Summary

The Infrastructure Investment and Jobs Act (IIJA) earmarks $1.2 trillion in spending for public works projects, such as highway widenings. Property owners should be prepared for an equally massive wave of eminent domain activity across sectors and across the country. Preparation is critical.

The Upshot

• Be proactive. Owners should determine which projects are in their area and what the likely effects will be.
• Property owners are entitled to just compensation for their buildings and land. They should have a current valuation of property and know its value on the open market.
• Understand the effects of a possible condemnation on leases, tenant rights, access, parking, exiting entitlements, and sewer or storm water fixtures.
• When a condemnation threatens the value of collateral, lenders can become involved. Review loan documents and plan for contingencies.

The Bottom Line

Property owners should consult with experienced counsel to prepare for or respond to a condemnation action.

The Infrastructure Investment and Jobs Act (IIJA)—signed into law in 2021—authorizes $1.2 trillion in spending for public works projects, such as highway widenings. Millions of acres of private property will likely be needed to get these projects underway. Owners should prepare for the possibility that they will be faced with an eminent domain action.

Condemnations can have devastating effects on private properties, especially for the owners of large office, commercial, and retail properties. Yet many of these owners have not sufficiently planned for the effect of a potential condemnation of their property. Nor are they aware of how to effectively protect their rights, including the right to obtain just compensation from the government.

Owners who receive a notice of condemnation, or learn of a threatened condemnation, should take a number of steps, including:

• Determine the effect of the overall project and the particular taking on the property. Consider the effects on leases, tenants, parking, access, utility issues, and use of the property, as well as whether publicity about the project could affect financing and future development plans.

• Review condemnation clauses and other relevant terms of leases and loan documents.

• Determine if the government’s offer of compensation is fair. Owners are entitled to compensation for the value of the property on the open market. Obtain a current valuation.

• Review the condemnor's plans in order to minimize disruption to the ongoing operation of the property, particularly during the construction phase.

We already have seen a significant increase in condemnations in the wake of the IIJA. For a checklist of key questions to consider when facing a condemnation, click here.