Eminent domain

From Wikinvestor

Eminent domain (United States), compulsory purchase (United Kingdom, New Zealand, Ireland), resumption/compulsory acquisition (Australia) or expropriation (South Africa and Canada) in common law legal systems is the inherent power of the state to seize a citizen's private property, expropriate property, or seize a citizen's rights in property with due monetary compensation, but without the owner's consent. The property is taken either for government use or by delegation to third parties who will devote it to public or civic use or, in some cases, economic development. The most common uses of property taken by eminent domain are for public utilities, highways, and railroads. Some jurisdictions require that the government body offer to purchase the property before resorting to the use of eminent domain.

The legal doctrine of eminent domain, like the doctrine of seizure of contraband, allows expropriation of property within the existing system of law. Otherwise, expropriation may imply either a criminal or a revolutionary act.

The term "condemnation" is used to describe the formal act of the exercise of the power of eminent domain to transfer title to the property from its private owner to the government. This use of the word should not be confused with its sense of a declaration that real property, generally a building, has become so dilapidated as to be legally unfit for human habitation due to its physical defects. This type of condemnation of buildings (on grounds of health and safety hazards or gross zoning violation) usually does not deprive the owners of the title to the property condemned but requires them to rectify the offending situation or have the government do it for the owner at the latter's expense.

Condemnation via eminent domain indicates the government is taking ownership of the property or a lesser interest in it, such as an easement. In most cases the only thing that remains to be decided when a condemnation action is filed is the amount of just compensation, although in some cases the right to take may be challenged by the property owner on the grounds that the attempted taking is not for a public use, or has not been authorized by the legislature, or because the condemnor has not followed the proper procedure required by law.

The exercise of eminent domain is not limited to real property. Governments may also condemn personal property, such as supplies for the military in wartime, franchises; this includes intangible property such as contract rights, patents, trade secrets, and copyrights.

History

After his victory in 1066, William the Conqueror seized virtually all land in England. Although he maintained absolute power over the land, he granted fiefs to landholders who served as stewards, paying fees and providing military services. During the Hundred Years War in the 13th century, Edward III used the Crown's right of purveyance for massive expropriations. Chapter 28 of the Magna Carta required that immediate cash payment be made for expropriations. As the king's power was broken down in the ensuing centuries, tenants were regarded as holding ownership rights rather than merely possessory rights over their land. In 1427, a statute was passed granting commissioners of sewers in Lincolnshire the power to take land without compensation. After the early 1500s, however, Parliamentary takings of land for roads, bridges, etc. generally did require compensation. The common practice was to pay 10 per cent more than the assessed value. However, as the voting franchise was expanded to include more non-landowners, the bonus was eliminated.

The practice of condemnation was transplanted into the American colonies. In the early years, unimproved land could be taken without compensation; this practice was accepted because land was so abundant that it could be cheaply replaced. When it came time to draft the United States Constitution, differing views on eminent domain were voiced. Thomas Jefferson favored eliminating all remnants of feudalism, and pushed for allodial ownership. James Madison, who wrote the Fifth Amendment to the United States Constitution, had a more moderate view, and struck a compromise that sought to at least protect property rights somewhat by explicitly mandating compensation and using the term "public use" rather than "public purpose," "public interest," or "public benefit."^[1]

Terminology

At the time the United States was created, it and the several states continued to use the British common law, including the principle of eminent domain. The term "eminent domain" was taken from the mid-19th century from the legal treatise, De Jure Belli et Pacis, written by the Dutch jurist Hugo Grotius in 1625, who used the term dominium eminens (Latin for supreme lordship) and described the power as follows:

"... the property of subjects is under the eminent domain of the state, so that the state or he who acts for it may use and even alienate and destroy such property, not only in the case of extreme necessity, in which even private persons have a right over the property of others, but for ends of public utility, to which ends those who founded civil society must be supposed to have intended that private ends should give way. But it is to be added that when this is done the state is bound to make good the loss to those who lose their property."

Some U.S. states, including New York and Louisiana use the term appropriation as a synonym for the exercising of eminent domain powers.

The term compulsory purchase, also originating in the mid-19th century, is used primarily in England and Wales (see compulsory purchase order), and some other jurisdictions that follow the elements of English law. Originally, the power of eminent domain was assumed to arise from natural law as an inherent power of the sovereign.

Allodial versus feudal title

Allodial title is the title to land generally held in fee simple by an individual or group that is sovereign on that land. Thus, in English law, only the monarch holds allodial title. All others are tenants of the sovereign through their feudal vassalages. Sovereigns generally gain allodial title either by grant of another sovereign to such title, or through right of conquest.

In the United States and other democratic republics, the people are the sovereign and delegate the power to exercise sovereign powers to their representatives in government. As in English law, what private parties own is not the land itself, but an interest in the property, and it is that interest for which they are entitled to compensation if the government exercises its eminent domain power.

