revolutionary governments from its former owners
and confiscated without payment. It should also be differentiated
from forfeiture which is an uncompensated seizure of contraband
from criminals and its confiscation by the government.
The term condemnation is used to describe the act of a government
exercising its power of eminent domain to transfer title to private
property from its rightful owner to itself. It is not to be confused
with the same term that describes a declaration that real property,
generally a building, has become so dilapidated as to be legally
unfit for human habitation due to its physical defects. This type
of condemnation of buildings (on grounds of health and safety
hazards or gross zoning violation) usually does not deprive the
owners of the title to the property condemned but requires them
to rectify the offending situation or have the government do it
for them and bill them for the cost.
Condemnation via eminent domain indicates the government is taking
the property or an interest in it, such as an easement. In most
cases the only thing that remains to be decided when a condemnation
action is filed is the amount of just compensation, although in
some cases the right to take may be challenged by the property
owner on the grounds that the attempted taking is not for a public
use, or has not been authorized by the legislature, or because
the condemnor has not followed the proper procedure required by
law.
The exercise of eminent domain is not limited to real property.
Governments may also condemn personal property, such as supplies
for the military in wartime, franchises, as well as intangible
property such as contracts, patents, trade secrets and copyrights.
History of Eminent Domain
The first case of eminent domain in English law is called the
"Saltpeter Case" or the "King's Prerogative Case".
The English King needed saltpeter for munitions and took a saltpeter
mine from a private individual. The private party sued the King
and the court established the right of the sovereign to take "private
property for public use". When the Colonies became the United
States and the English Common Law was adopted as the law of the
new nation, this principle was recognized. Contrary to
popular belief, the Fifth Amendment to the Constitution did not
establish this right in the US, as it was already inherent in
common law as a result of the Saltpeter Case precedent. Rather,
the Fifth Amendment limited the right of eminent domain by requiring
"just compensation" to be paid for property taken by
eminent domain. The term eminent domain is used primarily
in the United States, where the term was derived in the mid-19th
century from the legal treatise, De Jure Belli et Pacis, written
by the Dutch jurist Hugo Grotius in 1625, who used the term dominium
eminens and described the power as follows:
"... the property of subjects is under the eminent domain
of the state, so that the state or he who acts for it may use
and even alienate and destroy such property, not only in the case
of extreme necessity, in which even private persons have a right
over the property of others, but for ends of public utility, to
which ends those who founded civil society must be supposed to
have intended that private ends should give way. But it is to
be added that when this is done the state is bound to make good
the loss to those who lose their property."
5th Amendment and eminent domain
In the United States, the Fifth Amendment to the Constitution
requires that just compensation be paid when the power of eminent
domain is used, and requires that the property be taken for "public
use". These requirements are sometimes called the takings
clause. While the clause does clearly establish the federal
government's absolute authority to seize private land over the
owner's objection, the usual terseness of the U.S. Constitution
has necessitated that terms such as "just compensation"
and "public use" be primarily determined
by the construction given to them under the latest presidential
U.S. Supreme Court decision.
The term "public use" has historically been the most
contested term of the takings clause, as it provides the only
real limitation of the government's takings power; economics-minded
legal scholars may pursue the fairest way to determine the true
value of one's home and land, but ultimately, money is an issue
for few U.S. governments. The original judicial construction of
"public use" was relatively strict: it required that
the land be used by the public, the common example being a railway
station.
The U.S. Supreme Court has largely given the public use requirement
an expansive interpretation and has allowed takings of private
property for re-conveyance to other private parties or in some
cases by private parties directly, on the theory that the new
owners will put the taken land to more lucrative uses that are
likely to generate more tax revenues.
Economic argument of hold outs
Supporters contend that seizures of private property are necessary
to the improvement of communities when transactions costs prevent
private parties from agreeing on the most efficient use of land.
Opponents point out that over a period of 200 years, American
city-dwellers created large land assemblages and major structures
without the coercive power of eminent domain, which they never
got to use for urban redevelopment until the 1950s. Critics also
point out that even successful redevelopment revives only limited
areas (such as downtowns), leaving other city areas in decline.
Eminent domain has driven the development of railroads and defense
infrastructure, permitting the construction of many otherwise
impossible connections. In the 20th century, it was used to construct
World War II and Cold War defense installations. From the early
1950s on, more than 42,000 miles of rights of way were acquired
by eminent domain to build the Interstate Highway System. Ports,
airports, and government buildings have also been constructed
on land appropriated through eminent domain.
More recently, eminent domain has come to be used for private
purposes (such as shopping malls), which has led to the current
controversy. In some cases, the non-government entities using
eminent domain have been community groups trying to take control
of planning and development. Such is the case of the Dudley
Street Initiative, a community group in Boston,
Massachusetts, which attained the right to eminent domain
and has used it to claim vacant properties for the purpose of
"positive community development". In other cases, well
connected firms persuade local governments to take property (sometimes
that of their competitors) and turn it over to them.
