itself. Generally, the government must give you 90-days notice before asking you to vacate your premises.
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You may be eligible to receive the actual reasonable expenses in moving yourself, your family, business, farm operation, or other personal property within a reasonable distance from the condemned property. Legitimate moving expenses can include:
- Packing and unpacking
- Temporary storage costs
- Insurance costs
- Appliances
- Equipment
- Removing and reinstalling machinery
If appropriate receipts are kept, businesses may also request reimbursement for:
- Licenses
- Permits
- Re-lettering signs
- Replacement stationery
- Connection of utilities
- Soil testing
- Marketability studies
- Impact fees
In general, certain things are not compensable relocation expenses:
- Renovation or improvement expenses of the new site
- Increased living expenses
- Loss of profits or goodwill
- Loss of employees
- Personal injuries
- Loss of time and expenses searching for a replacement residential dwelling
Generally, the government will also offer you a fixed price option, often called “Method A.” This is often an acceptable alternative, particularly where tracking additional expenses is impracticable or may be less than what is offered.
02. Residential Landowner
How much your condemnation is worth?
The most common question residential owners ask when seeking legal counsel is: “How much money is my Condemnation case worth?”
Our top-tier condemnation attorneys’ answer to that question is always: “You can’t tell by just looking at the initial information the Department of Transportation (or other entity) has given you. But I can help you find out.”
The reason for this is simple. We’ve seen hundreds of ‘initial offer packages’, and these packages simply do not provide enough information from which to make an informed decision on value. The majority of those ‘packages’ include the booklet, “What Happens When Your Property Is Needed For A Transportation Facility”; a “Receipt for Brochure”; a “Statement of Estimated Values”; an “Owner’s Receipt of Plans & Explanation Acknowledgement”; an “Option for Right of Way”; and a “Right of Way Map” (usually attached to the ‘Option’).
First, the “Right of Way Map” shows only a two-dimensional drawing of the amount of fee simple land and easement area that the Department needs for its purposes. To make an informed decision, in addition to what is shown on the Right of Way Map, you need to know, at a minimum: what the taking looks like in three dimensions, the proximity of the taking to improvements, the construction limits of the property and whether there are ‘cuts’ and/or ‘fills’ that affect you, the size and shape of drainage structures that may be discharging water onto your property, and slope and size of any adjustments being made to your driveway.
The good news is that the DOT has this information and will usually share it if you know what to ask for. Nearly all of the information you need is contained in a thick set of plans (like the kind given to the construction contractor) called aptly, the Construction Plans. Within these are the ‘Mainline Plan’, which looks like the Right of Way Map but has more detailed information; the Profile of the road, which shows any difference in elevation between the new and old road beds; the Cross Sections, which show the new road and new shoulders in three dimensions; the Driveway Profile, which shows the construction and slope of any changes to your driveway; and Drainage Profiles, which give the specifics of any new drainage pipes that may affect your property. While having even all of these plans may not give you all the information you need, it almost certainly will make you better informed and give you a better starting point from which to negotiate with your Right of Way agent.
Beyond that, you need more information about the offer. The State of Georgia’s Constitution requires any Condemning Authority to pay for both the value of land taken or used and any consequential damages to the remainder. Before you can make an informed decision about the worth of your case, you need to know whether the Department’s offer includes money for both. You also need to know things like: How did the appraisers arrive at the value? What price per acre was used? What are the comparable sales that were used? Is there a Cost to Cure? Is any money being paid for a business operated on the property (if applicable)? Like most things in life, it is only when you have all the best available information that you can make an informed decision.
Is Your Easement Worth a Fee?
The most common follow-up questions we receive are related to the meaning of certain words that can be foreign to someone unfamiliar with the process. For example, terms of art like ‘right-of-way or fee’, and ‘temporary or permanent easement’ carry significant meanings in eminent domain proceedings. But, a property owner may not know what those terms mean, or the significance that they carry, because such terms are not used in everyday contexts. Here are the differences between the most common ownership interests acquired by condemning authorities through eminent domain.
First, the right-of-way is normally the nomenclature used to describe that portion of land, which will be acquired in ‘fee simple absolute’. That phrase denotes the broadest level of ownership interest in the property that is being acquired. In other words, the land acquired in ‘right-of-way’ or ‘fee’ will belong to the condemning authority outright after the taking. The former property owner will retain no ownership interest in it whatsoever. For this reason, the compensation required for land acquired in ‘right-of-way’ or ‘fee’ is its fair market value as of the date it was, or is to be, acquired by the condemning authority. The phrase ‘fair market value’ also means the price a willing buyer would pay, and, perhaps, more importantly, a willing seller would accept for the property in a situation where neither party is obligated to enter into the transaction.
Second, condemning authorities will also acquire easement rights in certain circumstances. The purposes for which an easement may be acquired can vary. But, the types of easement interests normally fall into one of two categories: permanent or temporary.
Permanent easement means that the condemning authority acquires certain rights to the property, but the property owner retains other rights. For example, the property owner still has the right (or obligation) to maintain the property acquired in permanent easement through such tasks as mowing the grass. The property owner also has to pay taxes on the portion of property acquired in a permanent easement. The condemning authority, however, has the right to use that portion of the property for the purposes it has acquired the easement for into perpetuity. For example, the easement may have been acquired to install drainage or utility infrastructure. As a result, the condemning authority has the right to make improvements to that infrastructure at any point. Normally, that means the property owner is prevented from placing any permanent improvements in the easement area that might interfere with this use unless the condemning authority gives the property owner permission.
