How Eminent Domain Works

Legally, eminent domain is also called condemnation. The process varies by state, but the basic steps are similar. Once the local government decides that it needs a parcel of land or a building, it contacts the owner to negotiate a selling price. At this point there are three different paths the process can take:

When the government needs land, it's referred to as a taking. There are several different categories of takings. A complete taking is when the entire property is purchased. When only a portion of the property is needed, a partial taking may be used. In this case, the owner must be compensated for the value of the land, as well as the amount the remaining property is devalued. If the property is used for a limited amount of time, then a temporary taking is necessary. The owner is paid for any losses that result from the temporary taking, but remains owner throughout the process. Using private land adjacent to a public works project is one way a temporary taking might apply.

The final category is called right of way or easement taking. Technically, this involves the general right of someone to make use of someone else's property; it usually refers to using land for a roadway or utility installation. The property owner maintains use of the land but gives up ownership.

When a business owner is forced from a leased building, he or she is entitled to compensation. Typically, this means the value of the lease is paid, in addition to improvements made by the tenant. The tenant also can ask for payment for the amount of lost business.

The definition of "public use" has sometimes been stretched to the point that any project that could potentially generate more tax revenue may be considered. The Supreme Court ruled for the government in the landmark case Kelo v. New London in 2005 [source: Oyez.org]. In the case, the city of New London, Connecticut had many homes and businesses razed to build an office complex.

The 5-4 ruling gave new power to local governments to build whatever they deemed a benefit to the community, including shopping malls, hotels, condos and health clubs. It was a victory for wealthy developers and a defeat for homeowners. Eight state supreme courts and 43 states have reacted to the decision by passing measures that more clearly define or restrict what is considered public use [source: Institute for Justice].

Lakewood, Ohio, residents fought back when their government attempted to take their homes in order to build expensive riverfront condominiums. The mayor of Lakewood had argued that the community couldn't survive without a strengthened tax base. The government determined that any home that didn't have three bedrooms, two baths, central air conditioning and an attached two-car garage was to be considered "blighted."

Fifty-five homes, four apartment buildings and 12 businesses were threatened with demolition. Locals were outraged. The television news show "60 Minutes" investigated and found out that even the mayor's home was considered "blighted." The town rejected the development by unanimous vote and was successful in voting the mayor out of office [source: CBS News].

A business owner in Mesa, Arizona also fought back and won his eminent domain case. The owner of a brakes and repair shop was being muscled out of the business his father started by a local politician looking to get an Ace Hardware in its place. The hardware store was only a few blocks away, but there was more land for expansion where the brakes shop operated. Instead of negotiating, the hardware store owner asked the City of Mesa to take the property and sell it to him. The brakes shop owner held his ground and the Arizona Court of Appeals ruled in his favor [source: CBS News].

One case that was not successful was in New York City, just a few blocks from Times Square. A corner building was taken under eminent domain for the purpose of erecting a new headquarters for The New York Times. The state of New York declared the block "blighted" and ruled in favor of the newspaper giant. The owner was forced to give up the building his family had owned for more than 100 years [source: CBS News].

If a government official comes to your door talking eminent domain, it's important that you know your rights as a homeowner. Groups like the Castle Coalition help educate homeowners about eminent domain abuse.