Does the government have a right to take your property? What rights do you have? Do you have to sell?
It’s not an issue that gets much attention, but the government has the right to seize your house, business, and/or land, forcing you out and into the street. This is called “eminent domain,” or "condemnation" which is included in the U.S. Constitution’s Fifth Amendment: “… nor shall private property be taken for public use without just compensation.” Every single state constitution also stipulates that a person whose property is taken must be justly compensated and that the property must be put to public use. Meaning that if your house is in the middle of a proposed highway, the government can take it, pay you market value, and build the highway.
If you cannot agree on a purchase price, the government has the absolute right to take your property, so long as is for a public use. And there is no question but that the proposed project is a public use.
But while you generally cannot challenge the taking of the property, you have the absolute right to object to the value set by the government.
The Property Condemnation Process
When the government condemns your property and takes it for public use:
- You receive a notice stating the government's interest in your property and identifying the planned project
- Your property is appraised to determine fair market value. You have the constitutional right to "just compensation" when the government takes your property
- The government makes an offer for a specific amount ("pro tanto award") for your property
- If you accept the offer, the government will ask you to sign legal releases waiving your right to sue the government
- If you don't accept the government's offer, the government will take the matter to court in an eminent domain proceeding to decide whether your property can be taken and how much you will be paid. (eminent-domain.lawyers.com)
Once the jury makes a decision, the government has two choices. It can pay the amount of the award and take title to the property or if it determines that the jury award is too high, it can drop the matter. If it does abandon, the government must pay your reasonable court costs and lawyer's fees. Otherwise, you will have to pay your own attorney.
Once you get the notice you must start planning immediately; you cannot wait until there is a trial. You should talk with any of your neighbors who are also subject to condemnation. A good idea is to have a group retain a lawyer experienced in eminent domain to walk you through the steps and get you prepared. You definitely will need an appraisal, and that can take time. You will want to consider other issues as should I try to sell now to a third party and take my money? If I have a tenant, do I discuss the situation with him? Should I spend money renovating my house?
How wrong it may seem, the government can take your property and then tax you on any gain you have made. You might be able to exclude up to $250,000 (or $500,000 if you file a joint tax return) of your gain and you may also be able to defer your gain by purchasing property that is similar to the one that was taken. You must discuss this with your tax advisors.
The condemnation process is extremely complex; its your property so don't procrastinate. Start your research now. There is a lot of helpful information on the internet under the topic Eminent Domain, or Condemnation or Involuntary conversion.
Lang Premier Properties are Birmingham Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Max Broock in Birmingham, Michigan. See what past clients have to say about Stephanie Lang. Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying a new luxury estate.