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04/26/2014: Property Owners Should Know Their Rights In Eminent Domain Cases

The Washington Post – Washington, D.C.

Author: Benny L. Kass

Date: Apr 26, 2014

What would you do if the Maryland Transit Administration sent you a formal notice that it intended to buy your house because it is in the path of the proposed Purple Line light-rail project? Does the government have a right to take your property? What rights do you have? Do you have to sell?

The technical term is “eminent domain,” but the process also is known as condemnation. If you cannot agree on a purchase price, the government has the absolute right to take your property as long as it is for a public use. And there is no question that the Purple Line project is a public use.

Both federal and state laws make it clear that if your property is taken by the government, you are entitled to receive a fair payment. Article III, Section 40, of the Maryland Constitution says: “The General Assembly shall enact no law authorizing private property to be taken for public use, without just compensation, as agreed upon between the parties, or awarded by a Jury, being first paid or tendered to the party entitled to such compensation.”

How does it work? Once a government agency determines that your house is needed for that public use, you will receive an offer with a specific dollar figure that the agency has previously determined will be “just compensation.” If you agree with the price, you will deed the property to the agency and will receive the agreed-upon amount.

While you generally cannot challenge the taking of the property, you have the absolute right to object to the value set by the government. Maryland law is specific in defining the standard on which to base the value: “The fair market value of property in a condemnation proceeding is the price as of the valuation date for the highest and best use of the property.”

Note the words “highest and best use.” That means that even if you own a single-family home, the highest and best use of the property could be a commercial building.

If you and the agency cannot agree on a fair price, the government will file an eminent domain lawsuit in the circuit court where your property is located. You are entitled to a jury trial. In fact, in most condemnation trials, jurors will be bused to the property for a view so that they can get a better understanding of what the house looks like and where it is.

The trial can last several days. The court will most likely require the parties to mediate the matter, in hopes of reaching an amicable settlement. But if you ultimately have to go to court, you will need to convince the jury that your number is the correct one. That is the only issue to be determined in a condemnation case.

You should have expert witnesses, such as experienced appraisers, to testify about the value of the property. You and your attorney may find it necessary to use other experts, such as zoning or traffic experts.

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 the government abandons its plans, it must pay your reasonable court costs and attorney’s fees. Otherwise, you will have to pay your own attorney.

What should you do when you get the notice? You must start planning immediately. You cannot wait until there is a trial. You should talk with any neighbors who are also subject to condemnation, and perhaps the group should retain a lawyer experienced in eminent domain to walk you through the steps and get you prepared. You clearly will need an appraisal, and that can take time. You will want to consider such 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 or her? Should I spend money renovating my house?

Is the money you receive taxable? Strange as 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 might also be able to defer your gain by purchasing property similar to the one that was taken. You must discuss this with your tax advisers.

The condemnation process is extremely complex. It’s your property, so don’t procrastinate. Start your research now. There is a lot of helpful information on the Internet under the topics “eminent domain,” “condemnation” and “involuntary conversion.”

Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. For a free copy of the booklet “A Guide to Settlement on Your New Home,” send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.

Credit: Benny L. Kass. Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.