The Effects of Expropriation on Your Private Property

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Expropriation is the process by which the government takes over private property from the property owner.

Definition of Expropriation

Expropriation assumes the following:

  1. The reason for the takeover is for the benefit of the public.
  2. The owner of the private property will receive just compensation for having their property taken over and having to relocate.

The concept of expropriation is based on the Fifth Amendment, which states that private property cannot “be taken for public use without just compensation.” This implies that private property can be taken, as long as the private individual receives a fair monetary payout or other comparable return.

Expropriation is similar to the concept of eminent domain. A government agency usually conducts eminent domain. Expropriation is usually carried out by a government agency as well, but there are instances when a private agency can carry out expropriation, as long as that agency is acting in the interest of the government.

This could include:

  • Federal Government
  • State Government
  • County Government
  • City Government
  • Public Utility Companies
  • Private Utility Companies (in certain cases)
  • School Districts
  • Health Facilities (such as hospitals)
  • Public Housing

Reasons for Expropriation

  • Develop Infrastructure (i.e., roads, railways, bridges, tunnels, and public utilities)
  • Develop Recreation Space (i.e., parks)
  • Develop Public Building (i.e., municipal buildings or schools)
  • Build a Hospital or Public Health Center
  • Relocate in the Interest of Public Health
  • If an environmental issue has caused contamination in an area, which threatens the health and safety of any individuals living nearby, a government agency can take over the private property of individuals in the interest of public safety. In this case, the government is relocating the population for a greater good, to protect the people from toxic contamination.

Does the Property Owner Need to Give Permission?

Unfortunately, no. The theory is that the interest of the masses is more important than the interest of the few. If the government wants to purchase your land to begin construction on a new railroad line, which will create new jobs and be used by thousands of people and offers you fair compensation, unfortunately, you will have to relocate.

The Process of Expropriation

  • Condemnation: The first step in a government agency acquiring private property for public use is called condemnation. In this step, the agency makes an official declaration that the private property needs to be used for the greater good of the public. The goal is to transfer the title of the property from private to public ownership.
  • Appraisal: As part of the expropriation process, the government has to offer the private owner just compensation. Therefore, private property must be appraised to determine what fair compensation would be. A third-party appraiser will conduct this appraisal.
  • Offer: Once the third-party appraisal comes back, the government agency will offer the private owner payment that they believe to be the fair market value of the property.
  • Negotiation: The property owner can accept the payment as just compensation, and the title to the property will then be transferred from the private individual to the government entity. The property owner also has the option of contesting the payment and the process of expropriation as a whole.

Can a Property Owner Contest Expropriation?

A private property owner can file a lawsuit against the entity that is trying to take over their property if they feel they are not receiving just compensation. They can also sue if they think the property is not actually being used for the good of the public.

The government agency must provide the reasons they believe they are justly compensating the individual for taking over their property, while the private owner must present the reasons why they think they are not being justly compensated. If the private owner is also contesting the claim that the property is being taken to benefit the public, then the government agency must also show how the property will be used for the good of the public.

An example of this could be if the property is being taken so that a hotel can be constructed. The private individual may argue that the hotel does not benefit the public and is just a way to make money, while the government will argue that it will bring jobs to the area and generate business by increasing tourism. A judge would ultimately decide the outcome.

How Expropriation Affects Landlords and Tenants

If a landlord’s rental property was taken over through expropriation, it would not only affect the landlord’s livelihood and income, it would also force all of the tenants in the property to relocate.

The landlord could file a lawsuit in court to contest what would be considered just compensation because the value is not just the value in the physical rental property and land. It is also the income that each rental unit generates for the landlord.

Also, the rental property is for the public good. Depending on how many units the rental property is, it is providing housing for numerous members of the public community, and these members would be adversely affected if they would have to relocate. They should also be compensated for having to move out of their homes.