The rules of eminent domain are vague, so courts routinely interpret them for individual cases. The first is the government must use the property taken for public use or purpose. Beyond that, the government: 

  • Must provide just compensation for the property 
  • May not take anyone’s land without due process 

Below, we examine who exercises this power, what a public use is, and what just compensation means. We explain these concepts in general, but this is a very complicated matter. If you are facing it, you should contact an attorney in your area who specializes in this.  

Who Can Exercise the Power of Eminent Domain? 

Local, state, and federal governments exercise the power of an eminent domain. Legislative bodies write laws that include the provision for it. Executives enforce these laws. The legislative bodies assign two groups the power to exercise it: 

  • Government executives (like the President or a governor) 
  • Private companies (like utility companies or land developers) 

Over the years the courts expanded the scope, and even definition, so both groups can get this power under certain conditions. On the federal level, and in most states, the legislative branch gives authority for its use, though.  

Public Use

A public use provides some benefit or advantage to the community. The term is not confined to direct use by the public, however. This means: 

  • The project doesn’t need to benefit all members of the community 
  •  The purpose of taking private property must benefit the public 
  • It includes for-profit development that results in needed economic growth 

Originally, it included only projects for direct public use, like roads and schools. Later, courts allowed Congress to delegate this power to utility companies. After that, courts allowed local governments to raze blighted areas and redevelop them. Finally, the Supreme Court allowed private developers to use it if they can show that their project benefits the whole community.1  

Just Compensation

Courts define just compensation as fair market value.  They intend this to fully accommodate a person who loses their home. Factors they take into consideration are: 

  • Value of land – Price the owner would receive if they were willing to sell 
  • Value of improvements – Includes anything added to increase the land’s value 
  • Residue damage – Refers to damage of remaining land because of a partial seizure 

They use one of three different approaches to determine how much to pay. The market approach compares similar homes that sold recently. The income approach takes the income and capitalization rates for investment properties and uses them to formulate a value. The cost approach accounts for a unique, valuable structure on the land. It values the land, then the cost of replacing the structure on a new property, and finally subtracts the depreciation of the existing building.  

 Often, though, people who lose their homes don’t consider the fair market value adequate. Other issues are important. These include the stress and cost of moving and the emotional connection the owner has to the home or community.2  

Negotiate Eminent Domain 

Under the rules of eminent domain, you can negotiate. It is your right to challenge or dispute the amount. In fact, it is common for owners to negotiate. Why? To be blunt, most initial offers the government makes are very low. The reason is simple: why pay more than you need. If they can convince you to sell your land cheaply, they will take advantage.  

What happens, though, when you reject that initial off? Usually, they will make a final offer. That sounds final, but it isn’t necessarily. If you reject that offer, they begin condemnation proceedings. This means: 

  • A special commissioner’s hearing looks at the evidence presented by you and the government about the value off the property.  
  • The commissioners decide the property’s value. 
  • You can even reject this and challenge it in civil court. 

This is not a simple negotiation. Any time you deal with the government there will be complex issues. At each stage, you need to present evidence of why the offer is too low. If you can’t make a reasonable argument you won’t succeed. Make sure you understand the laws and procedures before you negotiate. A good lawyer is valuable in this situation. We highly recommend you consult with one before you begin your challenge.3 

How Long for Compensation? 

Compensation should take place at the time the government takes possession of your property.  

  • The full amount is due at the time of possession 
  • They must pay reasonable interest from the date of possession until the date of compensation 

Acquisition of the property occurs on the day of seizure, but you don’t pass the title until you receive payment. From the beginning of acquisition procedures, the government owns your land, and your title is only a claim for compensation.4 

Taxes on Compensation? 

You may have to pay taxes on your compensation. Property sales are subject to capital gains taxes, even if they are not voluntary. If you owned the house for a long time the taxes may be high.  

Homeowners usually avoid this in a voluntary sale, because of Section 1031 of the tax code. Under this, you may reinvest the proceeds from the sale into another property and avoid capital gains taxes.  

Section 1033 offers a similar provision for the condemned property. Under this you are eligible if: 

  • The property is condemned 
  • You replace the property within a specified time period (usually 2 years) 
  • The replacement property is eligible (similar) 

While this exchange helps your tax situation it does not cover any interest paid, lost business profits or relocation expenses.5  

Final Thoughts on Rules for Eminent Domain 

Under the rules of eminent domain, the government may take your property. This power is emotional and controversial. While private property is a foundation of our political and economic system, we recognize that the government should have the authority to seize property for public use. 

From the beginning, homeowners litigate the scope of power. Over time, court decisions expanded the definition and role of this power. Today, the rules are very broad, and many states enacted laws to curb these seizures. The most important aspects remain, it must be for public use or purpose, owners must be fairly compensated, and no one may be denied due process. 


  1. FindLaw 
  2. Investopedia 
  3. Johnson, Hobbs, Squires LLP 
  4. USLegal 
  5. Owners counsel