Private property is owned subject to the right of the government or certain private companies to acquire it in exchange for just compensation. It is governed by both the federal and state constitutions. The Fifth Amendment to the United States Constitution states that “private property [shall not] be taken for public use, without just compensation.” Most eminent domain cases are governed by Article X § II of the State of Michigan Constitution, which is affords more extensive rights.

The power of eminent domain is vested in the federal and state governments. Both can pass legislation, generally called enabling acts, to delegate the power to lower levels of government or even private companies. In Michigan, eminent domain is most commonly used by the Michigan Department of Transportation, counties, school districts, road or drain commissions, cities, townships, airport authorities and private utility companies like International Transmission Company, Consumers Energy, and other pipeline companies.

A property owner can challenge whether the taking is justified by a public use. Examples of typical public uses include roads, bridges, schools or universities buildings, easements protecting airports, and utilities like sewers, pipelines, and electrical lines. Michigan’s Constitution limits the use of eminent domain for economic development or blight removal projects.

An owner can acknowledge that a public use exists but assert that all of the rights being sought are not necessary. For example, it may be a public use to acquire property for a pipeline but a necessity challenge may exist if the agency seeks the right to construct more than one pipeline.

Finally, a property owner can challenge whether the jurisdiction of the Court has been properly invoked. Agencies must strictly comply with all procedural requirements before seeking to condemn property.

Most eminent domain cases do not involve challenges to the taking. However, it is critical to evaluate whether there is a basis to challenge the public use or necessity of the project because there are strict statutory time limits for such challenges.

Michigan statutes provide condemning authorities the ability to obtain various types of information to evaluate whether they desire to exercise the power of eminent domain or to fulfill procedural requirements. Agencies may seek access to property at the beginning of the process. For example, agency representatives may enter onto privately owned land to do things like surveying, environmental testing, or inspections by appraisers or other experts to help identify the amount of just compensation. Additionally, an agency may demand that financial data be provided allow identification of all owners and to establish the amount of just compensation to offer. An agency exercising the rights must do so in writing and will likely identify the statute that authorizes the request.

All owners, with that term broadly defined to include the property owner, tenant, mortgagor or other lien holders, and the beneficiaries of easements, must receive a good faith offer. The good faith offer must identify what property rights the agency seeks and the amount of just compensation it desires to pay, among other things. If an agreement cannot be reached about the conveyance of the property rights sought, the agency may then file a lawsuit in the county circuity court in which the property is located.

The agency files a lawsuit against the recipients of the good faith offer and serves them. The owners that do not respond are defaulted and no longer participate in the lawsuit. Owners must decide whether to challenge public use or necessity at the very beginning of the lawsuit. If any challenges are filed, the court must rule promptly. Often, jurisdictional challenges are also filed at this time. If no challenges are filed or the court denies the challenges, the case proceeds to the determination of just compensation.

The agency must pay its estimate of just compensation to the remaining property owners at the outset of the case. If multiple property owners are requesting a portion of the just compensation, the court allocates among the claimants. The court will vest title to the acquired property in the agency and determine when to grant possession of the property rights. At that point, the case generally becomes a battle of expert witnesses who contest the amount of just compensation. Prior to preparation of expert reports, owners may need to provide certain notices relating to just compensation to the agency.

If an agreement cannot be reached to settle the lawsuit, the issue of just compensation is tried by either a jury or the court in a bench trial. At the conclusion, the court addresses reimbursement of attorney fees, expert expenses, and other costs.

If an owner successfully challenges public use, necessity or jurisdiction, the agency must pay the owner’s reasonable hourly attorney fees.

As to just compensation claims, attorneys working for owners generally charge a contingent fee, taking 1/3 of the increased just compensation and interest. There are statutes relating to the agency’s obligation to reimburse those attorney’s fees. While past results are not promises of future performance, in the vast majority of eminent domain cases in Michigan, the agency pays all the attorney fees incurred by the property owner relating to increased just compensation. Additionally, an owner is entitled to reimbursement of their reasonable expert costs incurred in evaluating and challenging the agency’s good faith offer.

It is common that agencies (particularly utility companies) seek excessive property rights from owners that would not withstand a necessity challenge. Agencies frequently reduce the rights that they seek when they know experienced eminent domain attorneys are representing the property owners. Additionally, appraisals done for agencies are frequently unreliable. Sometimes agencies hire appraisers who do not understand the sophisticated legal standards that apply in eminent domain. Sometimes the appraisers do not have enough information to properly consider just compensation issues and property owners do not understand what information should be provided. Sometimes appraisers willfully disregard just compensation claims by hiding untrue assumptions in the boilerplate of their reports that unsophisticated owners do not understand.

Michigan law is generally favorable to property owners by allowing just compensation claims that are not recognized in other states. These sophisticated rules are best understood and applied by experienced eminent domain attorneys. Given that the standard arrangement is contingent, with reimbursement by the agency of that fee contemplated by statutes, there is no reason not to consult with counsel.

Agencies are more than happy to accept more rights that they are entitled to receive for less money than they are required to pay from property owners that do not understand their rights.

When valuing property, just compensation must be determined after disregarding the effect of the pendency of the project. For example, if the contemplation of the project results in the devaluation of the property, the property must be valued as though that had not happened.

If the property being acquired is party of a larger parcel enjoying common beneficial ownership, whether contiguous or not, the impact on the larger parcel must be considered. For example, if the acquisition of one property reduces the value of another property that is part of the larger parcel, just compensation must be paid for both.

Property must be valued on its higher and best use, not its actual use if a more intense use is reasonably possible. This includes evaluating the reasonable possibility of rezoning or the potential of assembling additional land.

In a case involving a partial taking, meaning that the agency is either acquiring only part of the parcel in fee or is imposing an easement on all or part of the property, it must be assumed that the agency will use its newly acquired rights to the fullest extent allowed by law. Agencies often tell owners that their construction plans do not contemplate using all the rights being acquired. This is inconsistent with the law.

In a partial taking, the impact on the zoning of the property, access, visibility, loss of vegetation, changes in grade, water drainage issues, or overall impact on the desirability of the property must be considered. Agency appraisers frequently fail to evaluate these issues.

Different valuation standards apply to the standards of special purpose properties. Agency appraisers sometimes fail to recognize the special purpose nature of a property or apply the wrong definition.

In certain limited instances, the agency may be required to pay for the going concerned value of a business.

Agencies generally must pay the reasonable costs that a business may incur to avoid business interruption.

There are special rules for the full compensation for fixtures.

A taking may result in the diminution of the practical value or the utility of the property, requiring a total taking.

Displaced owners are entitled to relocation benefits.

Property owners may be entitled to property tax relief.

Sometimes, government actions can result in a violation of the Fifth Amendment or Article X § II of the Michigan Constitution even though formal eminent domain issues are not initiated. These are called inverse condemnations or de facto takings. Under Michigan law, property owners may be able to obtain an injunction preventing the initiation or continuation of a de facto taking. Alternatively, if a property owner can prove a de facto taking, it is entitled to just compensation.

Agencies must reimburse the reasonable attorney fees incurred by a property owner that successfully challenges the public use of the project, necessity of the taking, or jurisdiction of the court.

Statutes also address reimbursement of the owners’ attorney fees based upon the standard contingency fee (1/3 of the increased just compensation and interest). While past results are not promises of future performance, agencies routinely reimburse owners’ full contingent attorney fees and expert expenses without questioning whether they are reasonable.