*This article is not a substitute for the advice of an attorney.*
Today we will kick off a four-part blog series on eminent domain in Texas. The purpose of this series is to provide landowners with basic information about the power of eminent domain, to explain the procedures surrounding condemnation proceedings, to specifically discuss eminent domain as it relates to oil and gas pipelines, and to provide a list of terms to consider when negotiating a pipeline easement. The series will be posted every Monday for the next month.
Today, Part 1 of this series will provide the basic background on the law surrounding eminent domain in Texas.
What do the terms eminent domain and condemnation mean?
Eminent domain is the power of the government or someone acting upon power granted by the government to take private property for public use. The power of eminent domain is recognized in both the United States and Texas Constitutions. The Fifth Amendment of the United States Constitution provides that private property may not be taken for public use without just compensation. Article I, Section Seventeen of the Texas Constitution, likewise, prohibits the taking, damaging or destruction of property for public use without adequate compensation being made.
Condemnation is the exercise of the power of eminent domain. Thus, when the government or a person/entity authorized to use eminent domain takes property, it engages in condemnation.
There are three elements of eminent domain under Texas law: (1) The actor must be the state or a private entity authorized to condemn; (2) the property must be taken for public use; and (3) the landowner must receive adequate compensation for the condemned property.
Who can condemn property?
Under Texas law, only a governmental entity or a private entity granted the power of eminent domain under law is permitted to condemn property.
Entities may only have the power of eminent domain when such power is conferred by the legislature. Beginning in 2010, the Legislature may grant this power only upon a two-thirds vote of both houses. Examples of private entities authorized by law to condemn property include gas or electric corporations, groundwater conservation districts, and common carrier pipelines. An example of a statute granting eminent domain authority to common carrier pipelines can be found here.
Any entity granted the power of eminent domain before December 31, 2012, was required to file a letter with the Comptroller in order to remain actively authorized to engage in eminent domain. Any entity that failed to do so will lose its eminent domain authority as of September 1, 2013. Thus, any property owner facing condemnation proceedings, should contact the Comptroller to see if the required letter was filed and whether the entity is still authorized to condemn property.
What can be condemned?
The simple answer is that the amount of private property reasonably necessary for public use may be taken. The taking can be of all or part of a property. Examples of property that can be taken include land, an easement on a piece of land, improvements such as homes or barns, and rights to surface or ground water.
An entity with the power of eminent domain determines the location and amount of property reasonably necessary for public use, and is granted broad discretion to make these decisions. The decision of the entity is honored unless there is evidence of bad faith, fraud, or abuse of discretion.
One limitation does exist and limits the circumstances when a fee simple estate may be condemned. A fee simple estate refers to the highest estate that exists under law and generally includes a property and all related rights (i.e. surface and mineral rights). The Texas Property Code states that a fee simple estate may be taken only where expressly provided by law. So, for example, looking at the common carrier statute as an example again, because it does not expressly allow for the condemnation of a fee simple estate, that type of estate may not be condemned.
What is public use?
In order for property to be condemned, it must be taken for “public use.” So what exactly is public use? It is statutorily described as the ownership, use and enjoyment of the property by the State, a political subdivision of the state, or the public at large, or an entity granted the power of eminent domain under law, or the elimination of urban blight. This definition is not entirely helpful, and courts generally decide whether a taking is for public used based upon the specific facts of that case.
Texas statutes do provide certain situations that do not qualify as public use. Public use does not occur if a private benefit is conferred to a particular private party through the use of the party. Nor does it include the taking of property for transfer to a private party for the primary purpose of economic development or enhancement of tax revenues. If, however, economic development or increased tax revenues is a secondary purpose, as opposed to the primary purpose, of the taking, it may be considered public use.
Examples of public uses include: transportation projects like highways, bridges, railroads, airports, utility projects, oil and gas pipelines, water and sewer lines, electric lines, commercial structures such as stadiums, arenas, shopping centers, public projects such as schools, hospitals or public parks, or water-related projects like water supply projects, drainage projects, and water reservoirs. Currently, the most common type of eminent domain power being exercised is for the construction of oil and gas pipelines.
How is adequate compensation calculated?
Adequate compensation is calculated based upon the market value of the property. The determination of damages to a landowner is governed by Texas Property Code Section 21.042. ”Market value” is defined as “the price the property will bring when offered for sale by one who desires to sell, but is not obligated to sell, and is bought by one who desires to buy, but is under no necessity of buying.” This market value is determined at the time of the taking (specifically at the time of the special commissioner’s hearing), which can be important, particularly if property values in an area have significantly changed over time. Further, a landowner is entitled to receive the value of the “highest and best use” of the property, rather than the value of the property for which the landowner actually used the land. For example, if a vacant lot was located in a commercially zoned area, the highest and best use of the property would likely be the value of a commercially developed property, rather than the value of a vacant lot.
If a person’s entire tract is taken, the damage is the local market value of the property at the time of the special commissioner’s hearing.
If a portion of a tract of land is taken, then the damage available includes the market value of the portion of property that will be taken but will also consider the effect of the condemnation on the value of the owner’s remaining property, including injuries that may be particular to the landowner, such as damages to his use or enjoyment of the property. Injuries that are shared by the landowner and general public (such as increased traffic), however, may not be considered in calculating a damage award. Typical damages that fall into this category include loss of access to a road or highway, cost of fencing, loss of street frontage, or loss of water sources. If there are any benefits to the landowner due to the taking, which actually increase the value of his remaining property, that amount is deducted from the remaining property damages recoverable.
Finally, if a landowner is displaced from his home or business and is not entitled to recover moving expenses under another law, he or she may recover reasonable moving expenses for a maximum distance of 50 miles. Additionally, under certain situations, relocation assistance, including relocation payments or housing assistance may be available for landowners, including those moving their farming or ranching operation as a result of condemnation.
A separate statutory provision, Texas Property Code Section 21.0421 provides how compensation is calculated with regard to groundwater.