Just Compensation

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The just compensation clause of the Fifth Amendment demands that a private property owner be made whole financially when property is taken by the federal government for public use. The same requirement is made applicable to the states by the due process clause of the fourteenth amendment. The requisite compensation is the monetary equivalent of the property taken, putting the owner in as good a position pecuniarily as before the taking, as the Supreme Court held in Monongahela Navigation Co. v. United States (1893). Compensation for losses peculiar to the owner, such as loss of investment or business profits, litigation expenses, and relocation costs, is not constitutionally required, but often is made payable by statute.

In recognition of the somewhat elusive nature of the "monetary equivalent" standard, a variety of working rules have been developed to aid the courts. The most important of these rules is the concept of fair market value. Under this concept, the owner is entitled to receive, as just compensation, the price for the property interest taken that would be agreed upon, as of the time of the taking, by a willing and informed seller and a willing and informed buyer, considering the highest and best use for which the property was available and suitable.

The market value test, however, is not an inflexible one, and other methods of estimating value have been held appropriate when reference to actual market data is impossible because there is no actual market for the property, or when the market value test would result in manifest injustice by diverging to an impermissible degree from the full indemnity principle of the Fifth Amendment.

If the property taken is only a part of a single parcel, just compensation includes payment to the owner for any diminution in value of the remainder resulting from the planned use of the part taken, but the value of benefits to the remainder may be offset against the value of the "take." These results, which ordinarily can be measured by the difference in value of the property before and after the taking, can theoretically, although seldom in fact, result in a zero award. Many states, deeming it unfair to deduct enhancements to the remainder, reject the "before and after" test and award the full value of the part taken plus any net consequential damages realized by the remainder after offsetting any special benefits thereto. That either approach is constitutionally permissible was affirmed in Bauman v. Ross (1897).

Arvo Van a lstyne


Orgel, Lester 1953 Valuation under the Law of Eminent Domain, Vol. 1. Charlottesville, Va.: Michie Co.