What is just compensation for eminent domain land?

On Behalf of | Jan 28, 2021 | Eminent Domain |

Occasionally there are circumstances where a private landowner is forced to sell their property to the government for public use. This is called eminent domain and is legal in Ohio. When a government wants to use a private owner’s land, they have to give the landowner just compensation. But what does just compensation mean and do landowners have options?

Eminent domain law

Under the U.S. Constitution and Ohio state law, property owners have the right to just compensation when their land is taken using the power of eminent domain. The payment is meant to fully compensate the property owner for what they lost in property. If the government only takes a portion of the land, the property owner may be eligible for the value of the property taken as well as damages for the remaining property they still own.

There are a number of factors in which fair market value may be established. These may include size of property; zoning; unique characteristics; accessibility; current or potential use; and level of development.

How is a property valued?

There are three ways in which a property may be valued:

  1. Market approach. This is where recent property sales are compared to the eminent domain property to determine market value.
  2. Income approach. This approach is used for income-producing properties. The net income of the property is determined by taking the rental income and subtracting the annual operating expenses. A capitalization rate multiplier is applied to the net income.
  3. Cost approach. This is used if market approach or income approach are not accurate or appropriate. It could be that the property contains a unique structure where the only way to replace it would be to reproduce it. In this case the value of the land would be determined and then the cost to duplicate the existing structures.

An attorney who specializes in eminent domain can help a property owner understand property valuation and how it can affect the process.