Understanding Just Compensation: Maximizing Your Land Value

American dollars grow on the garden bed on a meadow Visual concept for a legal blog: Understanding Just Compensation: Maximizing Your Land Value

The federal or state government has certain rights under eminent domain laws to take private property for public use. To do so, the governmental entity or public agency must provide the property owner with “just compensation.” This protection is granted in the U.S. Constitution and is a critical aspect of eminent domain and condemnation cases. If you’re a landowner who has been approached by the government for your land, it’s vital to understand how just compensation is determined and how you can ensure you receive it.

How is Just Compensation Determined?

Just compensation” for the governmental taking of an entire property is the fair market value on the date the taking occurs. While the owner’s opinion regarding the value of the land can be admitted into evidence, it’s important to be aware that the government does not consider the emotional value of a property — or how long it might have been in a landowner’s family. Rather, an appraisal process is used to assess the highest and best use of the property.

If the government seeks less than the entire parcel of land, it is considered a “partial taking.” In these situations, the compensation will be measured by the difference in the fair market value of the whole tract of land before the taking occurs and the fair market value of the land after the taking. In other cases, compensation may be based on the fair market value of the land that has been taken — or the difference in fair market value immediately before and immediately after the taking — whichever is greater.

How Do Appraisers Value Property?

Before just compensation is determined for a parcel of land, an appraisal will be conducted. However, eminent domain appraisals are very different from standard real estate appraisals. They must comply with certain procedures, rules, and standards. In the event an eminent domain appraisal does not comply with the necessary requirements, it may be deemed inadmissible in court for the condemnation matter.

There are three basic methods that can be used to value a property under eminent domain in North Carolina. These include the following approaches:

  • Sales comparison approach — Sometimes referred to as the market approach, this method generally compares similar properties that have been purchased and sold. It considers a number of factors regarding the land when determining its value, such as its physical characteristics, the size of a parcel, the geography of the land, and its location.
  • Income capitalization approach — This method of appraisal is typically applied to property with earning capabilities. It considers income capitalization to determine the value of the land.
  • Cost approach — When the cost approach is used, the appraiser determines the cost to replace property and deducts any depreciation to the value of the land. This method is typically applied to land that has unique attributes or structures.

As part of the appraisal process, the government will be given detailed information by their selected appraiser regarding the value of any right of way, permanent easements, temporary easements, or improvements being acquired. The appraiser will also provide information regarding the amount of damages to the remaining land. While the appraiser chosen by the public entity is working on behalf of the government, it may be best for a property owner to hire their own appraiser who can provide another assessment. However, this appraiser should be hired with the assistance of an experienced eminent domain attorney to ensure that the appraiser is competent to assist in eminent domain court proceedings.

How Can You Maximize Your Land Value?

Eminent domain generally cannot be stopped, so it’s crucial for landowners to ensure they are receiving the highest possible amount of compensation for their property. The government will likely lowball the first offer it makes for a property, typically due to sheer lack of effort in the appraisal process. A landowner should be prepared to negotiate to maximize their compensation. A skillful eminent domain attorney can best advise regarding the valuation process and will know how to determine whether fair compensation is being offered.

Under eminent domain laws, land does not need to be valued based on how it is currently being used. A landowner must be paid “just compensation” for the property’s “highest and best use.” Although most properties have multiple purposes, not all uses might be legally or reasonably possible. Highest and best use must be both reasonable for the property in question and the local market.

Determining a property’s highest and best use often comes down to whether the use is physically possible, legally permissible, and financially profitable. It also considers what results in the maximum value. After the highest and best use of the land has been determined, the value must be proven. It may be necessary to assemble a team of professionals and experts to gather the evidence needed to establish the property’s value. These professionals can testify in court regarding the land’s highest value — expert witnesses who may qualify to give their opinion can include appraisers, land planners, environmental consultants, engineers, and developers.

Contact a North Carolina Eminent Domain Attorney with Experience

If you are facing a governmental taking of your property, it’s essential to have a knowledgeable attorney who can guide you through the eminent domain and condemnation process — and ensure you are provided with just compensation. Located in Charlotte, Murray Law provides representation to landowners for matters pertaining to eminent domain in North Carolina. We welcome you to contact Murray Law’s Charlotte office or call us at 704-940-9095 to schedule a consultation to discuss your case.

Categories: Eminent Domain