Eminent Domain
Eminent domain is a legal procedure. It gives the government and in some cases private entities that are doing public works projects, the right under certain circumstances to take your real estate for a certain amount of compensation, whether you want to sell it or not.
Eminent domain processes can be a tragedy for those not wanting to sell because they lose their land and their homes. It can also be a boon for real estate investors who are able to predict, well in advance, the possibility of an eminent domain action.
The opportunity for profiting from eminent domain proceedings comes from intentionally buying raw land for low prices and hoping it subsequently becomes subject to an eminent domain process. Another opportunity comes from buying land adjacent to a potential eminent domain corridor, such as acquiring land in an area where a future freeway will be built.
In the state of Texas, eminent domain law is found in Section 2206 of the State of Texas legislative code.
Application of Eminent Domain
There are many reasons why a property may be subject to an eminent domain action. The primary purpose must be that the eminent domain action is taken for a reason that serves the public good.
There is a prohibition of using the power of eminent domain to take a property when the transaction confers a private benefit to a private party. Moreover, it is illegal to use eminent domain to obtain property for a supposed public use that is merely a pretext to convey a private benefit to a particular party.
Here are some examples of what the Texas law allows for lawful uses of eminent domain:
• Public transportation projects – Airports, highways, roads, and railroads
• Municipal Projects – Drainage projects, flood control, water supply, wastewater, waste disposal, and sewage systems
• Public Buildings and Parks – Governmental buildings, public hospitals, libraries, museums, and areas managed by parks and recreation departments
• Sports and Community Centers – If approved by voters in an election
• Resource Transportation – Oil and gas pipelines, and underground storage facilities
• Slum Restoration – Section of cities subject to demolition for new development
Under eminent domain proceedings in Texas, there are public hearings. If, by majority vote, the eminent domain receives approval by the local authority and/or appropriate state authority the property is “condemned,” allowing it to be seized by the government for the new use.
Compensation for the Property Owners
The government cannot take a property in Texas without paying compensation. The owner must receive fair market value for the property. This issue causes plenty of disagreement.
Texas law allows the owner to be compensated for the value of a property taken by eminent domain proceedings that is calculated considering the “best use” of the property. The valuation depends on whether all of the owner’s property at a specific location is taken under eminent domain processes or if only part of the property is taken.
Disputes are ultimately settled by civil action in the courts, where a judge makes a ruling on what the judge thinks is a fair market value for the property after hearing all the evidence from both sides.
Summary
Eminent domain is a powerful legal tool that can be used by governmental agencies, counties, municipalities, and certain private entities to take a property by force. Anyone subject to an eminent domain proceeding on a property they own in Texas should immediately seek competent legal counsel that specializes in this specific area of law.
Further reading:
Understanding the Condemnation Process in Texas
https://assets.recenter.tamu.edu/documents/articles/394.pdf