The Law Is Stacked Against You – How Eminent Domain Is Legal (But Often Unfair) to Property Owners
Whether it’s your home or your business, the government can come knocking and take a piece of your property. The law allows the government to take your private property and convert it to public use for the public good, which is called eminent domain. As an owner of the property, you must be compensated by the government for the taking. But it’s not a fair fight.
Is Eminent Domain Law in North Carolina Unfair?
The laws are antiquated, to be perfectly frank. It’s worth mentioning upfront that the laws are the issue, not the people who work at the NCDOT. They’re just doing their jobs. They don’t make the laws, after all.
The laws developed from our history, and from a historical perspective, we were an agricultural society. Most land was vacant or used for farming. Few people lived on it, and very little was invested in businesses other than farming. Your land and your business were one and the same.
Our eminent domain laws, which developed to serve that farming economy, have failed to keep pace with how people use their land in the 21st century. For example, the legal foundation of eminent domain comes from the Fifth Amendment – which became law in 1791.
Using that foundation, much of the law views property as it did decades or even centuries ago and allows the government to take it with rules that are far out-of-date by today’s standards.
It Could Be Worse
Under the Fifth Amendment, the government generally has the power to take your property and convert it to public use as long as they justly compensate you for your loss. They can take your “real property” (land and things permanently attached to the land), your “personal property” (things you own that are movable, such as cars, boats, etc.), and your “intellectual property” (patents are a good example).
In North Carolina, an act of the state legislature prohibits the Department of Transportation (NCDOT) from taking anything but land.
Lawful and Unfair: The Government Is Allowed to Ignore Certain Real Estate Rules
The simple fact is that the legislature and appellate courts allow the government to purchase or condemn land from property owners and pay less than what the property would fetch on the open market. It happens, is perfectly legal, and not uncommon – even though it is unfair. The government is allowed to pay less because, by law, it gets to ignore a lot of factors that private buyers and sellers would take into consideration when buying property.
For example, the government can ignore:
- new medians
- lost profits for businesses
- service roads
- driveway convenience
- and more
Fairness in Property Value: The Arm’s Length Transaction
In real estate, an “arm’s length” transaction is when the buyer and seller each act in their own best interests to get the best deal possible. The seller wants to make the largest profit, and the buyer wants the lowest price. Both parties participate willingly. That’s not how eminent domain real estate works.
Because the government gets to ignore factors that the market can’t, its purchase price only roughly approximates a true arm’s length transaction. And where its purchase price fails to match an arm’s length transaction, it benefits the government, not the property owner.
Fair Market Value: How the Government Both Makes and Ignores the Rules
Fair market value is the price agreed upon by a buyer who is not forced to buy and a seller who is not forced to sell. They’re engaging in the transaction voluntarily without any thumbs on the scales to arrive at a price they agree on – an arm’s length transaction as defined above.
Would you, as a buyer or seller, choose to do business with someone who was allowed to ignore the rules for their benefit? Probably not. It’s not fair – and a sale price derived from dealing with them would not be “fair market value.”
The government’s ability to ignore certain market factors means it doesn’t have to compensate you for those factors. Plus, it can force you to sell. Thus, the laws that require the government to offer fair market value also ensure that the government will rarely pay fair market value.
The Government Must Pay for the Land It Takes
The government can generally take what it wants and leave what it doesn’t want. If the government only wants one square foot of your house, they can take only that square foot regardless of whether it leaves your remaining property in shambles or unusable.
Frequently, the government’s first offer tries to compensate you only for the land they’re taking, ignoring how they have damaged your remaining property. That’s where we can help.
Inconvenience Is Your Problem, Not the Government’s, Part 1
This is a true story.
It happened to Grover and Katherine Smith. They were in the cattle business and lived on the generations-old family farm that had belonged to their grandfather. It was both a home and a business, and the two were inextricably linked.
One day, the NCDOT showed up at their door with plans for a new four-lane highway that would run through the middle of the Smiths’ farm. This new highway would force the Smiths to travel nearly two miles down the highway to get to the other side of their land. As Mr. Smith said, “You can’t run cattle across a four-lane highway.” Just like that, the Smiths were out of the cattle business.
Could they still live there? Sure. But the farm was the family business, and they were out of business. The NCDOT said that this “inconvenience” was not their problem, but we argued otherwise.
The Government Must Pay for the Land, But Not Necessarily the Mess It Makes
We had a client who owned a couple of office buildings at a freeway interchange. When the NCDOT announced its project, tenants left because they did not want to deal with construction. The NCDOT doesn’t always have to pay for business interruption caused by construction.
Legal? You bet.
Construction is a messy business. If your home is next to an NCDOT construction project, they may make it incredibly inconvenient for you even if they aren’t taking your land. And while residential owners face numerous headaches, business owners may have it even worse. When a government entity like the NCDOT builds a project, the construction often results in temporary noise, dust, pollution, and inconvenience.
You can imagine the tough conversations we have to have with car washes next to new road construction. And how many of your regular patrons will fight lane closures, construction barrels, uneven roads, slung gravel, and car-coating dust just to continue patronizing your business?
