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What Is Condemnation In Real Estate And What Do Homeowners Need To Know?

December 20, 2023 4-minute read

Author: Sarah Sharkey

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Condemnation in real estate occurs when a government seeks to take property from a private owner, either through eminent domain or some other governmental function. Generally, in a condemnation proceeding, the court must decide whether the taking is legal and appropriate compensation.

Let’s take a closer look at condemnation in real estate.

What Is The Definition Of Condemnation In Real Estate?

Condemnation in real estate is a legal proceeding most frequently used when a government entity, or private agency with eminent domain authority, seeks to gain ownership of privately owned property.

In the case of eminent domain, the government needs to only show that it is taking the land in furtherance for public use and that it has offered just compensation. In some cases, the government may create an easement on the property and compensate the owner accordingly.

But eminent domain is not the only reason a government can pursue condemnation. In some states, governments may also initiate condemnation proceedings when a property becomes extremely dilapidated, dangerous or out of character with the community around it. At that point, the government may take warranted action to address the situation.

With these types of situations, absentee owners or years of unpaid property tax liens are often at the root of the problem.

What Is Eminent Domain?

Eminent domain provides governments of all levels in the United States the power to compel a property owner to transfer title to the government. This power can apply to all types of land ownership if the government can make the case for important public use.

As the property owner, eminent domain will likely create a headache. But owners are entitled to receive just compensation and due process in the case of disputes.

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What Should I Do If I’ve Received A Notice Of Condemnation?

The process starts out with a condemnation notice, which is the first step of commencing legal actions by the government to transfer the property status from private to a public use property. If you receive a notice of condemnation, the first thing you should do is consult with a real estate attorney.

The real estate attorney will be able to guide you through this tumultuous process. In most cases, the real estate attorney will encourage you to have a private appraisal of your property performed.

With this independent property appraisal in hand, you will be better prepared to negotiate with the government. Typically, the initial government offers are deemed insufficient and negotiation is possible.

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How Does The Condemnation Process Work?

The condemnation process will vary slightly based on the state you live in. Most condemnation actions are carried out according to the laws of the state in which the property is located.

But in all condemnation proceedings, the government has the burden of proof. That means they must satisfy the judge and sometimes a jury that the taking of property is necessary to pursue a public purpose. Plus, the government must show that just compensation, generally fair market value, is offered.

From there, the property owner has the opportunity to address the court to cover the legality of the taking. Unfortunately, most claims of illegality are unsuccessful as courts have defined public use very broadly.

Although the property condemnation is rarely reversed, the property owner does have a good chance of contesting the government’s appraisal of the property. Once the property value is contested, the court will witness a battle between the government’s and the owner’s appraisers.

What Is The Inverse Condemnation Process?

The inverse condemnation process is usually pursued as a lawsuit brought by property owners against a public or private interest that has damaged the property and reduced its market value.

Generally, the property owner has already witnessed damages to their property caused by the government. Since the damage has already been done, property owners are seeking restitution.

Inverse Condemnation Examples

First, let’s say that the government allowed or caused a major influx of pollution that negatively impacted your land or waterways. You can initiate the inverse condemnation process to receive compensation for this injustice.

Or let’s say that you are a shop owner on a busy roadway. The city government has decided to widen the road in front of your shop. In doing so, the city must engulf your parking lot to accommodate the roadway. Although the city offers to pay for the fair value of the parking lot, you know that your business will suffer without any available parking for your customers. With that, you ask for the value of the entire plot of land, including the value of your shop’s building.

If you feel that a government authority has negatively impacted the usage of your land, then consider getting in touch with a real estate attorney to explore your options.

Condemnation Real Estate FAQs

Let’s take a moment to answer some frequently asked questions surrounding condemnation in real estate.

What’s the difference between condemnation and eminent domain?

Condemnation is used when a government entity, or private agency with eminent domain authority, seeks to gain ownership of privately owned property. Eminent domain is a type of authority that gives U.S. governments the power to move forward with condemnation of a property.

What is an example of condemnation?

The government can pursue condemnation if a property becomes unlivable or if they have eminent domain. For example, let’s say the government is looking to expand a current highway through your property. Since this will be for public use, the government can exercise eminent domain over your property in order to move forward with their highway construction.

How do I prove inverse condemnation?

With an inverse condemnation lawsuit, you must prove and be able to show the damages to your property that were caused by the government (this includes not receiving proper compensation). This can be tough to do but a real estate attorney can help you navigate this kind of claim.

The Bottom Line: Property Owners Are Entitled To Due Process And Just Compensation When Condemnation Occurs

If a condemning authority determines that your land is required for public use, there is little chance of overturning that decision. Unfortunately, private property rights can be taken by the government and quasi-governmental entities.

However, owners can fight for the compensation they believe is just by hiring their own attorney and appraisers. With the right approach, you could walk away with a truly fair amount of money in exchange for the property you didn’t plan to part with.

Though condemnation can happen to any homeowner, the benefits of owning a home far outweigh the risks. Take action and start the mortgage process today with Rocket Mortgage®.

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Sarah Sharkey

Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make savvy financial decisions. She’s covered mortgages, money management, insurance, budgeting, and more. She lives in Florida with her husband and dog. When she's not writing, she's outside exploring the coast. You can connect with her on LinkedIn.