What is condemnation in real estate?

If you ever receive notice from your local government that it wants to take ownership of your home or other property, take it seriously. This is a process called condemnation and it can be tricky to navigate.

What is condemnation? In real estate, it occurs when a government takes a property from a private owner, either through eminent domain or some other governmental procedure. Generally, in a condemnation proceeding, the court must decide whether the property acquisition is legal and provide the owner with appropriate compensation.

Condemnation also can involve a condemned property – one that is deemed to be unsafe or uninhabitable – as well as inverse condemnation, which happens when a government or public agency interferes with or takes private property without formally initiating eminent domain proceedings.

Key Takeaways:

• Condemnation is when the government takes private property, either to use it for a public project or because the property is considered unsafe to live in.
• If you get a condemnation notice, it’s smart to hire a real estate attorney and get your property appraised so you can protect your rights and push for fair payment.
• Inverse condemnation happens when the government damages your property or reduces its value without officially taking it, and you’ll need to prove the harm to get compensated.
• It’s tough to stop a property taking, but you can fight for a better payout by challenging the government’s valuation with your own experts and legal help.

Condemned property defined

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

Eminent domain is the government’s legal right to take private land for public use. With eminent domain, the government needs to demonstrate that it is taking the land for public use and 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 is dilapidated, dangerous, or out of character with the surrounding community. At that point, the government may take action to address the situation.

“A condemned property is a building officially determined by an agency of government – typically a housing or building department – to be unsafe, uninhabitable, or otherwise unoccupiable,” says Sean Salter, associate professor of finance at Middle Tennessee State University in Murfreesboro, Tennessee. “This status may be caused by severe structural deterioration, contamination with toxic substances, or extensive nonconformity with local building codes and public health standards.”

Often, absentee owners or years of unpaid property tax liens are often at the root of the condemnation 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 likely will create a headache. But owners are entitled to receive just compensation and due process in the case of disputes.

“Government condemnation through eminent domain requires fair market compensation determined through formal appraisal processes and potential negotiation,” says attorney Seann Malloy, founder and managing partner of Malloy Law Offices in Bethesda, Maryland. “However, many property owners accept initial offers without understanding their right to challenge valuation through independent appraisals.”

By presenting market evidence demonstrating unique property attributes not captured in standardized valuations, you can hopefully receive a higher compensation than the government or agency is offering, Malloy says.

What should I do if I’ve received a notice of condemnation?

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

“The most effective response to condemnation notices involves immediate qualified legal consultation rather than direct government negotiation,” Malloy says. “Property owners frequently undermine their position through uninformed statements or agreements made during initial discussions with acquisition agents.”

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

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

“When a condemnation notice arrives, it’s important to secure all relevant documents, including property surveys, improvement records, and comparable sales data before any government meetings,” says Malloy.

When it comes to unsafe structure condemnations, documentation of any remediation efforts proves particularly valuable in negotiating compliance timelines or appealing determinations, Malloy says.

“One of my clients successfully contested an uninhabitable designation by providing evidence of scheduled repairs and temporary alternative housing arrangements – gaining valuable time to address violations without forced vacancy,” he says.

How does the condemnation process work?

The condemnation procedures can 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 its public purpose. Plus, the government must show that just compensation, generally fair market value, is offered.

“The process typically begins when a government agency decides there is a need to take private property for a public use,” says Salter. “A certified appraisal is then conducted to determine the fair market value of the property. The government then formally offers the proposal to the property owner. If the owner rejects or challenges the offer, negotiations could ensue.”

If both parties don’t agree, the government typically files an action of condemnation with the court. A judge or jury would then decide whether the taking is valid and if the amount of compensation is fair, Salter says. The property owner can address the court to challenge 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, you have a good chance of contesting the government’s appraisal of your property. Once your property value is contested, the court will witness a battle between the government’s appraiser and yours.

“If the court ruling supports the government agency, the property is seized and the owner is provided compensation,” Salter says.

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

“Inverse condemnation occurs when governmental activities like construction projects, water diversion, or regulatory changes effectively diminish property rights without compensation,” Malloy says. “Here, the burden falls on property owners to prove that government action directly caused substantial property value reduction or loss of use rights.”

Property owners who are successful in these cases usually have thorough records documenting their property’s condition and value both before and after the government did something that reduced the property’s value or limited the owner’s rights without paying them for it, Malloy says.

Inverse condemnation examples

Imagine 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’re 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. Consequently, you ask for the value of the entire plot of land, including the value of your shop’s building.

“A recent example of inverse condemnation was in California, where public utility companies were found liable for massive wildfires caused by their infrastructure. Although no formal property acquisition took place, the courts ruled that the damage constituted a de facto taking, thus requiring compensation,” Salter says.

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

FAQ

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 a 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 the condemnation of property. “Condemnation” and “eminent domain” are two terms often used interchangeably, although technically they don’t mean exactly the same since one is the authority and the other is the process instrument.

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 wants to expand a current highway through your property. Since this will be for public use, the government can exercise eminent domain over your property to move forward with its highway construction.

One of the most well-known eminent domain cases is Kelo v. City of New London (2005). In this case, the city of New London, Connecticut, planned to hand over private homes to a developer as part of an economic revitalization project. Homeowner Susette Kelo and others argued this wasn’t a legitimate “public use” under the Fifth Amendment. In a narrow 5-4 decision, the U.S. Supreme Court sided with the city, ruling that economic development qualified as public use. The decision sparked national backlash and led many states to tighten their laws, making it harder for governments to seize private property for private development projects.

How do I prove inverse condemnation?

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

The bottom line: Property owners are entitled to 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^®.