Starting a business from the ground up is one of the most rewarding ways to earn a living. Despite its challenges, growing that business into a profitable and stable success is a significant achievement. Not all business owners reach the point of being able to buy their own commercial premises, but when it is possible, the sense of accomplishment cannot be beaten.
It makes sense, therefore, that when the government exercises its legal right to take part of those premises from a business, it can be a distressing experience. In most cases, the Department of Transportation (DOT) or a local municipality wants to build a new road, widen an existing road, or to construct a government building, and to do so they need to buy your land or building.
This is officially called the government’s ‘eminent domain’ right in the Fifth Amendment to the US Constitution and can happen to any type of business. Specifically, the government and state municipalities have the right to take private property for public use, but only if ‘just compensation’ is given to the owner of the property. Unfortunately, the initial offer of compensation rarely indicates the land’s true value.
If you have received notice from either the state or local government that they need to buy part or all your land, you need to take steps to ensure that you receive the appropriate compensation.
How does it work?
- If you agree to accept the government’s offer, they will issue the payment, and the deed to the property will be transferred to the government.
- If you do not accept the initial offer, the matter will move to a hearing to establish what is a fair value for the property. This involves attorneys and appraisers and may be decided by a jury.
- If you refuse to sell, the government can file legal action against you where they will provide evidence that they have made efforts to negotiate and that the land is needed for public use. If they are successful, an independent appraiser will decide how much you will be paid for the property, and you will be evicted. This is known as a condemnation lawsuit.
Click here for more detail on the eminent domain process.
You do not need to accept the initial offer made to you, but you will need to seek legal advice. Here are the five key steps you should take to protect your commercial interests if the government is attempting to buy your property for public use.
1. Seek legal advice
If you have received notice that your local authority is seeking to buy part or all your commercial property for a public roadway, your first step is to find an experienced eminent domain attorney. An attorney will explain your rights, ensure that you get a fair price for your property, protect the value of any remaining land, and support you through unforeseen complications that might crop up once construction is underway.
The earlier you can get legal advice, the better. In fact, if you believe that your local government is planning construction that might affect your property, you should seek legal advice even if you have not received an official notice yet. You should certainly seek legal advice before accepting or refusing an initial monetary offer.
Some attorneys or law firms will charge an hourly rate, but others will not charge you until you receive your compensation, and the fee is then based on a percentage of what you have been paid.
2. Consider the wider impact on your business
It is rare that the government will need to purchase your entire property but losing a part of your property can bring complications. For example, if a new roadway runs too closely to your business, it may restrict access or reduce footfall. Increased traffic could interfere with your business’ daily operations.
A traffic engineer will be able to assess how a new road could affect your business and any safety risks it could present. Assuming that the assessment is completed early enough in the planning stage, the government may be able to adapt its plans. In some cases, an attorney can work with a traffic engineer and the municipality to create a solution that does not require them to purchase or impact your property at all.
3. Valuing the property
The government will hire their own appraiser to come up with a value for your property. While the government may be offering ‘just compensation’, it is important to verify this by hiring your own appraiser to carry out an independent valuation. If your appraiser confirms that your property is worth significantly more than you are being offered, you will have hard evidence to take to a hearing. The appraiser that you hire needs to have experience in conducting condemnation appraisals as the process is more complicated than standard real estate valuations. They also need to be recognized as competent by the courts and prepared to testify.
4.Going to court
If the government files a condemnation lawsuit against you, any other parties with an interest in the property will be the defendants. If you do not want to accept the money being offered, you will need to prove that the land is not being purchased for a public purpose and/or that the price being offered is not ‘just’. It is essential that you hire an attorney to represent you throughout the court process to ensure the best possible outcome in the circumstances.
5. Apportioning the proceeds of condemnation
At the end of a condemnation lawsuit, the agreed compensation will be shared between all parties interested in the property, e.g., lenders, owners, and tenants. If you are the sole owner, this will be simple, but it can become complex if multiple parties are involved. The deeds of trust may stipulate how the money will be apportioned in the event of a condemnation award, but common law becomes relevant if it does not. Again, an attorney will be vital in ensuring that you receive the money that you are entitled regardless of whether you are leasing the property or you are the owner.
