4266 Tuller Road
Dublin, OH 43017
Eminent Domain
Robert Moore
Ohio and Federal law gives government entities and utility companies the authority to use an individual’s land for a public project such as a roadway or utility line. The legal definition for this concept is appropriation but it is better known as eminent domain. The authority of eminent domain is very powerful and it is usually very difficult for an individual to prevent some or all of his land being taken for eminent domain. However, individual’s do have rights to ensure that they are fairly compensated for the loss of their property.
Eminent domain typically has a negative connotation because it often involves a government entity taking an individual’s property. While this skepticism of government takings is needed and warranted, it is important that government be able to take property for the good of the public. Without eminent domain, a single land owner could obstruct a much needed highway or force the road to go around his property at considerable expense to taxpayers. So while eminent domain is needed to ensure that public projects can be completed with the least cost to taxpayers, the law helps ensure that those who have property taken are fairly compensated for their loss.
Before the government or utility company can take land by eminent domain, they must make an effort to negotiate a purchase of the property with the owner. In many case, an agent will be hired to contact land owners and to initiate negotiations. At some point in the negotiations, the agent will present the landowner with a contract that contains payment terms and terms for the property. The offered price must be based on an appraisal. Therefore, landowners should always ask to see the underlying appraisal and analyze it closely. It is extremely important that the landowner understand that he has negotiating leverage and need not simply take what is offered. Like any buyer, the government or utility company has incentive to purchase the property at the lowest price possible.
The government or utility company will either require an easement or a purchase of the property. An easement allows the government to use the individual’s land but does not transfer complete title. The individual can continue to use the land as he wishes subject to any restrictions in the easement. If the government purchases the property then the land owner no longer has title to the property and has no right in how it is used. It is therefore very important to understand if property is being taken as an easement or a purchase. It is common that both an easement and a purchase will be done at the same time. Landowners should always ask for a survey or map of the property being taken so that they fully understand what is being taken as an easement and/or a purchase.
Individuals can attempt to stop eminent domain proceedings but it is extremely difficult to prevail. The government or utility company merely needs to show that the project is for the public good and that the route of the project is reasonable. Therefore, the landowner is usually better served to focus his time and energy on negotiating the best price possible. The landowner may want to get his own appraisal, talk to adjoining landowners regarding their negotiations, and/or discuss the offered price with real estate professionals. An important factor to consider is the affect that the easement or purchase will have on accessibility to the property. If the eminent domain causes the portion of the property to be inaccessible it may significantly decrease the value of the property. For example, the government purchases a right of way expand a major highway. The terms of the new right of way do not allow the property owner to have direct access to the road. Previously, the property owner had direct access to the roadway but now will only be allowed to access the new roadway several miles away at the nearest intersection. The inability to directly access the roadway will likely significantly diminish the development value and possibly the agricultural value of the property.
If the landowner cannot come to agreeable terms with the government or utility company, the matter will go to trial and a judge or jury will decide what compensation is owed to the landowner. A trial is very expensive and time consuming and should be avoided if at all possible. However, if the landowner believes that he is not being fairly compensated for the eminent domain taking, the law provides him a day in court to make his case.
Eventually, the landowner will receive compensation for the property that was taken. This compensation is taxable income. However, if the landowner uses these funds to purchase other real estate, the capital gain taxes are deferred. There are other strategies available to help reduce the tax liability on any eminent domain compensation. The landowner should seek the advice of a tax professional at the first opportunity to be sure that he fully understand the tax implications of the compensation and how best to minimize tax liability.
