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What is ‘just compensation’ during a federal acquisition of land?

| Nov 21, 2014 | Development |

The United States Constitution’s Fifth Amendment protects citizens from having their land taken for public use without receiving just compensation for its value. Therefore, as outlined in the Uniform Appraisal Standards for Federal Land Acquisitions, any entity acquiring property on behalf of the United States must abide by specific guidelines in appraising the land in question. Because property appraisal for federal purposes raises unique appraisal issues, the standards of valuation are mainly determined by law.

The federal courts have established a general standard of setting just compensation as equivalent to the property’s market value. Appraisers reviewing the federal land acquisition must understand the established case law applicable to the process in order to make constitutionally sound determinations. All determinations must be made in an unbiased, accurate and thorough manner.

The U.S. Supreme Court has set the market value of property as “what a willing buyer would pay in cash to a willing seller” at the time the taking is to occur. This definition assumes a property was on the open market for a reasonable length of time. The reasonableness of the time limit can vary, however, depending on the property type and location, market conditions and price range of nearby property.

Additionally, government-constructed buildings and improvements already on the land are generally excluded from market value consideration. Market value is also determined according to the property’s highest and best use, which is typically assumed to be the current use. Any party wishing to claim a different highest and best use exists has the burden of proving as much.

Any land acquisition appraisal completed outside these standards may not conform to the minimum Constitutional standards. The Supreme Court has helped preserve U.S. citizens’ rights to receive just compensation for their property, should it be taken for public use. Anything less than fair market value violates this safeguard, allowing the landowner to take action to enforce the rights given to thim or her.

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