Inconvenience Is Your Problem, Not the Government’s, Part 2
The impact of the construction – even for a limited amount of time – can severely injure or kill a business. Some of our clients have even been confronted by DOT construction projects:
- closing their freeway exit
- temporarily closing their driveways
- closing or altering their lanes of travel
- placing them on a service road
- dead-ending their streets
While the DOT will often work with property owners to provide some access, these detours and temporary driveways may be confusing, uncomfortable, or inconvenient and detour customers away from businesses.
And while the DOT has to pay for the property rights it acquires, it doesn’t typically have to pay for any of these losses – what the courts often describe as “mere inconvenience.”
There aren’t a lot of ways for business owners to get compensated for these losses. If a project forces you to relocate your business, relocation benefits may be available to help in the transition. Otherwise, you’ll need to work with the DOT to minimize the impact of the construction on your property. If there are construction easements on your property, they may temporarily impact the value of your remaining land and the NCDOT should pay you for that. However, the NCDOT does not compensate you for the lost business resulting from the construction.
Furthermore, if you mention those business losses in discussions with the NCDOT, it could hurt your ability to negotiate for compensation later! While you’re expressing your pain, the NCDOT is hearing you complain about things they do not have to pay for and may point out that your pain is non-compensable at a later date.
Government Takings May Cause Property Owners More Problems – With the Government!
Sometimes, the left hand doesn’t know what the right hand is doing. The Department of Transportation may not take into account the city or county’s land-use rules. Let’s say, for example, that the NCDOT is taking a small corner of your residential lot as it expands a turning lane. It’s not a big piece of property, just a few feet off one corner of the parcel. It’s even outside of your backyard fence, and you’ll never even see it. This is fine, right?
What if the new property line makes your fence, or worse, your house, non-conforming to building codes? The NCDOT may not tell you that, or compensate you for it. When it comes time to sell the property, nonconformance issues could damage the property’s value or, in the worst case, make it impossible to sell.
An Eminent Domain Taking Can Fatally Damage Your Business for the Price of the Land
The laws operate in terms of buildings and/or vacant land, so the courts can tend to treat business owners as if their businesses are distinct, separate, and wholly divorced from the buildings and land. As a result, losses businesses suffer are historically overlooked by the courts.
For example, suppose the NCDOT erects a concrete median on a four-lane road or eliminates a center turn lane. In that case, it can reduce access for a business’s customers, making the property less desirable (and therefore less valuable). Or it may take an easement across the front of a business’s property, which eliminates parking spaces. We’ve even seen them take the drive-thru lane – which is likely fatal to a quick-service restaurant business.
All they pay for is the land and buildings, but they don’t pay for your business’s lost profits. It’s not fair. It’s just the law.
The Eminent Domain Double Standard, and Why We Fight It
Is it right that the government is allowed to ignore factors that affect a property’s value and your livelihood when it condemns property? In partial taking cases, where the government only takes a portion of your property, how do you honestly and fairly value a property – especially commercial properties – if you ignore many access issues?
We face these issues time and time again. While the government typically ignores this fundamental component of property value and pays “just compensation” based on the land they took and nothing more, we try to help property owners navigate the labyrinth of what’s compensable versus non-compensable to the property owner’s benefit.
We Know the DOT Because We Worked for the DOT
It is rare to see former state DOT attorneys who now work for property owners. Four of us work at the NC Eminent Domain Law Firm. We work for property owners now because we saw them taking far less compensation than they should have, over and over, because they did not understand their rights or the law.
Some may not even have known they had rights. Others may have believed that the government was required to compensate them fairly (it is) and therefore assumed the government’s offer had to be fair (it doesn’t). As eminent domain attorneys who are immersed in eminent domain law, every day, we urge people to:
- be skeptical of any government offer for their land, and
- contact a dedicated eminent domain attorney immediately if your property is subject to an eminent domain taking.
Holding the Government Accountable for What the Law Allows
Despite the numerous advantages under the law for the government in eminent domain takings, the fact is that the government is required to compensate you fairly for what it takes. While you may disagree with the government’s idea of fair compensation, you can try to negotiate for a better offer.
Knowing what’s compensable is the first step, and it’s a complicated one. While you can negotiate your eminent domain case alone, we don’t recommend it. Our experience gives us a head start in a few significant ways.
- We know the law and what it does and does not allow compensation for
- We know the deadlines and the processes to try to get matters addressed efficiently
- We know appraisers and professionals when needed to determine value accurately
NC eminent domain laws are not always fair. There’s not much anyone can do about that. Focus on trying to get the most you can for your property. If that means calling an attorney, do it sooner than later. And if you contact us, it won’t cost you a dime out of your pocket. We front the costs associated with your case, including appraisers and experts, and we only charge an attorney’s fee if we’re able to get the government to raise their offer and only from the amount by which they raise it. Call us any time at 877-393-4990.
1Cases or matters referenced do not represent the law firm’s entire record. Each case is unique and must be evaluated on its own merits. The outcome of a particular case cannot be predicated upon a lawyer’s or a law firm’s past results.