When They Make You an Offer You Can’t Refuse...

by Greenberg Glusker Fields Claman & Machtinger LLP

[author: Garrett Hanken]

Property rights are part of the fabric of American law.

They have been protected by the U.S. Constitution since adoption of the Bill of Rights. But the protection of property rights is not absolute. The Fifth Amendment to the Constitution does not absolutely prohibit the taking of private property for public use – it only prohibits the taking of private property “without due process of law” or “without just compensation.” The bottom line is that the government (or even non-governmental entities acting in the public interest, like utility companies) can take any property for public use, as long as they follow lawful procedures and pay fair value for the property rights taken. What should a business do when it receives such an offer it can’t refuse?

Be Aware of the Process

The taking of private property for public use is referred to as condemnation or eminent domain. Important steps in the eminent domain process can occur quickly, sometimes even before a business is aware of the threat to its property. A business cannot respond appropriately to a threat of condemnation unless it has a general understanding of the process.

Generally, a condemnation arises out of a public project. An agency’s staff and consultants will study how best to implement a proposed project, where to site it, how to relate it to neighboring properties, how to finance it, how to mitigate its adverse environmental impacts, etc. That process may or may not involve public workshops or hearings. Once the general design for the project is decided on, the agency may give the property owner notice of its intent to perform environmental studies or appraisals of the private property involved. The agency will then typically make an offer to purchase the property rights, supported by a summary appraisal.

If the offer does not result in an agreement, the agency will typically hold a hearing on a “resolution of necessity,” an action that authorizes the commencement of a lawsuit to take the property. The physical taking of the business’s property can occur fairly quickly after the commencement of the condemnation litigation. The law allows public agencies to take possession of condemned property and build their projects long before a final judgment is entered in the condemnation litigation. The public agency could, therefore, have possession of the property within a few months after the time the business owner learns of the threatened taking, even though the condemnation litigation may take years to resolve.

Evaluate Your Goals

How a business responds to a threat of condemnation depends on the importance of the property to the business’s operations and the extent of the taking. If the business would be gravely impacted by the taking of its property, the business may seek to challenge the right to take. If the property is not critical, the best approach for the business may be to seek to maximize the compensation it receives for the taking. If the property being taken is just a small encroachment on or interference with the property, the most important response may be to try to limit the impact of the taking on the business’s operations.

Challenging the Right to Take

The grounds for challenging a public agency’s right to take private property are severely limited. Adoption of a resolution of necessity conclusively establishes (with limited exceptions) most of the factual prerequisites to condemnation of private property. While a challenge to the right to take sometimes enhances the property owner’s ability to settle the condemnation case on favorable terms, the cost of challenging the public agency’s right to take is sometimes not justified in light of the limited chances of success in resisting the taking.

If a challenge to the city’s right to take the property is either not pursued or is not successful, the city will be allowed to take the property and the owners of the property will be entitled to compensation for the loss of the property.

Maximizing Compensation for the Taking

The measure of the compensation to which the property owner is entitled may fall into several categories, including:

  • the fair market value of the property and its improvements;
  • the fair market value of furniture, fixtures and equipment located on the property;
  • if only part of the property is taken, severance damages to compensate for injury to the part of the property not taken;
  • relocation expenses for relocation of business operations on the property;
  • loss of good will suffered by the business conducted on the property.

Where multiple parties have interests in the property taken (for example landlord and tenant, owner and lender, etc.), those interest holders may have to compete with each other for the compensation to be paid by the public agency. Public agencies typically elect to have a condemned property valued as a whole. Where the public agency makes such an election, after the value of the whole property is determined, the parties claiming interests in the property must settle or litigate among themselves to apportion the condemnation award. Such apportionment is governed in part by statute and in part by agreements between the parties. Crucial in lease situations is the issue of “bonus value” of the lease – i.e., the excess of the fair rental value of the property over the rent provided in the lease.

Minimizing Impact on Operations

Many condemnations seek not to take the whole of a parcel of land but rather to take only a small part or easement, as, for example, for construction of a utility pipeline, road widening or a new rail project. In those instances, the business owner must focus on how the proposed work may adversely affect the business’s operations. Experienced counsel can often negotiate and enforce work rules that minimize the impact of the taking on the operations and income of the business.

While a business may not be able simply to refuse the government’s effort to buy its real property, if the owner understands the process, acts quickly to assess its position and formulate its goals in response to the condemnation, and proceeds with appropriate legal guidance, the business can greatly improve the outcome of its encounter with an offer it can’t refuse.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Greenberg Glusker Fields Claman & Machtinger LLP | Attorney Advertising

Written by:

Greenberg Glusker Fields Claman & Machtinger LLP

Greenberg Glusker Fields Claman & Machtinger LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.