Eminent Domain Abuse: Putting a Stop to It

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Every so often, another story of eminent domain abuse hits the headlines for a day or two. Someone whose property is desired by the government gets hit with an eminent domain suit and ends up forced to sell and getting a lot less than they believe the property is worth. One of the most common things about these in recent years is that the government agency condemning the land hands it over to some other private individual for some purpose or other that may not have any real public need.

Let's be clear and explicit about eminent domain abuse: The issue is money.

Every once in a while there's someone who really won't sell the old family homestead at any price. The media loves these stories. They're also somewhat less common than hen's teeth. Far more common, indeed typical, is they offer someone a price below what similar properties that happen to be vacant or voluntarily marketed ones are going for.

If an eminent-domain condemning agency were to offer these business owners the amount the property is really worth to those business owners, i.e. value plus cost of relocating their business, they'd sell in a heartbeat and no legal case happens, not to mention there is no legal delay. Everyone wins. With the cost of litigation, nobody wants to get the courts involved.

If a condemnation agency were to wait, the property would become available on the market in the course of time. How much privately held property has not been sold voluntarily in the last fifty or a hundred years? The proportion is vanishingly small.

But in the case of a condemnation, we're not talking about a voluntary sale. We're talking forced sale of a property. The property is not on the market. If it were, the condemning agency could negotiate the price same as anyone else. I should also mention that the condemning agency also has the choice of purchasing some other property that is on the market, and that would be a viable choice in a majority of cases. The current owners do not wish to sell. Most particularly, they do not wish to sell for the price offered.

However, the incentives for government agencies don't work the way they do for private individuals and corporations. Their legal budget is what accountants call a "sunk cost" not charged against those bureaucrats like operating budgets are. Furthermore, if a project takes longer because everything is tied up in court, that's okay because everyone still gets paid, and the person directing it all has more opportunity to build themselves a secure little bureaucratic empire. But cost of acquisition? That comes out of budgeted dollars and they're held responsible for those!

All too often these days, there's a politically connected private individual or corporation who is the true beneficiary of the condemnation standing behind the government agency doing the actual condemnation. These people are sensitive not only to cost, but to the cost of delay. They could afford to pay enough to induce the owner to move voluntarily. They choose not to because the cost of the delay is less than the windfall they get from the condemnation getting the property for less than it is worth.

Let's look at the Fifth Amendment. I'm going to emphasize the relevant text:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

What is just compensation?

Should not a case be made that just compensation includes the expense of involuntary relocation, since we are forcing the property owners to relocate, allegedly for the common good? Certainly in such cases if the owners were poor people from the inner city, it would be demanded the government pay over and above the actual assessed property value to compensate them for their hardship.

I submit that it is no different in the case of a "wealthy" individual or corporation.

This includes any permits the business may require to move to the new location. If the business spent lots of time and money obtaining permits that are specific to the site they currently occupy, and do not transfer to the new location - or have to be re-done when they move - That is a legitimate expense the condemning agency is forcing them to bear if they want to stay in business, and should be included in any settlement that has any claim to "just compensation"

Let's be clear on another point as well: The condemned property is neither vacant nor voluntarily marketed. If it were, we'd have a clear case of negotiation being necessary until both sides come up with something mutually satisfactory. If the owners have a higher offer, or even rejected a higher offer, obviously the condemning agency needs to pay more, not threaten to end the negotiation with a "nuclear option" consisting of "We'll take you to court and get it for less". Reduced to the essential components, that's governmental robbery of private citizens. If you don't agree that's a bad thing, check yourself into a mental hospital immediately.

Require just compensation for the owners of condemned land, in the same way and via the same methods that corporations are required to make restitution to the victims of corporate malpractice (or even alleged victims) and watch the practice of eminent domain abuse come to a screeching halt.

The people practicing eminent domain abuse don't want to pay lawyers any more than their victims do. They are simply more able to pay their lawyers than the victims are able to pay theirs. They do so because it is cost effective: They make more money utilizing this scheme of legal terrorism than they do negotiating a price that reflects the real value to the current owners in the first place.

Take that incentive away, the problem will vanish.

Caveat Emptor

Original article here

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About this Entry

This page contains a single entry by Dan Melson published on February 12, 2014 7:00 AM.

Real Estate Loans Require Land was the previous entry in this blog.

The Bank Wants Their Money - And They Are Entitled To It is the next entry in this blog.

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