United States

The power of governments to take private real or personal property has always existed in the United States, being a part of the common law inherited from England. This power reposes in the legislative branch of the government and may not be exercised unless the legislature has authorized its use by statutes that specify who may use it and for what purposes. The legislature may so delegate the power to private entities like public utilities or railroads, and even to individuals for the purpose of acquiring access to their landlocked land. Its use was limited by the Takings Clause in the Fifth Amendment to the U.S. Constitution in 1791, which reads, "...nor shall private property be taken for public use, without just compensation". The Fifth Amendment did not create the national government's right to use the eminent domain power, it simply limited it to public use.^[2]

The U.S. Supreme Court has consistently deferred to right of states to make their own determinations of public use. For instance, in 1832 the Supreme Court ruled that eminent domain could be used to allow a mill owner to expand his dam and operations by flooding an upstream neighbor. The court opinion stated that a public use does not have to mean public occupation of the land; it can mean a public benefit.^[3] In Clark vs. Nash (1905), the Supreme Court acknowledged that different parts of the country have unique circumstances and the definition of public use thus varied with the facts of the case. It ruled a farmer could expand his right-of-way (here an irrigation ditch from a river) across another farmer's land (with compensation), because that farmer was entitled to the "the flow of the waters of the said Fort Canyon Creek... and the uses of the said waters... is a public use." Here in recognizing the arid climate and geography of Utah, the Court indicated the farmer not adjacent to the river had as much right as the farmer who was, to access the waters.^[4] However, until the 14th Amendment was ratified in 1868, the limitations on eminent domain specified in the Fifth Amendment applied only to the federal government and not to the states. That view ended in 1896 when in the Chicago B. & Q. Railroad v. Chicago case the court held that the eminent domain provisions of the Fifth Amendment were incorporated in the Due Process Clause of the Fourteenth Amendment and thus were now binding on the states. This was the beginning of what is known as the "selective incorporation" doctrine.

An expansive interpretation of eminent domain was reaffirmed in Berman v. Parker (1954), in which the U.S. Supreme Court reviewed an effort by the District of Columbia to take and raze blighted structures, in order to eliminate slums in the Southwest Washington area. After the taking, held the court, the taken and razed land could be transferred to private redevelopers who would construct condos, private office buildings and a shopping center. The Supreme Court ruled against the owners of non-blighted properties within the area on the grounds that the project should be judged on its plans as a whole, not on a parcel by parcel basis. In Hawaii Housing Authority v. Midkiff (1984), the Supreme Court approved the use of eminent domain to transfer a land lessor's title to its tenants who owned and occupied homes built on the leased land. The court's justification was to break up a housing oligopoly, and thereby lower or stabilize home prices, although in reality, following the Midkiff decision, home prices on Oahu escalated dramatically, more than doubling within a few years.

The Supreme Court's decision in Kelo v. City of New London, 545 U.S. 469 (2005) affirmed New London’s authority to take non-blighted private property by eminent domain, and then transfer it for a dollar a year to a private developer solely for the purpose of increasing municipal revenues. This 5-4 decision received heavy press coverage because the Court sided with the city's argument that this sort of taking and private redevelopment was a public benefit. Kelo inspired a public outcry that eminent domain powers were too broad. As a reaction to Kelo, several states enacted or are considering enacting state legislation that would further define and restrict the state's own power of eminent domain. The Supreme Courts of Illinois, Michigan (County of Wayne v. Hathcock(2004)) Ohio (Norwood, Ohio v. Horney(2006), Oklahoma, and South Carolina have recently ruled to disallow such takings under their state constitutions.

The redevelopment in New London, that was the subject of the Kelo decision, proved to be a failure and as of the late fall of 2008 (over three years after the court's decision) the redeveloper has not been able to obtain financing for the project and nothing has been built on the taken land in spite of the expenditure of some $80 million in public funds.

American libertarians argue that eminent domain is unnecessary. Bruce L. Benson notes that utilities, for instance, have a variety of methods at their disposal, such as option contracts and dummy buyers, to obtain the contiguous parcels of land needed to build pipelines, roads, and so forth. These methods are routinely used to acquire land needed for shopping malls and other large developments.^[5] Defending the Undefendable argues that the problem of recalcitrant landowners (i.e. "the curmudgeon") who refuse reasonable offers for the sale of their land is solved in the long term by the fact that their failure to accumulate wealth through such trades will give them a relative disadvantage in attempting to accumulate more land. Thus, the vast majority of land will tend to ultimately end up in the control of those who are willing to make profitable exchanges.^[6]

Bush Executive Order

On June 23, 2006 - on the one-year anniversary of the Kelo decision (see above), President George W. Bush issued an executive order stating in Section I that the federal government must limit its use of taking private property for "public use" with "just compensation", which is also stated in the constitution, for the "purpose of benefiting the general public." He limits this use by stating that it may not be used "for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken". However, eminent domain is more often exercised by local and state governments, albeit often with funds obtained from the Federal government.

Eminent domain

From Wikinvestor

Contents

History

Terminology

Allodial versus feudal title

United States

Bush Executive Order

Notes

Further reading

Views

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