October 18, 2005 |
2005-R-0674 | |
JUST COMPENSATION | ||
| ||
By: John Rappa, Principal Analyst | ||
You wanted to know if states apply different standards for determining the amount of compensation government agencies must pay when they take property by eminent domain (i. e. , condemnation).
JUST COMPENSATION
All states appear to use the same basic standard for determining the amount of compensation government agencies must pay when they condemn property. But a review of 15 states’ eminent domain laws shows that states consider additional factors that affect the total compensation an owner actually receives.
That basic standard requires a property owner to receive “the full and perfect equivalent of the property taken,” plus compensation for any damage the agency causes while taking his property. But the fact that no two properties are exactly alike makes it hard to develop and apply a universal formula for determining just compensation. Consequently, agencies and courts must determine just compensation by weighing all the factors that a willing buyer and a willing seller would have considered as they negotiated a property’s sales price. The agreed upon price is often referred to as the fair market value. The U. S. Supreme Court recognized this as the appropriate measure for determining just compensation (U. S. v. 564. 54 Acres of Land, More or Less, Situated in Monroe and Pike Counties, Pa. , 441 U. S. 506 (1979)).
FAIR MARKET VALUE ADJUSTMENTS
As Attachment 1 shows, all of the states we examined require agencies to include or exclude certain benefits and costs when calculating fair market value or to adjust that value in other ways. For example, Montana requires agencies to pay interest on the amount of compensation offered during a specified time period. Alabama excludes changes in fair market value that could be attributed to how the agency intends to use the property. Connecticut adjusts the value to reflect contamination and clean-up costs.
ADDITIONAL COSTS AND PROCEDURAL FACTORS
The other factors that could affect the total amount of compensation an owner receives include procedural requirements and compensation for various costs. As Attachment 2 shows, the former includes specifying the date for determining a condemned property’s fair market value (10 states), giving owners access to agency appraisal reports (five), and allowing juries to determine just compensation (13).
Most of the states set conditions under which government agencies must pay court costs and the property owner’s attorney fees. California is the only state in our sample that requires agencies to compensate business owners for the loss they suffer if they cannot recover their business at another location (i. e. , loss of business good will).
Attachment 1: Additions, Exclusions, and Adjustments to Fair Market Value Calculations in Selected States
State |
Determination Includes: |
Determination Excludes |
Determination Adjusted for: |
Al |
• Legal fees and taxes related to conveying title to property • Prorated property taxes • Mortgage prepayment penalties |
Change in value attributed to the condemning agency’s proposed reuse of condemned property |
Deduct benefits accruing specifically to owner of condemned property from its subsequent reuse |
CA |
Machinery and equipment that cannot be removed without substantial economic loss or damage |
Change in value due to proposed reuse, condemnation proceedings, or preliminary steps to condemn property |
No adjustments |
CO |
In a partial taking, benefits to that portion that is not taken |
No exclusions |
Deduct benefits accruing to the owner’s other uncondemned properties |
CT |
No inclusions |
No exclusions |
Condemning agency can adjust compensation amount to reflect contamination and clean-up costs |
ID |
• Value of each separate estate or interest in condemned property • In a partial taking, damages to any part of the property the agency does not condemn |
change in value attributed to the condemning agency’s proposed reuse of condemned property |
No adjustments |
KY |
No adjustments |
Changes in fair market value occurring before condemnation date and attributed to knowledge of possible condemnation or subsequent proposed use of condemned property |
No adjustments |
MS |
Legal interest on the jury award from the date the agency files the compliant to the date it compensates the owner |
No exclusions |
No adjustments |
MT |
10% annual interest from date of summons to earlier of (1) expiration date for appealing to state supreme court or (2) date when owner withdraws from the court the full amount of compensation |
No exclusions |
No adjustments |
NE |
• In a partial taking, damages to any part of the property the agency did not condemned • If the taking affects an easement, damages to fences and crops • If the owner appeals and the court increases the compensation, the owner receives interest on that amount at the same rate for delinquent tax payments; interest starts from the date the agency deposited compensation with the court |
No exclusions |
No adjustments |
OH |
• Legal fees and taxes related to conveying title to property • Prorated property taxes • Mortgage prepayment penalties |
Change in value occurring prior to valuation date and caused by the public improvement or likelihood of condemnation |
No adjustments |
OK |
• Legal fees and taxes related to conveying title to property • Prorated property taxes • Mortgage prepayment penalties • In a partial acquisition, agency must acquire the remaining property if the owner can make little or no use of it |
Change in value occurring prior to valuation date and caused by the public improvement or likelihood of condemnation |
In a partial taking, the agency can adjust the compensation to the remaining property by the special and direct benefits accruing to it |
SC |
• Mortgage prepayment penalties • In a partial taking, loss of value to remaining property |
Increases in the property’s value resulting from the public works placed on it |
• General and specific benefits to owner • Rights relinquished or reverting to owner as a result of the taking |
TN |
• Legal fees and taxes related to conveying title to property • Prorated property taxes • Mortgage prepayment penalties • Reasonable costs of disconnecting and removing machines, equipment, and other personal property if the taking requires their removal |
No exclusions |
Incidental benefits to the owner from the proposed improvement |
TX |
Market value of ground water rights separate and apart from the market value of the land if the condemning agency plans to develop or use the rights for a public purpose |
No exclusions |
In a partial taking, special commissioners determine how the taking uniquely injures and benefits the owner |
Attachment 2: Factors Affecting the Amount of Compensation in Selected States
State |
Disclosure of Appraisals |
Valuation Date Specified |
Compensation for Loss of Business Good Will |
Jury Trial |
Court Costs |
Attorney Fees |
AL |
No |
Yes |
No |
Yes |
No |
No |
CA |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
CO |
Yes |
Yes |
No |
Yes |
Yes |
Yes |
CT |
No |
No |
No |
No |
Yes |
No |
ID |
No |
Yes |
No |
Yes |
Yes |
No |
KY |
No |
Yes |
No |
Yes |
No |
No |
MS |
No |
Yes |
No |
Yes |
Yes |
Yes |
MT |
No |
Yes |
No |
Yes |
No |
Yes |
NC |
No |
Yes |
No |
Yes |
No |
Yes |
NE |
No |
No |
No |
Yes |
Yes |
Yes |
OH |
Yes |
No |
No |
Yes |
No |
Yes |
OK |
No |
No |
No |
Yes |
No |
Yes |
SC |
Yes |
Yes |
No |
Yes |
Yes |
Yes |
TN |
No |
No |
No |
Yes |
No |
No |
TX |
Yes |
Yes |
No |
No |
Yes |
Yes |
JR: dw