Can The Government Take Your House?

Written by Posted On Wednesday, 30 April 2014 10:41

What will you do when you get a formal notice to buy your house from the Maryland Transit Administration, because it is in the path of the proposed Purple Line light-rail project? Does the government have a right to take your property? What rights do you have? Do you have to sell?

The technical term is "eminent domain" but also is known as condemnation. If you cannot agree on a purchase price, the government has the absolute right to take your property, so long as is for a public use. And there is no question but that the proposed project is a public use.

Both Federal and State law make it clear that if your property is taken by the government, you are entitled to receive a fair payment. According to Article III, Section 40 of the Maryland Constitution, "The General Assembly shall enact no law authorizing private property to be taken for public use, without just compensation, as agreed upon between the parties, or awarded by a Jury, being first paid or tendered to the party entitled to such compensation."

How does it work? Once the government agency determines that your house is needed for that public use, you will receive an offer to buy with a specific dollar figure that the agency has previously determined will be "just compensation". If you agree with the price, you will deed the property to the agency and will receive the agreed upon amount.

But while you generally cannot challenge the taking of the property, you have the absolute right to object to the value set by the government. Maryland law is specific in defining the standard on which to base the value: "the fair market value of property in a condemnation proceeding is the price as of the valuation date for the highest and best use of the property which a vendor, willing but not obligated to sell would accepl for the property, and which a purchaser, willing but not obligated to buy, would pay..."

Note the words "highest and best use". Even if you own a single family home, if for example, you are in an area where commercial buildings can be located, that will be the best use.

If you and the agency cannot not agree on a fair price, the government will then file an Eminent Domain lawsuit in the circuit court where your property is located. You are entitled to a jury trial, and in fact, in most condemnation trials, the Jury will be bused to the property for a view, so that the jurors can get a better understanding of what the house looks like and where it is.

The trial can last several days. The court will most likely require the parties to mediate the matter, so as to possibly reach an amicable settlement. But if you ultimately have to go to court, you will need to convince the jury that your number is the correct one. That is the only issue to be determined in a condemnation case.

You should have expert witnesses, such as experienced appraisers, to testify as to the value of the property. You -- and your attorney -- may find it necessary to use other experts, such as zoning or traffic experts.

Once the jury makes a decision, the government has two choices. It can pay the amount of the award and take title to the property or if it determines that the jury award is too high, it can drop the matter. If it does abandon, the government must pay your reasonable court costs and lawyer's fees. Otherwise, you will have to pay your own attorney.

What should you do when you get the notice? You must start planning immediately; you cannot wait until there is a trial. You should talk with any of your neighbors who are also subject to condemnation; perhaps the group should retain a lawyer experienced in eminent domain to walk you through the steps and get you prepared. You clearly will need an appraisal, and that can take time. You will want to consider such issues as should I try to sell now to a third party and take my money? If I have a tenant, do I discuss the situation with him? Should I spend money renovating my house?

Is the money you receive taxable? Strange as it may seem, the government can take your property and then tax you on any gain you have made. You might be able to exclude up to $250,000 (or $500,000 if you file a joint tax return) of your gain and you may also be able to defer your gain by purchasing property that is similar to the one that was taken. You must discuss this with your tax advisors.

The condemnation process is extremely complex; its your property so don't procrastinate. Start your research now. There is a lot of helpful information on the internet under the topic Eminent Domain, or Condemnation or Involuntary conversion.

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Benny L Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of KASS LEGAL GROUP, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

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