Condemnation: Definition in Real Estate, Types, and Examples

What Is Condemnation?

The term condemnation refers to the legal acquisition of property by a local government or other private entities. A municipality often condemns a piece of property, such as a home or commercial building, either temporarily or permanently because it may be deemed unsafe or hazardous.

A structure can also be condemned for acquisition under the legal doctrine of eminent domain. Owners have legal recourse to challenge the condemnation of their property or may receive fair market value (FMV) if they accept the terms.

Understanding Condemnation

Condemnation is a real estate term that involves the process of legally acquiring a piece of property. This procedure can be executed by local governments and private entities. As noted above, the process aims to satisfy a specific need, such as a safety or health concern or another (public) purpose.

The process can be temporary until the conditions are addressed and improved. In other cases, they may be permanent, which means owners risk losing their properties under eminent domain. This happens when the government takes ownership or transfers ownership to a third party, followed by demolition and reconstruction.

Orders to condemn buildings are executed by local authorities if structures are deemed unsafe for residents and may pose a threat to surrounding structures. Others may be condemned if they are a nuisance to the area, such as those that are abandoned, dilapidated, or otherwise poorly maintained. Whether they are occupied or vacant, these buildings cannot be inhabited.

Owners who receive condemnation orders have two different options available to them. Those who receive orders because of health and safety reasons must remedy the situation to bring their properties up to date. Others who don't agree (with a health and safety order or an eminent domain claim), may fight it with legal action.

Types of Condemnation

The two most common situations where a government condemns a property are when its condition makes it unsafe for use or occupancy or when the government intends to take the property to convert it to some legitimate public use in a process known as eminent domain.

Dilapidated or Unsafe Buildings

Dilapidated or unsafe buildings are often subject to condemnation to prevent harm to occupants or neighboring structures. Local, state, and federal housing codes and safety standards may apply to any given building, and if the condition of the building violates these then the property may be subject to condemnation.

This can occur due to deterioration of a property over time, or in the wake of a specific event that damages the property such as a fire, earthquake, or chemical spill. If renovations are made or the damages are repaired, the order may be lifted. But in some cases, renovations may lead to condemnation if they trigger inspections that uncover other unsafe conditions or violations, which may not have been in effect at the time of the original construction.

It is important that property owners don't ignore condemnation orders as problems and costs can add up by avoiding them. Owners can rectify the situation and have orders removed by making the necessary repairs or, in extreme cases, by demolishing the property. Those who don't agree with the orders may consult a lawyer to determine their options.

Eminent Domain

The U.S. federal and state governments have the right of eminent domain, which allows them to condemn property and transfer the title from private to public ownership or to a private third party. The condemning authority must provide a notice of seizure and just compensation. The seizure must carry out the process for a public purpose.

Authorities must appraise the property before they execute a seizure, then pay a pro tanto award, which the owner can accept without losing the right to sue. The condemning entity must provide timely notification throughout the process and issue a copy of the appraisal.

Pro tanto payments are often small compared to the amount the courts ultimately award owners of the condemned property so if the property owner believes the amount offered inadequately reflects the value, they can pursue the matter in court. Condemned property owners can also challenge the legality of the seizure itself and sue for the right to keep the property as long as they can prove that the seizure is not in the public interest.

These matters are generally heard by a special commissioner. If they don't agree, the property owner can challenge the commissioner's ruling. However, the condemnor can issue payment based on the commissioner's decision. As the appeal proceeds in the court, the condemnor will have the right to access the property and move forward with their project.

Examples of Condemnation

As noted above, local officials may condemn property if it poses a threat to others. For instance, local authorities may issue a condemnation order to the owner of a rental property that has a known rodent infestation. This can pose a serious health and safety hazard to new and existing tenants. In order to remove the order, the landlord must rid the property of the rodents and ensure it is inhabitable.

The most straightforward examples of condemnation via eminent domain involve land and buildings, which governments may seize to make way for a public project, such as a highway or private projects that are believed to serve the public good. For instance, a municipal government may consider building a hotel to attract business and generate tax revenue.

Powerline and pipeline projects are also good examples that involve condemnation. The government gains an easement, which grants them nonpossessory rights to install and maintain the pipelines or powerlines on your property. An agreement is executed via a deed with the original property owner, who retains ownership.