The effect of a permanent easement can vary. However, the compensation offered for the portion of land acquired in the permanent easement is typically less than what is offered by the condemning authority for land acquired in the right-of-way fee. This is why the explanation of the initial offer package may specify that a discount rate of twenty-five to fifty percent is applied to the unit value of the land acquired in the easement. For example, the compensation offered for 1,000 square feet of the easement may be half of what the offered compensation was for 1,000 square feet of the fee. In many circumstances, however, the practical effect of an easement acquisition is essentially the same as though the land were acquired in fee from the property owner’s perspective.
Easements can also be acquired temporarily. The most common scenario for this is when a driveway easement is taken so that the existing driveway can be replaced. Condemning authorities commonly do not want to pay for this type of property interest because, in their view, the value of the easement is compensated by the benefit of receiving a new entry point. However, there are other circumstances where temporary easement involves the exchange of a benefit exclusively to the condemning authority, which correspondingly means that the property owner must be paid for that type of acquisition. Since the property interest is acquired only temporarily, however, the discount rate applied to temporary easements can be as much as seventy-five percent of the fee value for the property.
03. Business Owner
Business loss in condemnation
Just and adequate compensation can include damages to an existing business impacted by a condemnation. Obtaining such compensation, however, can be tricky. For example, Georgia law places the burden of proving business loss on the business owner. By comparison, the condemning authority has the burden of proof regarding the value of any land taken or damaged by a condemnation.
When a business is operated by the property owner, the business loss is only available in cases where the condemnation acquires all of the land, known as a ‘total taking’. When a condemnation acquires only a portion of the land, known as a ‘partial taking’, the business loss is available only when the business owner is separate from the property owner. Naturally, there are ways around this general rule, such as by having one entity (such as an LLC) own the property while another entity owns the land and leases it to the business owner. When considering how to structure such an arrangement, it is important to consult a lawyer who does condemnation to avoid certain pitfalls.
There are other considerations when it comes to business loss, especially when structuring a lease between unrelated parties whereby one party owns the land and leases it to another entity that will operate the business. The considerations are important to protect both parties in the event of condemnation.
To recover for business loss, the property must also be unique, which means that it is incapable of being relocated to another location in the same vicinity that it was in before and continuing to operate. Since the burden of proof for business losses is on the business owner, a condemning authority will not typically offer business-loss damages before condemnation. However, the condemning authority may offer relocation expenses. In that case, it is important to understand the impact of accepting relocation damages on claiming that a property is unique for purposes of later establishing a business-loss claim.
While the forgoing information is intended to be general, if you are a business owner and have been contacted by a condemning authority regarding a potential condemnation, we would be happy to speak to you regarding your rights. Contact our office to schedule a free consultation.
Business Loss Damages You May Be Entitled To During Condemnation
In many cases, especially with the widening of roads and highways, businesses are directly impacted by a condemnation action in a variety of different ways. For some, the road widening simply takes away some of their parking spaces. For others, the road widening and introduction of a median into the roadway completely cuts off the business’s access to the main road, decreasing the overall amount of potential customers. In either case, having an attorney who is experienced in litigating business loss cases is vital when negotiating with condemning authorities. This blog post will take a deeper dive into business loss within the condemnation context and how it is measured.
In the most basic sense, the measure of compensation for business loss is the difference between the market value of the business before the condemnation compared to the market value of the business after the condemnation. To prove this difference in market value, courts will look at factors such as lost profits, loss of customers, or a general decrease in the earning capacity of the business because of the condemnation. However, to recover business losses separate from the overall condemnation award itself, the property must be considered “unique” and the business losses must not be remote or speculative.
There are three tests under Georgia law for whether property is considered “unique.”
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The Relocation Test
For this test, the business depends upon its current location for its operation and no substantially comparable site exists within the area for relocation of the business. This test focuses on specific elements such as certain access, traffic flow, signage, and improvements to the current property that would make relocation to a new location extremely difficult or impossible.
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The Value to the Owner Test
For this test, the property’s particular value to the owner cannot be passed to a third party. This test typically comes into play when there is a business that provides certain benefits to the operator that may be contractual and, therefore, would not be transferable to a new owner. It is important to note that the court is not concerned with sentimental value or even whether the owner operates a business and lives on the property, there has to be something more definite connecting the property owner to the property.
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The No Market Value Test
For this test, the property is a type that is not generally bought and sold on the open market and, therefore, the fair market value would not afford the property owner just and adequate compensation. This test is best suited to instances where there is a unique value to the real estate itself rather than where business damages are primarily implicated.
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Real-World Results
Initial Offer: $2,725.00
Settlement: $65,000.00
Initial Offer: $0.00
Settlement: $50,000.00
Initial Offer: $4,500.00
Jury Verdict: $233,100.00
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Facing eminent domain or condemnation issues on your own can be extremely complex and challenging. Our attorneys have the expertise and experience to deliver legal advice and representation in eminent domain matters. Call us at 1.855.505.SWWW (7999) to schedule your legal consultation or case evaluation.
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