The controversy is further fired up by the courts defining the
"just compensation" promised by the
Constitution so narrowly that displaced home-owners and businesses
are not fully compensated for their demonstrable economic losses,
which are sometimes deemed "noncompensable".
This is particularly controversial in cases where business properties
are taken, the owners are not compensated for lost business, and
the taken land is turned over to another business at no cost.
Back in 1798, Justice Samuel Chase in Calder v. Bull
(3 U.S. 386) held that it was preposterous for the government
to take one person's property with no restriction and give it
to another private party for their own profit. Today, many still
adhere to this traditional view, which they see as morally sound,
but courts have not lent much support to it.
Private economic use of properties acquired through eminent
domain
Since the Supreme Court's Kelo decision, more than 5,783 properties
have been threatened or condemned by local governments. Some of
the more egregious examples catalogued in Dana Berliner's Opening
the Floodgates follow:
In March 2005, officials in Garfield Heights, Ohio, called for
the seizure of 52 homes and 13 undeveloped properties. The 52
homes were blighted, according to city's development plan, because
they were too old and too small. The next month, the City engaged
a private developer who hopes to build Bridgeview Crossing, a
shopping center that will be anchored by a Lowe's and a Target.
In July 2005, the city of Oakland, California, evicted two auto
repair and supply businesses in order to replace them with 1,000
new condos and apartments as well as with a Sears tire and auto
shop. In December 2005, the city of Riviera Beach, Florida, approved
a plan to acquire 283 properties and displace one thousand renters
in order to build luxury housing and a marina. The city attempted
to get the plan started before Florida eminent reform legislation
went into effect.
In January 2006, the city of Baltimore, Maryland planned to seize
75 properties for the Charles North development project. Seven
of those properties had been sold in 2005 to investors who planned
to redevelop the land. The city also decided to acquire the 90-year-old
Parkway Theater while it was under active restoration.
Nuisance law
When a property owner's use is improper, the state under its
broad police power may ban it as in Hadacheck v. Sebastian
239 U.S. 394 (1915) in which Justice McKenna held that an owner
of a brickyard business was not entitled to compensation because
the zoning laws in Los Angeles prohibited his use because it was
a nuisance.
What is Nuisance
Nuisance is a common law tort. It is one of the oldest causes
of action known to the common law, with cases framed in nuisance
going back almost to the beginning of recorded case decisions.
Nuisance signifies that the right of quiet enjoyment is being
disrupted to such a degree that in law, a tort is being committed.
Traditionally, nuisance is divided into public nuisance,
interference with the reasonable expectations and rights of the
general public (ie, society), and private nuisance, the
interference with the right of specific people.
Legal definition of nuisance
Under the common law, persons in possession of real property
(either land owners or tenants) are entitled to the quiet
enjoyment of their lands. If a neighbor interferes with
that quiet enjoyment, either by creating smells, sounds, pollution
or any other hazard that extends past the boundaries of the property,
the affected party may make a claim in nuisance.
To be a nuisance, the level of interference must rise above
the merely aesthetic. For example, if your neighbor paints their
house purple, it may offend you, but it does not rise to the level
of nuisance. In most cases, normal uses of a property that can
constitute quiet enjoyment cannot be restrained in nuisance either.
For example, the sound of a crying baby may be annoying, but it
is an expected part of quiet enjoyment of property and does not
constitute a nuisance.
Nuisances come in two forms: private and public.
A public nuisance is an unreasonable interference with the public's
right to property. It includes conduct that interferes with public
health, safety, peace or convenience. The unreasonableness may
be evidenced by statute or by the nature of the act, including
how long and how bad the effects of the activity.
A private nuisance is simply a violation of one's use of quiet
enjoyment of land. It does not include trespass.
Any affected property owner has standing to sue for a private
nuisance. If a nuisance is widespread enough, but yet has a public
purpose, it is often treated at law as a public nuisance. Owners
of interests in real property (whether owners, lessors, or holders
of an easement or other interest) have standing only to bring
private nuisance suits.
Safeguards against government action
The Fifth Amendment to the U.S. Constitution
requires that property may only be taken for "public use",
and upon payment of "just compensation". But the U.S.
Supreme Court has diluted the meaning of "public use"
to such an extent that virtually anything that a local condemning
authority declares to be "public use" will be accepted
by the Supreme Court and the lower federal courts. Some state
courts disagree and in recent years the courts of Illinois, Michigan,
Oklahoma, South Carolina and Pennsylvania have taken the position
that the taking of private land for so-called "economic redevelopment"
-- i.e., for reconveyance of the taken land to private companies
for the construction of private, profit-making enterprises such
as shopping malls, factories, office buildings and even gambling
casinos does not meet the "public use" limitation under
the state Constitution.
Property-rights advocates contend that abuses of the exercise
of these powers in the past require substantial additional safeguards
to protect the people from having their homes and businesses taken
for what are obviously private, not public, uses.
