How adequate compensation is determined in eminent domain claims

Posted by iLawyer on Jul 24th, 2020 Eminent Domain, Firm News

There are three bedrocks for property owners with regards to Texas eminent domain laws. First, the condemner must be authorized in its use of eminent domain. Second, the land in question can only be seized for public use. And third, the property owner must receive “adequate compensation” for the land.

That final piece will be the focus of this blog post. Namely, how is “adequate” compensation actually determined?

Local market value is the driver

Texas, like many other states, offers only general guidance on the topic of adequate compensation. The answer, however, is generally derived from local market value at the time of the seizure.

To determine this figure, parties generally approach the transaction as if it were occurring between a willing buyer and willing seller. That is, what price would be satisfactory to both a property owner that is not obligated to part with their land but open to a sale, and a buyer that wants the land, but does not require it?

Naturally, even with these guidelines, there remains ample room for disagreement between the two parties.

There are a couple of additional considerations worth noting. First, as the Texas Farm Bureau explains, the property’s value should be tied to its highest and best use. Essentially, this is the worth of the property based on how it will be utilized by the new owner – not necessarily its value under its current use.

Second, if only a portion of a property owner’s land is taken, the law allows for remainder damages. This is compensation for a decrease in value to the remaining land as a result of the seizure. Losing direct access to an important destination, such as a roadway or water source, is one common reason for the awarding of remainder damages.

Ensuring you receive adequate compensation

It is not uncommon for a landowner and the seizing entity to disagree on adequate compensation. While a condemner is legally obligated to negotiate in good faith, they may not see the full value of your property – and therefore, offer a proposal far lower than you believe is fair.

It is at this stage that effective negotiation becomes critical. Whether done before any legal action is taken or during the course of litigation, fighting large companies or government entities that want to take your property requires a hard-nosed, aggressive approach.

If you do not receive adequate compensation now, then your opportunity to do so may be lost.