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Eminent Domain

The power that the government and municipalities of a country behold where private properties can be converted to public use

What is Eminent Domain?

Eminent domain refers to the power that the government and municipalities of a country behold where private properties can be converted to public use, following monetary compensation for the use of private land.

 

Eminent Domain

 

Understanding Eminent Domain

The eminent domain comes under the Fifth Amendment of the U.S. Constitution. Most common-law nations follow a similar rule – it is called “compulsory acquisition” in New Zealand, in the U.K., and Australia. In Canada, it is called “expropriation,” and in Ireland, it is known as “compulsory purchase.”

A process called condemnation proceeding occurs where the owner of the private land can test the legitimacy of the seizure of land and settle the issue by using the fair market value as compensation. An example of condemnation proceedings is building and lands detained to give birth to public projects. It may include water, dirt, airspace, and rock taken from private lands to build roads. Moreover, the eminent domain includes stock, investment funds, and leases.

Municipalities in 2013 considered the use of eminent domain laws to refinance underwater mortgages by grabbing them from owners for their current market value and reselling them at a reasonable rate. It is a form of subsidization that the government undertook to reduce the manufacturing cost and improve production efficiency.

A law was passed by congress inhibiting the Federal Housing Administration from finance mortgages seized by eminent domain in 2016. However, eminent domain is still a major issue that undermines the mortgage market. As contract rights, copyrights, and patents are all part of the eminent domain; theoretically, the federal government can seize Facebook and turn it into a public utility to defend the users’ privacy and data.

 

Negative Effects of Eminent Domain

In recent years, the definition of public property underwent changes, with the Supreme Court expanding the definition – from airport expansions to trade centers, to highways and other utilities, to everything that will make a town or city a rejuvenated community and visually attractive.

Under the current definition, eminent domain began to incorporate the benefits of large business when General Motors took private land in the 1980s for a factory, as it would produce more jobs in the locality and increase tax revenues. However, it created a downward spiral effect because large companies were using private land for their benefit and were abusing their powers.

In the early 2000s, Pfizer infamously snatched homes in a poor neighborhood in New London, Connecticut to build a new research and development facility. It caused outrage within the general public, as houses in a poor neighborhood were used for private development. In 2005, the Supreme Court supported the ruling, and lawmakers passed a law to protect property owners from the negative consequences of eminent domain.

 

Eminent Domain in Canada

In Canada, expropriation is ruled by the federal or provincial governments. Under the rules, public authorities possess the legal right to obtain private property for public use as long as the federal or provincial government approves the acquisition. Once the property is taken, the owner of the property is allowed to “be made whole” by compensation at fair market value for the expropriated property, damages to the property, disturbance damages, special difficulty in relocation, and business loss.

Owners of the private property can ask for compensation above and beyond the initial amount provided by the expropriating authority by bringing a claim in front of the court or an arbitrator appointed by the governing legislation.

 

Related Readings

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  • Market Value
  • Easement in Gross
  • Statute of Frauds
  • Deferred Compensation

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