California's Eminent Domain Laws and Property Rights

Most public entities in California have the power of eminent domain to take private property for a public use. The entities include: the State of California; State agencies like CalTrans or the High-Speed Rail Authority; counties; cities; towns; school districts; and other special districts. In addition, some private entities like utilities, hospitals, and universities may also exercise the power of eminent domain in certain circumstances.

A public entity may only use its power of eminent domain to acquire property for a public use. The public entity must have the constitutional or statutory power to acquire property for the particular public use involved for example, CalTrans may exercise its eminent domain power to take property for a freeway, but not for a school. In all cases, the public entity must establish three elements of necessity: (1) the public interest and necessity must re- quire the public entity's project; (2) the project must be planned and located in the manner most consistent with the greatest public good and the least private injury; and (3) the property to be acquired must be necessary for the project.

A property owner may challenge a condemnation where there is no proper public use or where the public agency has not established the elements of necessity or has failed to follow the proper procedures for invoking the power of eminent domain. The ability to challenge the condemnation is limited, however, and dependent on the facts of each particular case.

A public purpose is broadly defined as any use which concerns the whole community or promotes the general interest in its relation to any legitimate object of government. Examples of typical public uses include roads, schools, parks, fire stations, public buildings, transmission and distribution of electricity or water, and railroads.

Although government has the power of eminent domain to take private property, government does not get to determine the price it must pay for the acquisition of such property. Rather, just compensation is determined by a jury.

Before filing an eminent domain case, a public agency is required to perform an appraisal of the property it seeks to acquire and to make an offer of compensation to the property owner. The property owner is not required to accept the government's offer. If the owner is not satisfied with the government's offer, the government must file an eminent domain lawsuit in court to acquire the property. If the government makes a deposit into court of the amount of compensation it feels is appropriate, the government may seek to obtain early possession of the property. In such circumstances, the property owner may withdraw the government's deposit and still litigate the right to obtain additional compensation. If the parties cannot reach a settlement on the proper amount of compensation, the case will proceed to a jury trial at which appraisers and other witnesses will testify regarding the fair market value of the property involved as well as damages to any remaining property. The jury will determine the amount of compensation after hearing all of the evidence from both sides.

Fair market value is "the highest price" that would be agreed to between a hypothetical fully informed buyer and a hypothetical fully informed seller, each dealing with full knowledge of available and likely uses of the property involved. Property is not necessarily valued at its current use but, rather, at its "highest and best use." This means that if the property is undeveloped or under utilized, it will be valued as the market would value it at its highest and best use, taking into account various factors that reflect whether the proposed use is legal and economically feasible.

When only part of a property is taken for a public project, the owner is also entitled to recover damages to any leftover property, called the remainder. This is called "severance damages," and is the net amount of damages to the remainder from the project and benefits to the remainder from the project. Property owners should seek legal advice early in the eminent domain process to assure that certain requirements are met in order to determine the larger parcel which is the basis for determining severance damages.

In California, the owner of a business is also entitled to recover for lost goodwill. Goodwill is defined as the benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in the probable retention of old or acquisition of new patronage. The business owner must prove that the business had goodwill and recovery is measured by the difference in goodwill at the acquired location versus goodwill in the relocated site, if the business is reasonably able to relocate.

Yes, but only where certain requirements are met. In an eminent domain case (a direct condemnation case), the property owner and the government exchange final demands and final offers shortly before the trial. When the trial is over and the jury has returned its verdict as to the amount of just compensation, the court will compare the jury's verdict to the amount of the owner's final demand and the amount of the government's final offer. If the court decides that the owner's final demand was reasonable and the government's final offer was not reasonable, in light of the evidence admitted at trial and the jury's verdict, the court may award litigation expenses to the owner. Litigation expenses include both attorneys' fees and expert witness costs incurred by the property owner, to the extent the court determines such amounts were reasonably incurred. The property owner is never required to pay the costs and fees incurred by the government in prosecuting the eminent domain case against the property owner.

In inverse condemnation cases where the government does not file an eminent domain lawsuit but the property owner sues the government for damage to private property the owner is entitled to recover its attorneys' fees and costs if the owner wins the case by proving the government is liable for damages. The property owner is also entitled to receive compensation for fees and costs incurred when an inverse condemnation case is settled on terms requiring the government to pay any amount of compensation to the owner.