Condemnation Proceedings: How A Property Is Valued

Condemnation Proceedings: How A Property Is Valued

The constitution of the United States does not exactly consist of something called the ‘Eminent Domain’, the government has the power to acquire private property where such property may be taken for public use with payment of a ‘just compensation’ to the property owner. Fairly established in the 5th Amendment, the constitution applies this right of a just compensation all across the country. The emphasis here is always on availing a fair and complete indemnification to the property owner in terms of equivalent financial compensation for the condemned property.

As was said in 1931 by the Court of Appeals, that the city is liable to pay for what it takes and nothing else, such undertaking eliminates any rights and interests on the property.

Know what is a condemned property

A condemned property is generally a private property which has been acquired by the Government agency, or a energy company under the Eminent Domain also called condemnation. On such acquisition, the private land owner is entitled to an equivalent compensation which is supposed to be just and fair.

The three ways a condemned property is valued are :

  1. Valuing property as per the market sales in terms of location, property size, zoning. The market comparison helps attain a value that is fair as per the similar property in a similar area.
  2. Comparing costs – this helps assess how the property is unique and different from other similar properties that can actually affect its cost. The other factors could be its separate value due to its special use and also taking into account its improvements.
  3. The income valuation – how much income does the property generate. This valuation helps understand how much value could the property generate.

But what counts as ‘Just compensation’

The question has bugged most people over the course of time and there is no one answer to it as every litigant or lawyer could come up with a different explanation. The value depends upon the current value placed on the land. It is to be noted in every eminent domain acquisition that once the property is undertaken by the respective agency the losses incurred by the original owner are not specifically attached to the property value. Therefore the owner is not paid for losses incurred when giving off the property, and the just compensation is nothing but the equivalent to the property value.

The main idea of compensating ‘just and fairly’ is to give the property owner the exact value of his property. Now the question arrives, how you measure the value of damages for the property taken? To which the answer is simple – The damages for property are valued as per its fair market value.

What is Fair Market Value? It’s a measurement standard for evaluating a just compensation for a condemned property. It is the fair market value which helps determine what should be the exact compensation to be paid to the landowner for the property being taken. To assess the fair market value of the property, at least 2 appraisals are obtained for the condemned property. In eminent domain, the property is valued as per the current area rates. As per recent decisions of the Appellate Division, second department it was emphasized that the measure of damages must be reflected in the fair market value.

During a condemnation trial, the landowner should be awarded a just compensation. This compensation is decided as per the property’s highest value and its best possible use despite the fact that the property may or may not be in current use and also assessing what was its current use.