What is condemnation in real estate?

Condemnation is the legal process by which a government can confiscate private property for a public use or declare a structure unsafe and uninhabitable under local building codes. If you receive a condemnation notice, act quickly. This article explains how the process works, your rights to due process and just compensation, when inverse condemnation applies, and practical steps to protect your interests.

Key Takeaways:

• Condemnation is when the government confiscates private property to use for a public project or because it's unsafe to live in.
• If you receive a condemnation notice, you should consider hiring a real estate attorney and having your property appraised so you can protect your rights and pursue fair compensation.
• Inverse condemnation is when the government damages your property or reduces its value without officially taking it. You may be able to file a lawsuit for compensation.

Condemned property defined

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

A property may be condemned if it is:

• Subject to eminent domain. Eminent domain is the government's legal right to take private land for public use. Under eminent domain, the government must demonstrate that it is taking the land for public use and that it has offered the owner just compensation. In some cases, the government may create an easement on the property and compensate the owner accordingly.
• Dilapidated or dangerous. Governments also can initiate condemnation proceedings when a property is decrepit and unsafe, posing a safety or health threat to the surrounding neighborhood.
• Out of character with the area. In rare instances, a local government may condemn real estate if it has fallen into extreme disrepair, thereby negatively affecting the surrounding community's character. This can happen if a structure is deemed a blight or a public nuisance that diminishes the value of adjacent properties.

Additionally, a property can be partially or totally condemned. The former occurs when only a specific portion of the land is taken, such as a strip for a sidewalk or utility line. This enables the owner to retain the remaining property and receive compensation for the loss in value. With the latter, the government takes the entire property.

What exactly is eminent domain?

Eminent domain is a legal principle that grants the government the power to compel a property owner to transfer title to the government. It requires the government to make a compelling case that it needs the land for an important public use.

For property owners, eminent domain can be a headache. Eminent domain requires a lengthy legal process designed to protect property owners. Owners are entitled to receive just compensation and to adequate due process to resolve potential 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.

How does the condemnation process work?

The condemnation process may work differently depending on which state you're in. In general, the process of condemning property involves the following steps:

1. Notice of condemnation. A formal notification is sent by the government or condemning authority to the property owner, indicating its intention to acquire the land for public use. This notice states the project's purpose and informs the owner of their legal rights.
2. Appraisal. To determine its fair market value, the property is evaluated by a professional appraiser, who considers its location, size, and any improvements. The home appraisal ensures that the initial financial baseline is based on objective data rather than a random estimate.
3. Offer submitted to the property owner. Based on the appraisal findings, the government or condemning authority issues a formal written offer to purchase the property. This offer must provide the owner with what the government determines to be a fair price for the land, known as "just compensation.”
4. Negotiations. The offer is reviewed by the property owner, who can make a counteroffer if they feel the valuation is insufficient. Both parties try to reach a voluntary agreement on the terms and price to bypass further legal action.
5. Court filing, if the agreement isn't met. If negotiation fails to lead to a settlement, the government or condemning authority files formal condemnation litigation in court to exercise its power of eminent domain. The case is reviewed by a judge or jury to determine the project's public necessity and the final compensation amount.
6. Compensation. After the property’s value is finalized via court order or agreement, the government or condemning authority pays the full amount to the property owner as just compensation.
7. Transfer of title. Once payment is confirmed, the property’s legal title is transferred from the owner to the government or condemning authority, allowing the planned public project to proceed.

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

Although a property condemnation is rarely reversed, you have a good chance of contesting the government’s appraisal of your property. The courts are willing and able to ensure that you receive just compensation because you will need the money to find a new home.

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

If you receive a notice of condemnation, the first thing you should do is consult with a real estate attorney. A lawyer will guide you through this tumultuous process. In most cases, your attorney will encourage you to get a private appraisal of your property.

“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.”

With an independent property appraisal and legal counsel, you'll be better prepared to negotiate with the government or agency. Typically, the initial offers are deemed insufficient by the courts, which makes more effective negotiations over compensation possible. Also, homeowners should provide their counsel with all relevant documents that could inform the property's true valuation.

However, when it comes to unsafe structure condemnations, documentation of any remediation efforts is valuable in negotiating compliance timelines or appealing determinations, Malloy says.

What is inverse condemnation?

Inverse condemnation is when a homeowner sues a government for damages or the taking of their property for public use, without the homeowner first being offered any compensation. It's essentially a homeowner's means of forcing the government to pay up for land it is already using.

“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.”

You should anticipate a series of formal steps, starting with a government appraisal and offer. Additionally, you have the right to hire your own lawyer or outside experts to challenge that property appraisal and negotiate a larger payout.

FAQ

Here are answers to common questions about condemnation.

What is the purpose of condemnation?                                                        

Condemnation allows governments to address unsafe properties or to acquire land needed for public use while maintaining a legal framework that includes compensation and due process. It serves both public safety and infrastructure needs while attempting to preserve fairness for property owners.

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 power granted to U.S. governments to condemn property.

How do I prove inverse condemnation?

With an inverse condemnation lawsuit, you must prove 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.

How can I stop a condemnation?

Stopping a condemnation can be difficult, particularly when it is tied to legitimate public use or safety concerns. But it may be possible to challenge the process or the compensation offered. Property owners can raise legal objections if procedural requirements were not followed or if the taking does not meet the standards for public use.

Does condemnation mean my property is unsafe?

“Condemned” doesn’t always mean a property is unsafe. Condemned can also be related to eminent domain, which involves the government taking land for projects. In safety-related cases, however, the designation is usually for conditions that must be remedied before the property can be reused.

The bottom line: Property owners should know their rights

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. Need to make critical repairs to your home, but need financing? Explore loan options available with Rocket Mortgage.