What is Just and Adequate Compensation?
The eminent domain provisions in both the Tennessee and United States Constitutions make clear that the government is not prohibited from taking property for public use. Rather, under the Tennessee Constitution, if the government takes or damages private property for a public purpose, it must provide just and adequate compensation to the property owner. As a result, property owners are typically entitled to recover the fair market value of the property interest that has been taken under eminent domain.
What Issues Give Rise to Compensation?
A physical occupation taking occurs when the government causes a direct and ongoing physical occupation of private property or effectively destroys the owner's property rights. In that situation, the owner is entitled to compensation for the fair market value of the property on the date of the taking and any incidental damages to the remaining property. Incidental damages cover the remaining property's decrease in value. If the value of the property increases because of the taking, the owner is still entitled to the fair market value of the property taken.
If the government takes part of a landowner's property for road construction and limits how the owner can access their property, the owner may be entitled to additional compensation for that loss of access. For example, owners have been compensated for the government replacing open access along the road with curbs and only a few entry points. If the government completely cuts off access to public roads, it must either restore reasonable access at its own expense or pay for the damages caused by the loss of access. However, not every change gives rise to compensation. For example, converting a road from one-way to two-way traffic does not entitle a nearby landowner to damages.
Inverse condemnation happens when the government affects private property in a way that is essentially a "taking," even though it does not go through formal condemnation proceedings. To bring this type of claim, a property owner must show four things:
- The government caused a direct and substantial interference with the owner's beneficial use and enjoyment of the property;
- the interference happened more than once or continued over time;
- the interference specifically affected the owner's property, not just the public in general; and
- the interference reduced the property's market value.
Common examples include repeated flooding, sewage backups, excessive noise or vibrations, pollution, or similar problems caused by government actions. To determine compensation, courts examine the fair market value.
A regulatory taking happens when a government rule or regulation effectively deprives a property owner of all meaningful economic use of their property. Courts have used two different approaches to decide whether a regulatory taking has occurred:
- The first is whether the regulation removes all economically beneficial uses of the property; and
- the other approach considers whether there was an economic impact, an interruption of the owner's reasonable expectations when they bought the property, or a legitimate public purpose.
A property owner's personal expectations or hopes for how the property could be used are not enough to establish a taking. Regulatory takings are rare, but when a court finds that one has occurred, the owner is entitled to just compensation, typically measured by the fair market value of the property interest taken.
For more information about just and adequate compensation under Tennessee eminent domain law, please contact Ivy N. Cadle, Kayla L. Pfeifer, or any member of Baker Donelson's Commercial Litigation team.
The authors acknowledge with appreciation the assistance and research from Baker Donelson Summer Associate Joseph Uribe.