Federal statutes (and their state counterparts) require relocation
assistance programs to be administered by the various states in
order to receive Federal participation in the costs of the improvements
(often 80%), and further require full certification that the public
process and benefits were offered to the claimants and that the
benefits were actually paid to the correct claimants and displaces.
However, the benefits payable under the Act provide only partial
compensation to the displaced loaners (for example $20,000 is
the maximum payable under the Act for the destruction of a business),
and the Act does not allow the owners to sue to enforce its provisions.
The use of eminent domain has slowed nationwide as the full build-out
of the Interstate System approaches and reflects the fact that
needs in the future will be for mostly projects of a local nature
such as schools, roads, and other local improvements. The extensive
uses of eminent domain for such purposes as economic development
are currently under attack in many jurisdictions and there is
a movement to pass state statutes to limit this use. Seven out
of nine states that had such initiatives on the ballot in the
2006 election, have adopted laws or state constitutional amendments
limiting or eliminating the use of eminent domain for "economic
redevelopment" that does not eliminate slums or blight, and
only finances redevelopment by private profit-making entities.
As of January 2007, 34 states had enacted some kind of legislation
reforming eminent domain laws, while 13 had failed to enact any
legislation regarding eminent domain (three state legislatures
did not hold sessions in 2006). Seventeen of those thirty-four
states either prohibited the use of eminent domain for private
development purposes or substantially strengthened their definitions
of blight, while the other seventeen increased eminent domain
protections.
Governor Richardson of New Mexico became the first governor to
veto eminent domain reform legislation resulting from this recent
surge in public interest.
President Bush Executive Order
On June 23, 2006 - on the one-year anniversary of the Kelo
decision (see above), President George W. Bush issued an executive
order stating in Section I that the Federal Government must limit
its use of taking private property for "public use"
with "just compensation", which is also stated in the
constitution, for the "purpose of benefiting the general
public." He limits this use by stating that it may not be
used "for the purpose of advancing the economic interest
of private parties to be given ownership or use of the property
taken.
12 things you need to know about the new Fannie Mae appraisal
forms right now
It's been 12 years since Fannie Mae revised its appraisal forms.
Now brand new forms and new versions of old stand-bys are going
to be required starting November 1. Banks and agencies are in
charge of whether the new or old versions are necessary in the
first couple months because Fannie Mae has granted some lenders
extensions on the deadline to stop using the old forms. Whether
you need the old or new, we're ready to provide you the same prompt,
professional service our clients have come to expect.
You don't have time to pore over the new forms and study them
to know how they're different and how the changes affect you.
As your valuation experts, we've put together this 5-minute primer
on the changes. More information is available on our website if
you'd like to learn more.
Take 5 minutes to learn these things about the new FNMA forms
and you'll be ready to do business.
- New "driveby" forms — no more "2055
With Interior"
With the redesign of the 2055 single family "driveby"
form there is no longer a "2055 with Interior." For
interior inspection, photos, sketches etc. please order a URAR.
There are new Exterior Only "driveby" forms for condos
(1075) and co-ops (2095).
- On purchase loans, you need to send us the sales
contract
The new URAR requires us to analyze the sales contract and information.
You can expedite our analysis but making sure to send this information
along with your order.
- New appraisal update/completion form does not provide
for value increases
If the value has gone up and you want to document that, it's
a new appraisal. The new 1004D is for certifying completion
of construction or that the subject has not declined in value
since the original appraisal. Use this instead of old Form 442.
- Cost and income approaches are not required in most
cases
If cost and income approaches aren't necessary, they normally
won't be included. From now on you'll probably only see them
on a small number of single family residential properties.
- New 2055 Exterior Only requires more thorough comps,
sales history research
This is true of the new URAR, too, but it's a bigger
change with the 2055. The important point is that appraisers
will need to do more thorough research on sales histories of
both the subject and comps, whatever the assignment.
- Appraiser makes more meaningful representations on
condition, structure
The old URAR asked if there were any apparent adverse
site conditions or issues with the structure, soundness, livability,
etc. No more "apparent" — we need to tell you if there
are any issues. This is a more thorough inspection and analysis
than previously.
- Appraiser must research, analyze sales, transfer
history of subject, comps
In addition to the sales contract, appraisers need
to examine the transfer history of the subject for the past
three years and each selected comp for the last year.
- Appraiser certifies there has been no pressure to
hit a number
We cannot complete the new form(s) if our client asks
us whether we can "come in" at a certain value or
threatens not to pay if the value isn't at least $X. We take
this new representation on our part seriously.
- Instead of structure only, is any part of the property
in a flood hazard area?
Previously the question was whether the house was built
within a flood zone. Now if any of the property is located in
the flood zone we must note that on the report.
- New, separate field review forms for single family,
2-4
There is a new 2000A form for field reviews of 2-4 family units.
The 2000 is for single family.
- New standalone manufactured home form (interior only)
The old 1004C manufactured home addendum is now its own standalone
form. It is interior only — no "drivebys" or exterior
only manufactured home appraisals.
- New 1025 residential income form does not require
listing comps
Rental and sales comps are still required.
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