February 21, 2006

220 YEARS OLD AND STILL WORKING LIKE A CHARM:

States Curbing Right to Seize Private Homes (JOHN M. BRODER, 2/21/06, NY Times)

In a rare display of unanimity that cuts across partisan and geographic lines, lawmakers in virtually every statehouse across the country are advancing bills and constitutional amendments to limit use of the government's power of eminent domain to seize private property for economic development purposes.

The measures are in direct response to the United States Supreme Court's 5-to-4 decision last June in a landmark property rights case from Connecticut, upholding the authority of the City of New London to condemn homes in an aging neighborhood to make way for a private development of offices, condominiums and a hotel.


As all but the hysterical recognized, it's a legislative matter.

Posted by Orrin Judd at February 21, 2006 8:15 AM
Comments

One of the incidents of owning real estate is the possibility that someday the demand for one's piece of land may dramatically increase. Kelo was an expropriation of that part of the value of real estate which represents the possibility that, in the future, someone may find a better use for it.

Think of the scene in Doctor Zhivago in which the doctor returns from service in the Civil War to discover that the Communists have discovered a "better use" for his house, and you may understand the loathing which this matter provokes.


Posted by: Lou Gots at February 21, 2006 9:06 AM

MSNBC found an eminant domain story they liked Monday night -- the officials as SMU are trying to use the procedure against homes and a condo complex near campus to clear land for a potential George W. Bush library. Of course, if the big networks or major newspapers pick this up, the names of the Supreme Court justices who voted in favor of the seizure of private property for commercial projects never will be mentioned.

Posted by: John at February 21, 2006 9:36 AM

Lou:

Except that the value would only go up if appropriated and is specifically provided for by the Constitution.

The better angle of attack here is the one you implicitly suggest, to return the holders higher value than current market in these cases.

Posted by: oj at February 21, 2006 9:40 AM

Passing over for the time being that the public use requirement is being discarded by the better use doctrine, let us focus primarily on the matter of valuation.

CURRENT market value is the value at the instant of conversion. Value before conversion includes the potential of increased value in the future. For some reason this is most clear to a Thomist.

My open field is worth ever so slightly more right now because someone else might possibly desire it more than I in the future. The increase in present market value due to potential future better use is the property being expropriated by Kelo.

Consider it this way: suppose oil, or, as Joseph Smith was selling before he founded his religion, buried Indian gold, is discovered on my land. What is the value of the land both before and after the discovery of the oil or Mormon gold?

The answer is that the potentiality of future increase in value was always part of what I enjoyed, what I had purchased, what I had maintained throughout my ownership.

The Keloites would use the power of the state to act as a great robber to despoil owners of the potential part of their property, setting its "value" at gun-point at its fictitious pre-demand level as though its potentiality were not really being actualized.

In the absence of the violence of the state, the market will set the value of land desired for another use quite well. If an owner will not sell at a price the buyer will pay the deal is off, and the owner has no profit while the buyer looks elsewhere.

Please do not tell us that the immolation of the holdout owner's property rights in service of the adjacent owners' desire to sell is a "public use," for language may only be stretched so far.

Posted by: Lou Gots at February 21, 2006 11:09 AM

Lou:

Yes, now consider the value of your tenement in a blighted downtown. If you had billions of dollars to develop it you could increae the value of the land. You don't. Someone else does. It's a perfectly sound exercise of the power of eminent domain for the public to take that land, justly compensate you, and put it to good use. To let it deteriorate jus because you dream oil will be found there one day is antithetical to Anglo-American legal history.

Posted by: oj at February 21, 2006 11:15 AM

I watched a pretty funny movie over the weekend called "The Castle." It is Australian and it is about a family who lives right next to the Melbourne airport. Well a private consortium arranges to have the local, state and federal governments take the house via eminent domain. Reminds you of Kelo.


The father is absolutely hilarious. The movie is available in DVD and was made in 1997. Well worth the time.

Posted by: pchuck at February 21, 2006 11:18 AM

For some reason your accusing Lou of living in a dream world does not strike me as a good way for you to leverage your respective reputations. But maybe that's just me. What Lou is saying, if I understand him, is that the right to speculate is inalienable from the right to property in general. That seems sound to me, particularly in light of the dodgy nature of so many of these reclamation projects. Those who can, make money in the market, and those who cannot, go to work for planning commissions.

Posted by: joe shropshire at February 21, 2006 11:36 AM

joe:

Yes, thus the requirement of just compensation. No dreaming is required to read the Constitution or the Court.

Posted by: oj at February 21, 2006 11:41 AM

Here in Omaha, I live a couple blocks from the old horse racing track, Aksarben (that's Nebraska spelled backwards). Casinos in Iowa killed an already declining horse racing business and the facility went to pot; however, it sits on 70 acres of prime real estate in mid-city. The whole thing is public/private foundation and they are developing the area for the University of Nebraska at Omaha and private concerns. They want to acquire more land next to the 70 acres which includes a very unattractive mobile home park as well as some small businesses. Initially, there was some talk (trial baloons) of eminent domain. This got some bad press. The foundation them decided to pay a boat load of money (much more than fair market value). For the die-hards, the foundation appears to be waiting them out. This appears to be going well.

Personally, I am for development because I live about 1/4 mile away and it will increase the value of my casa.

Posted by: pchuck at February 21, 2006 11:54 AM

pchuck: the boatload of money is fair-market value. It's just more than you feel inclined to pay. Too bad.

Posted by: joe shropshire at February 21, 2006 11:58 AM

Joe, "boat-load" is not a negative term. I feel great for everyone involved. From what I understand, everyone is satisfied. In addition, on some of the business properties that were acquired, the businesses may remain until 2007 or 2008 with leases for nominal amounts ($1.00 per month??).

Posted by: pchuck at February 21, 2006 12:03 PM

Sorry, pchuck, that was snippy. But the idea stays: those trailer-parkers who just got lucky didn't get more than their fair-market value. Good fortune, as well as bad, are part of what they bought when they bought their properties.

Posted by: joe shropshire at February 21, 2006 12:05 PM

Joe, no offense taken.


An interesting little side note. The unattractive mobile homes were unattractive for a really odd reason. The mobile home park was near a creek. Because of flood plain zoning regulations, new mobile homes could not be moved in. I even think that the regulations were pretty strict regarding improvements and therefore everything went into disrepair. Just goes to show you that some government action made with the best intentions sometimes creates unintented results.

Posted by: pchuck at February 21, 2006 12:21 PM

pchuck: The Castle is a good movie.

Everyone: You will never get a better price for your house that the government will pay you under eminent domain. You don't just get fair market value. You get the highest price that a willing seller, not under duress, is likely to get for the highest and best use of the property. This will almost always be more than either the assessed or appraised value, which is supposed to be a likely value or at the current use.

A war story: We once represented a developer who entered into a contract to buy a large parcel of land. The town was anti-development, so before the sale closed, it took the land at the sale price. We sued, arguing that our client had negotiated a very good deal with a seller who had an urgent need to sell and had agreed to pay only about half of the eminent domain price. Without his having to spend a dime for the land, the jury agreed, awarding him as much again as he had agreed to pay. The government is not out stealing land through eminent domain.

Besides which, if your problem with Kelo is that it wasn't for a public use, then complaints about the price received are irrelevent; or at least don't distinguish Kelo like takings from run-of-the-mill takings for the new highway.

Posted by: David Cohen at February 21, 2006 6:50 PM
« DO YOU SUPPOSE THEY KNOW THIS IS HIS FIRST LAUNCH?: | Main | THEN I KISSED HER LITTLE SISTER AND FORGOT MY..... »