Eminent Domain | Exclusions From Fair Market Value

Eminent Domain Law - Exclusions From Fair Market Value and Just Compensation.

Before I begin this post on some of the factors that are excluded in assessing fair market value, let me point out that the law in each state is different regarding these factors, this is a very general overview, and you should consult your eminent domain lawyer before implementing or excluding any of these factors from your fair market value/just compensation argument. Call me if you are in Washington State.

The whole idea behind eminent domain is that the government is afforded the power to acquire anyone's property at any time, if the right circumstances exist. Usually this means the property is required for a public use. Although the Kelo vs. City of New London case has expanded how a public use is defined, the general rule still holds true.

In acquiring property for a public use, the state of Washington may not simply seize your property. You have some power. You are afforded the right to just compensation for what is being taken from you. Just compensation is loosely based on the fair market value of the property, or what a willing buyer would pay for the property and a willing seller would sell the property for in an open market. Just compensation also includes damages to the remaining property, if they exist.

Despite this broad language regarding payment for your property, not everything that you may think contributes value to your property is a compensable item.

Length of Ownership is Not a Compensable Item in Eminent Domain.

If your family has owned a property going back generations and generations, maybe even hundreds of years, in many states this factor is not considered a compensable item, even though to you it makes the property particularly valuable.

Why is this? It goes back to the theory behind just compensation. The goal is to make the landowner whole, to give them what they had before. The fairest way to do this is to determine what the marketplace supports. The marketplace would not consider the length of familial ownership of a property, so an appraiser cannot as well.

For example, if you were to put your property up on the market today, you could command a premium for location, for zoning capabilities, for present use, for the minerals located on it, and for many other things. But the fact that the property had been in your family for years would not be a factor a buyer would consider when making an offer. As much as it stings, that factor does not contribute to the value of the property (although some states require an automatic bump in the purchase price if the land has been in the same family for 50 years or more.

The Fact that Washtington State Took your Property is Not Compensable.

As much as an appraiser would like to be able to take into account that your property is being taken against your will by the big bad government, it is not a compensable item. This should make sense going back to the theory just discussed.

And if you think about it, this makes sense. In most circumstances, whether you admit it or not, the property that is being acquired is going to be used for something that benefits the general public (99% of the time). So the greater good in this case prevails over the tribulations of the few. It may not be fair, but it makes sense, and the legislatures, acting on the fifth and fourteenth amendments to the Constitution, have not made this a compensable item.

Uses that are Remote, Speculative, or Conjectural are Not Compensable.

If your property could potentially be a new commercial or residential development site, this can be factored into the valuation of your property for just compensation purposes. This potential, in eminent domain, though, must be realistic, meaning there must be concrete facts that demonstrate the properties conduciveness to development.

For example, in some areas that are growing quickly, everyone thinks their 40 acre parcel is prime commercial development, on the cusp of being sold for $3 per square foot. It might even be two blocks from new commercial development. If your property doesn't have utilities, isn't zoned for commercial use, and could not qualify to be rezoned and get access to utilities, it would be speculative at best to value it as a commercial site. This valuation of condemnation property to determine just compensation is not allowed.

Evaluation and Negotiation of Just Compensation Offers in Washington State Eminent Domain Cases are Most Successful if these Rules are Followed.

It is possible to bring these things up in a condemnation hearing, but the likelihood is that these pleas will fall on deaf ears. To get the most value out of your property in condemnation, your best bet is to hire an experienced, realistic attorney or eminent domain consultant and do your best to present the highest value of your property and get the most money for your property taking. Doing that will ensure you get the most money for your condemned property.