What Is Expropriation?

Expropriation is the act of a government taking privately owned property against the wishes of the owners, ostensibly to be used for the benefit the overall public. In the United States, properties are most often expropriated in order to build highways, railroads, airports, or other infrastructure projects. The property owner must be paid for the seizure, since the Fifth Amendment to the Constitution states that private property cannot be expropriated "for public use without just compensation."

The Legal Basis for Expropriation

In the U.S., a doctrine known as "eminent domain" provides the legal foundation for expropriation. U.S. courts have accepted the doctrine as a power of the government by suggesting it is implied by the Fifth Amendment clause covering compensation. Under this rationale, the Amendment's statement that property cannot be expropriated without proper compensation implies that property can, in fact, be taken.

Governments have the power to take private property for fair-market-value compensation through the doctrine of eminent domain; some fees and interest may also be payable to the former owner(s).

In some jurisdictions, governments are required to extend an offer to purchase the subject property before resorting to the use of eminent domain. If and when it is expropriated, property is seized through condemnation proceedings, a use of the term that is not to be confused with that to describe property that is in disrepair. Owners can challenge the legality of the seizure and settle the matter of fair market value used for compensation.

Another main justification for expropriation comes from the area of public health. It is generally recognized that events that threaten public health, such as toxic environmental contamination of an area, justify the government acting to relocate the affected population in the area, and part of that action may logically entail the government expropriating the property of the relocated residents.

Government expropriation is widely found around the world, generally accompanied by agreement that owners should receive appropriate compensation for the property they lose. The few exceptions to agreement on just compensation are primarily in communist or socialist countries, where it is also sometimes the case the government expropriates not just land but domestic or foreign businesses that have a presence in the country.

Compensation Concerns Regarding Expropriation

A number of issues have arisen over expropriation—ranging from the justifiable reasons for doing so, to the process for objecting to it, through the scope and amount of fair compensation. Both legislation and court rulings have helped to resolve these.

In regard to compensation, there is debate on the question of what constitutes fair recompense for owners of expropriated property. In cases spanning five decades, from the 1930s to the 1980s, the U.S. Supreme Court has repeatedly acknowledged that "fair market value" as defined by it can fall short of what sellers would demand and be able to receive in voluntary transactions.

Consequently, in eminent domain cases, the standard is often not the most probable price, but the highest price obtainable in a voluntary sale transaction involving the subject property. Since the condemnation deprives the owner of the opportunity to take their time to obtain the optimal price the market might yield, the law provides it by defining fair market value as the highest price the property would bring in the open market.

Inconsistency and controversy also prevail over property owners being compensated not only for their property but for the inconvenience of being required to relocate and for the expense and possible business losses of doing so. These costs are not included in the concept of "fair market value," but some are compensable in part by statutes, such as the federal Uniform Relocation Assistance Act (Code of Federal Regulations 49) and its state counterparts. Attorneys' and appraisers' fees the property owner incurs may also be recoverable by statute, and in California and New York an award of such fees is discretionary with the court under certain conditions.

When payment of just compensation is delayed, the owner is also entitled to receive interest on the amount of the late payment.

Expropriations to Boost Tax Revenues

A federal Supreme Court decision in the early 2000s—and subsequent reactions to it—have shaped the ability of governments to seize property under eminent domain for the sole reason of increasing tax revenue. Kelo v. City of New London, 545 U.S. 469 (2005) affirmed the authority of New London, Conn., to take non-blighted private property by eminent domain, and then transfer it for a dollar a year to a private developer solely for the purpose of increasing municipal revenues.

The decision spurred outcry about overly broad expropriation powers, and prompted further action at both the state and federal levels.

The Supreme Courts of Illinois, Michigan (County of Wayne v. Hathcock [2004]), Ohio (Norwood, Ohio v. Horney [2006]), Oklahoma, and South Carolina subsequently ruled to disallow such takings under their state constitutions. There was also federal action, despite relatively few expropriations being carried out by that level of government. On the first anniversary of the Kelo decision, President George W. Bush issued an executive order stating that eminent domain may not be used by the federal government "for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken."