Governments and other condemning authorities need private property all the time to build projects such as roads, light rail transit systems, parks, electric lines, pipelines, waterworks facilities, hospitals, prisons and so on. In many states, the condemning authority is required by law to try to acquire the property it needs through a process that should resemble a normal “private” real estate transaction: in other words, the condemning authority is supposed to contact the landowner, make an offer to acquire the property, enter into negotiations, reach an agreed upon purchase price, and “close” the real estate transaction just as if it were a normal market-based real estate sale. This “normal market transaction” process is typically outlined in the state law governing condemnation (also called “eminent domain”) cases.
Normal Market Transaction Process: An Overview
In states that have adopted this “normal market transaction” approach to acquiring property needed for public projects, some form of the following process is usually required:
- The condemning authority obtains its own appraisal, which “values” the property to be acquired; the condemning authority may have to give that appraisal to the landowner at some point during the negotiations.
- The landowner may obtain its own appraisal (sometimes at the condemnor’s expense) and may offer any other evidence of property values to the condemning authority if it disagrees with the condemning authority’s conclusion of value.
- The condemning authority may be required to take into consideration the evidence of value provided to it by the landowner; the condemning authority may also be required to enter into “good faith negotiations” to acquire the property directly from the landowner through a process resembling an ordinary “private” real estate transaction.
- As is the case in an ordinary private real estate transaction, if the parties can agree on a price, the landowner will give a deed to the condemning authority, the condemning authority will give the landowner its payment, the deed is recorded, and the transaction is then complete.
This “private real estate transaction” model for purchasing private property needed for public projects reflects the law’s preference for not forcing landowners into a lawsuit in order to acquire their property. Instead, most states want condemning authorities and landowners to work together to reach an agreed upon price without resorting to a lawsuit.
Understanding ‘Good Faith Negotiations’
Under the “private real estate transaction” model for acquiring property, the condemning authority is often required to engage in “good faith negotiations” with the landowner. That means that the condemning authority has to make a good faith effort to acquire the property it needs without resorting to a lawsuit. In some states, it has to have a candid discussion with the owner concerning the value of the property, and it has to consider any evidence of value provided by the landowner. The duty of good faith negotiations does not, however, require the condemning authority to accept a landowner’s proposal that has no support in the marketplace. The duty also does not require the condemning authority to enter into a “never-ending” cycle of offer and counter-offer with a landowner when there is no reasonable prospect of reaching an agreed upon price. Some states, for example, require only that the condemnor present the landowner with a good faith offer and a reasonable opportunity to respond — nothing more.
In some states, the duty to negotiate in good faith is a jurisdictional requirement. This means that, unless the condemning authority can prove that it has negotiated in good faith with the landowner to acquire the property without resorting to a lawsuit, the condemning authority is not allowed to proceed with a lawsuit to acquire the property. Thus, if a condemning authority starts a condemnation (or “eminent domain”) case against a landowner, and the landowner can prove to the Court that the condemning authority did not engage in good faith negotiations with the landowner prior to starting the condemnation lawsuit, the Court does not have “jurisdiction” to allow the condemnation case to go forward and cannot approve the proposed takings. If that happens, the condemning authority must “start over” and first conduct good faith negotiations with the landowners and then, if it is not able to obtain the property it needs through the “normal market transaction” type process, it may start a condemnation case. While the law on this point does vary from state to state, many states do find that the duty to negotiate in good faith is a jurisdictional requirement.
Facing Condemnation? The Early Stages Are Critical
Condemnation cases can be difficult and time-consuming. Landowners who are faced with a condemnation case should obtain competent eminent domain attorneys to assist them through the process. In the end, the goal of every condemnation case is to ensure that landowners whose property is acquired for a public project receive the “just compensation” for the taking that the state and federal constitutions require. If you are facing a condemnation, you should consider hiring experienced condemnation attorneys early in the process so they can help you with the good faith negotiation process.