A Federal Takings Law Primer

Your Guide on How to Protect Your Rights in Regulatory Takings and Inverse Condemnation Actions

Takings Law Explained

Situations arise where the government takes property without instituting formal eminent domain proceedings to condemn property including leaseholds, buildings, water rights, farm land, timber rights, homes or building lots, franchise agreements, office buildings, business enterprises, and trade secrets – to name a few.

In these cases, a private landowner may go to court and bring an action for inverse condemnation to force the government to pay just compensation. What are your options if the government takes your property through what is usually called a regulatory taking or inverse condemnation?

Here is your concise guide to takings law and litigation, from the attorneys at Marzulla Law – takings law explained in plain English.

Government Rights vs Your Rights

We all know that government must be able to acquire land in order to carry out its ordinary and legitimate functions, not the least of which would include construction of buildings, highways, and military installations, as well as the preservation of parks, wildlife refuges, and other natural areas. But the government also can take privately owned property through regulations that define land or water as wetland or critical habitat for an endangered species, or by other designations that declare off-limits any beneficial or productive use of your property.

The government’s power to acquire property through condemnation, even over the objections of the owner is called “eminent domain,” and is possessed by federal and state governments alike. A taking in which the government formally exercises its right to take property is called an exercise of eminent domain. A taking that occurs when the government only purports to be regulating activities or taking other actions—not condemning private property by exercising its power of eminent domain—is referred to as an inverse condemnation.

What is inverse condemnation? Inverse condemnation is a legal term that describes a situation in which the government takes private property without paying the compensation required by the Fifth Amendment of the Constitution, forcing the property owner to sue to obtain required just compensation. 

It should be remembered that the power of eminent domain is an inherent attribute of governmental sovereignty. Accordingly, it need not be (and is not) specifically listed as an enumerated power of the federal government in the Constitution. What is explicit in the Constitution, however, is the guarantee that if the government does exercise its inherent right to condemn private property—just compensation must be paid for the property taken.

But what about your rights—the rights of private persons, business entities, and organizations–in these matters?

Filing a Federal Takings Lawsuit

A substantial body of law has developed around the process by which government exercises its eminent domain power and provides just compensation to property owners. Because property owners must often sue to obtain just compensation in instances of inverse condemnation, takings litigation is complex and requires significant expertise. As takings attorneys with decades of experience, we pioneered takings litigation in the U.S. Court of Federal Claims—the only federal court in the country in which takings claims can be brought against the federal government.  We are recognized leaders in takings matters that affect property owners such as landowners, businesses, developers, water districts, agricultural water users, and lease holders. If you face a taking, you have options–indeed, constitutionally protected options.

Property owners facing a government taking owe it to themselves to thoroughly examine their legal rights relating to just compensation. For example:

• In instances when the government exercises its power of eminent domain to condemn land, federal law permits the government to obtain immediate possession (the so-called “quick take”) if it deposits the estimated just compensation in escrow and files an action.
• Property owners seeking to recover just compensation for the taking of their property rights in an inverse condemnation can only bring suit against the federal government in the U.S. Court of Federal Claims, located in Washington, D.C. The Court of Federal Claims can hear cases from anywhere in the United States.
• Successful property owners who do seek just compensation in the Court of Federal Claims are entitled to recover their attorneys fees, costs, and interest on the just compensation award, from the date of taking.
• Timeliness of filing a claim for a federal taking is crucial. A federal taking claim must be filed within six years of the taking—or the claim is forever time barred.

Two Conditions That Limit a Government’s Power to Obtain Your Land or Property

The Fifth Amendment’s Just Compensation Clause provides two conditions that limit a government’s power to obtain land and other property through eminent domain:

1. Takings Must Be for “Public Use”

First, the acquisition or taking of the private property must be for “public use.” That is, the taking must not be for the private benefit of some government official (e.g., constructing a road to his or her property) but must be for public benefit and in furtherance of actual powers possessed by the government, such as national defense or commerce.

However, it is important to recognize that the “public use” limitation on the government’s ability to condemn private property has been construed broadly. For example, the United States Supreme Court has held that a reallocation of land or other property through an urban renewal project or similar process meets the “public use” requirement even though title is held by private individuals as a result of the process. The key issue in determining “public use” is whether the activity furthers governmental (rather than private) purposes.

2. “Just Compensation” Must Be Paid

The second condition placed by the Constitution upon the exercise of the eminent domain power is that the owner be paid “just compensation” for the property taken. “Just compensation” is, quite simply, the monetary value of the property taken. Failure of the government to provide just compensation invalidates the attempted exercise of eminent domain power or, at a minimum, gives rise to a claim for the value of the property taken.

The Just Compensation Clause does not, in and of itself, forbid the exercise of otherwise legitimate governmental power. Indeed, it is only designed to “secure compensation in the event of otherwise proper interference amounting to a taking.”

Your Options: How Do Your Determine, and Contest, “Just Compensation”?

As previously noted, all federal takings claims must be brought in the Court of Federal Claims. State takings claims, however, may be brought in state or federal court. Different states have different procedures for determining just compensation and acquiring title. Some require deposit of estimated just compensation into court, while others do not. Some allow for trial before a jury, while others use the commissioner system of knowledgeable persons appointed to advise the court.

The litmus test for any of these proceedings is whether it ultimately affords just compensation for the property taken.

The value of the property is generally decided on the basis of testimony given by the owner, appraisers, or both. The fundamental issue is: what price would a willing buyer pay to a willing seller for this property? This amount is its “fair market value,” and is the universally accepted measure of damages in an action for just compensation.

Although various appraisal methodologies may be employed, the most common is the “comparable sales” approach in which the appraiser first determines the “highest and best” use of property, then compares the property to others in similarly situated locations. “Highest and best use” is the most profitable use which could reasonably be expected to be made of the property in light of all of the circumstances. Such circumstances can include:

• economic conditions prevailing at the time of the taking
• the physical suitability of the land
• supply and demand: strong demand for particular types of land (e.g., residential, commercial, office) will drive up the price, and a soft market will drive down the price

The existing two hundred years of eminent domain law serves as the foundation for analysis of the “newer” development of inverse condemnation—i.e., physical and regulatory takings. But the touchstone of the constitutional analysis in each instance is the Fifth Amendment’s Just Compensation Clause. Therefore, all takings cases—including eminent domain—are constructed of the same logical and constitutional components.

Your Action Plan

The best way to protect your rights when faced with a federal taking of your property rights is to know your rights and your options. We have attempted to give you a 30,000-foot overview of the issues in this short primer. But issues abound in pursuing relief in an inverse condemnation action or in ensuring that full compensation has been fairly paid in a formal exercise of eminent domain. In our decades of work representing clients in federal and state takings, we recommend that the following three steps be among your first three steps in evaluating your options:

1. Collect any documentation relevant to governmental actions that you believe may have given rise to a taking of your property or unfair payment of just compensation for your property.
2. Contact an experienced takings or eminent domain attorney to discuss the particular facts regarding your property and the government’s actions.
3. Do not delay. Time is not on your side when faced with any kind of taking claim, and your right to just compensation can disappear if you do not timely act.