Condemnation Essentials

If you’ve driven around Montgomery County recently, you are aware of the impact of the construction of the Inter County Connector. What is not as visible is the impact of “eminent domain”, the process by which the State Highway Administration is taking the property of its citizens for the construction of the highway to serve “the common good.” It has been several decades since a project of this size has come to our area, and thousands of properties and property owners are affected. Soon, we may see similar takings involving the Purple Line and the Corridor Cities Transitway. Few people ever have been involved in a condemnation of their property, nor have many businesses or major corporations ever experienced the taking of their property by a public agency.

Many different governments, government agencies, and even private companies have the right to take private property by eminent domain, also known as condemnation. Federal, State, County and City governments can condemn property, as can private companies such as railroads, utility companies, and transportation agencies (WMATA). All of these entities are governed by the federal and state constitutions. The Fifth Amendment to the United States Constitution tacitly recognizes eminent domain, but guarantees that no private property may be taken for public use without the payment of just compensation. This Amendment was placed in our Constitution to eliminate the possibility that any citizen of the United States of America should suffer the uncompensated taking of property that had been endured in other countries historically. That the Founding Fathers incorporated such a protection into the Bill of Rights gives weight to the importance of land and private property to the individual, and further that it should not be taken by the government without a specific need and with adequate payment for its loss to the owner.

As the body of condemnation law has grown, so have the number of laws and rules to govern eminent domain, making the subject more complicated. However, there are some simple points regarding condemnation of property that are often overlooked or misunderstood. A few are set forth below:

What the Courts Will Not Consider

As a general principle, courts will not review the issue of public necessity for the taking, the precise boundaries of the targeted land, or the amount of the land being taken. If a property owner wants to challenge any of these points, he/she must allege and prove bad faith or illegality on the part of the taking agency, a very difficult thing to do. A great deal of time, money and effort can be wasted trying to disprove the public necessity of a given project.

If Your Property is Mortgaged

Most property owners own their property subject to a mortgage or a deed of trust. Under the terms of those legal documents, the lender is entitled to be paid before the property owner. 

If property owners want any part of the condemnation payment to come to them rather than their lender, they must negotiate an agreement with the lender early in the process. The lender ultimately must approve the sale of the property, which today can be a challenge as fewer and fewer lenders have real people answering their telephones! The inability to get documents signed by lenders can create major delays in the payment process. Additionally, if an owner purchased his/her property at the height of the market, and the value of the property has fallen subsequently due to market conditions or the proximity of the public project to the property, a lender will be loathe to part with any of the proceeds from the sale of a partial taking, preferring instead to keep those dollars to reduce its financial exposure.

If You Are a Tenant

Similarly, whenever rental property is the subject of a condemnation case, the rights between landlords and tenants almost certainly will be governed by the lease. Tenants’ compensation, if any, will be controlled by the lease and usually will be limited to fixtures which cannot be relocated, as well as possible moving expenses.

You Are Entitled to Interest

Under the Maryland Constitution, owners are entitled to 6% interest on the condemnation value from the date of taking to the final settlement.

Quick Take Condemnation

A very limited number of government agencies have been given the right of “quick take”, where the agency can obtain an appraisal, deposit the amount of the appraised value with the court, and immediately take the property. The Inter-County Connector is a prime example of a quick take project. While many properties may not have been formally sold to the State Highway Administration, construction is going forward on those properties anyway. While this option sounds arbitrary, it does leave the owner with certain benefits. The owners may withdraw the funds deposited with the court and still contest the value of the property if the owners feel the funds do not constitute fair and just compensation.

SHA and Montgomery County have quick take rights, but there are stringent conditions that must be met for quick take to be used, these vary with the condemning agency.

Even in a quick take, property owners have the legal right to prove the value of their property and may pursue fair compensation by negotiation, mediation or court action.

Partial Taking of Property

In cases involving a partial taking of their property, owners are entitled, by Maryland Statute, to receive damages caused to the remainder of the property not taken. This includes damages caused due to the public announcement of the project.

Total Taking or Taking of Occupied Property

If there is a taking of occupied property, the taking agency may be responsible for payment of relocation expenses. The definition of “fair market value”, e.g. what a willing seller will accept, and what a willing buyer will pay, is constantly evolving and depends on many factors. Maryland Statute defines fair market value to include:

“any amount by which the price reflects a diminution in value occurring between the effective date of legislative authority for the acquisition of the property and the date of actual taking if the trier of facts finds that the diminution in value was proximately caused by the public project for which the property condemned is needed, or by announcements or acts of the plaintiff or its officials concerning the public project, and was beyond the reasonable control of the property owner.”

The ability of property owners to obtain full and just compensation almost always depends on the expertise of a competent, professional appraiser and the negotiating skills of an experienced condemnation attorney. Other experts may be required, including a land planner, an engineer or others. Condemnation law is complex, and can be different for any given case. Many people accept the financial settlement that the condemning agency offers because they believe it is a final offer and they are required to accept it. As with any property sale, there is always room for evaluation and negotiation, and the level of success will often depend on the expertise of the owner’s negotiator and land use team of experts. To successfully challenge fair market value set by a condemning authority is not a task for the faint of heart or those uneducated in condemnation law. It takes knowledge, time, and above all, patience and the ability to deal with the many layers of government involved. Some individuals give up on the process simply because they become emotionally exhausted. But with the right team working for a property owner, the stress is reduced, the process becomes more user friendly, and best of all, the financial rewards can be very significant.

As they say on TV, “don’t try this by yourself at home.”