The Real Estate Encyclopedia
Eminent Domain, or Imminent Dominion?
Category - Real Estate Information Sources - Real Estate Articles

In a close 5-4 split decision on June 23rd, the highest court in the land ruled… Well, what exactly did they rule? Let’s look at some key excerpts from the actual certiorari handed down by the Supreme Court:

SUPREME COURT OF THE UNITED STATES

KELO et al. v. CITY OF NEW LONDON et al.

CERTIORARI TO THE SUPREME COURT OF CONNECTICUT

No. 04—108. Argued February 22, 2005–Decided June 23, 2005

‘Held: The city’s proposed disposition of petitioners’ property qualifies as a ‘public use’ within the meaning of the Takings Clause.

While the city is not planning to open the condemned land–at least not in its entirety–to use by the general public, this ‘Court long ago rejected any literal requirement that condemned property be put into use for the … public.’ Rather, it has embraced the broader and more natural interpretation of public use as ‘public purpose’.

Because that plan unquestionably serves a public purpose, the takings challenged here satisfy the Fifth Amendment.

Neither precedent nor logic supports petitioners’ proposal that the Court adopt a new bright-line rule that economic development does not qualify as a public use. Promoting economic development is a traditional and long accepted governmental function, and there is no principled way of distinguishing it from the other public purposes the Court has recognized.’

Whether substantive or superficial, the shock of this ruling is still reverberating throughout the country, as folks involved in the sale and purchase of land and property try to discern how this ruling may affect their business, and ultimately, their livelihood.

What is Eminent Domain?

Eminent domain is the constitutional right of the government to take private property for public use, provided it offers ‘just’ compensation to the property’s owner. Governments most commonly use the power of eminent domain when the acquisition of real property is necessary for the completion of a public project such as a road or a bridge, and the owner of the required property is unwilling to negotiate a price for its sale.

The concept of eminent domain is based on the Fifth Amendment’s view of the deprivation of private property,

‘No person shall [sic] be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.’

Traveling further back into history, the concept of eminent domain finds it’s roots in the Latin term dominium eminens (‘supreme lordship’), first coined in the 17th century writings of Hugo Grotius, a Dutch jurist, politician, and theologian whose major work Of the Law of War and Peace (1625) is considered the first comprehensive treatise on international law.

It’s Law, Right? So Where’s the Loophole?

Actually, there are two, but let’s tackle the question below, and move forward from there.

  1. What is the current scope and authority of the phrase ‘public use’?

Answer: The Fifth Amendment requires that the ‘public use’ of the property be sufficiently demonstrated. Yet, over the years, the definition of ‘public use’ has expanded to include private economic development, where large and powerful corporations use eminent domain to displace private homes and businesses in order to build more profitable developments.

In the 1954 case known as Berman v. Parker, the Supreme Court redefined one word in the clause ‘nor shall private property be taken for public use, without just compensation.’ They changed ‘public use’ to ‘public purpose’, opening the door for later cases ruling that condemnation of real property in need of economic improvement is an acceptable public purpose, and therefore constitutional.

Twenty-eight years later, in 1981 the Supreme Court of Michigan, building on this precedent, permitted the neighborhood of Poletown to be taken in order to build a General Motors plant. Courts in other states relied on this decision, which was overturned by a 2004 precedent set in the first hearing of the KELO et al. v. CITY OF NEW LONDON case.

In essence, the recent Supreme Court decision on eminent domain has further expanded the ability of local governments to seize private property.

A Search for Justice

The second question in response to such a ruling would naturally be:

Who decides the fair monetary value of the ‘just’ compensation the owner of said private property should receive?’

The short answer is that if the entity wishing to seize the land via eminent domain cannot appease the owner of the land with what both parties agree is ‘just’ compensation, the courts make such a decision.

And, as you read above, the highest court in the land just decided to offer even more legal clout to those very entities: municipal governments and large public and private companies, whose reluctance to assert eminent domain for a public ‘purpose’ they deem profitable is quickly eroding away.

So How Will This Ruling Affect You?

Though many fear the court’s decision heralds the end of private property rights, there’s no need to fly into a panic just yet. Nevertheless, as a real estate agent, you should be prepared to answer the very real questions posed by prospective homebuyers and sellers by researching the Supreme Court’s decision for yourself. You should also keep in mind that as an agent who deals in property every single day, you are not immune to the reach of eminent domain. If there is any question whatsoever about the future of a property with respect to eminent domain, you have a fiduciary responsibility to discuss with your client the impact that decision could have on the purchase or sale of the property in question.

If selling homes is your livelihood, you owe it to your family and your brokerage to empower your customers with the information they need to make the wisest possible decision. To that end, we’ve composed a short list of online articles you should read to become familiar with the consequences of this landmark ruling.

Informative Articles

  • First and foremost, read the Supreme Court’s one-page certiorari here.
  • To read NAR’s response to the ruling, among many other helpful links, visit here.
  • Six days after the ruling, a private developer decided to make a point and strike a little closer to home by contacting the local government in Supreme Court Justice David Souter’s hometown in New Hampshire to ask that the property of the judge – who voted in favor of a controversial decision allowing a city to take residents’ homes for private development – be seized to make room for a new hotel. Read the article explaining how the developer wants to serve Souter his ‘just desserts’ here.
  • To read a poignant article describing the absurdly ‘unjust’ compensation offered to one particular family, click here.
  • To read an article supporting the decision, visit here.
  • To read an article refuting the decision, visit here.




References


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