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What Is Expropriation?
Expropriation is the act of a government claiming privately owned property to be used for the benefit of the overall public. Properties may be expropriated in order to build highways, railroads, airports, or other infrastructure projects. In the United States, property owners must be compensated fairly for property that is expropriated, according to the Fifth Amendment of the U.S. Constitution.
Key Takeaways
- Expropriation involves the government seizing private property to benefit the public, like building infrastructure.
- The U.S. Constitution’s Fifth Amendment instructs that government expropriation requires fair compensation to property owners.
- Eminent domain in the U.S. provides legal grounds for expropriation, allowing property seizure with just compensation.
- Compensation debates focus on fair market value and whether it reflects voluntary sale prices.
- Expropriation is legal in the U.S. under eminent domain, balancing public use with fair owner compensation.
Legal Framework and Process of Expropriation
In the United States, a doctrine known as “eminent domain” provides the legal foundation for expropriation. U.S. courts have accepted the doctrine as a government power suggesting it is implied by the Fifth Amendment clause covering compensation. Under this rationale, the Amendment’s statement that property cannot be expropriated without proper compensation implies that property can, in fact, be taken.
In some jurisdictions, governments are required to extend an offer to purchase the subject property before resorting to the use of eminent domain. If and when it is expropriated, property is seized through condemnation proceedings, a use of the term that is not to be confused with property that is in disrepair. Owners can challenge the legality of the seizure and settle the matter of fair market value used for compensation.
Important
Governments have the power to take private property for fair-market-value compensation through the doctrine of eminent domain; some fees and interest may be payable to the former owner(s).
Another main justification for expropriation comes from the area of public health. It is generally recognized that events that threaten public health, such as toxic environmental contamination of an area, justify the government acting to relocate the affected population in the area, and part of that action may logically entail the government expropriating the property of the relocated residents.
Government expropriation is widely found around the world, generally accompanied by agreement that owners should receive appropriate compensation for the property they lose. The few exceptions to an agreement on just compensation are primarily in communist or socialist countries, where a government may expropriate not just land but domestic or foreign businesses that have a presence in the country.
Determining Fair Compensation in Expropriation Cases
Expropriation brings up concerns about the reasons for property seizure, the recourse process, and fair compensation. With regard to compensation, there is debate as to what constitutes fair recompense for owners of expropriated property.
From the 1930s to the 1980s, the U.S. Supreme Court noted that “fair market value” often didn’t match what sellers could get in voluntary sales.
In eminent domain cases, the standard isn’t the most likely price but the highest price from a voluntary sale. Because condemnation doesn’t let owners wait for the best market price, the law defines fair market value as the highest open market price.
Owners face inconsistency in compensation, moving inconvenience, and possible business losses.
These costs aren’t part of fair market value, but some are covered by laws like the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act.
Owners may recover attorney and appraiser fees by statute, with court discretion under certain conditions.
When payment of just compensation is delayed, the owner is entitled to receive interest on the amount of the late payment.
Expropriation and Tax Revenue: Economic Impact
A federal Supreme Court decision in the early 2000s—and subsequent reactions to the decision—have shaped the ability of governments to seize property under eminent domain for the sole reason of increasing tax revenue. Kelo v. City of New London, 545 U.S. 469 (2005) affirmed the authority of New London, Conn., to take non-blighted private property by eminent domain and then transfer it for a dollar a year to a private developer solely for the purpose of increasing municipal revenues.
The decision sparked outcry about overly broad expropriation powers and prompted further action at both the state and federal levels.
The Supreme Courts of Ill., Mich (County of Wayne v. Hathcock [2004]), Ohio (Norwood, Ohio v. Horney [2006]), Okla., and S.C., subsequently ruled to disallow such takings under their state constitutions.
There was also federal action, despite relatively few expropriations being carried out by that level of government. On the first anniversary of the Kelo decision, President George W. Bush issued an executive order stating that eminent domain may not be used by the federal government “for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken.”
What Is an Example of Expropriation?
An example would be if the local government needs to build new water piping to serve the community. The path would currently go through an existing residential apartment building, which will need to be torn down to create the various facilities needed for the piping. The government seizes the building from the owner and pays them fair compensation, which includes not only the value of the building but also the rent that the owner can no longer charge tenants.
Is Expropriation Legal in the U.S.?
Yes, appropriation is legal in the U.S. under the Fifth Amendment and is known as eminent domain. Expropriation is only allowed, however, if the government pays just compensation.
Is Expropriation a Political Risk?
Expropriation can be a political risk when purchasing land or property in a foreign country. Political turmoil and a change in government could lead to property or businesses being expropriated, confiscated, or nationalized. Political risk insurance can help mitigate the possible loss.
The Bottom Line
Expropriation occurs when a government seizes private property for public use, such as for building infrastructure benefitting many. In the U.S., the government must provide fair compensation to the owner of property that is expropriated. This is required under the Fifth Amendment of the Constitution.
The process of expropriation is known as eminent domain in the U.S. Property owners can challenge the legality of expropriation and the compensation offered. Expropriation controversies, such as the Kelo v. City of New London case, which allowed a municipal government to seize a property to raise tax revenue through private development, caused immense public outrage and shaped subsequent policies that denied such seizure.
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