Land issues Featured

7:00pm EDT January 31, 2007

Eminent domain became a hot issue in 2005 when the U.S. Supreme Court ruled in Kelo vs. New London that property could be obtained from private owners and provided to private developers, expanding the concept of a public use. Eminent domain was originally created to enhance blighted areas and was not thought of as a tool to enhance local tax revenue by elevating the use of a given parcel of land, says Larry Vanore, director with Sommer Barnard PC.

Eminent domain laws do not simply allow taking homes away from people, says Vanore. The law should be used to better a community. But under Indiana’s new eminent domain statutes, that cannot be done by displacing current residents. With the new regulations, relocating costs may need to be paid even if an area qualifies for eminent domain.

Smart Business spoke with Vanore about the requirements of eminent domain and how it can create new business and the steps that need to be taken to protect existing businesses.

How do eminent domain regulations benefit commercial businesses?

If people are willing to purchase houses in a blighted area at low cost to renovate them, then there is likely to be a new inflow of people. It also becomes a good business investment for developers. With the inflow of new people, there will also be a need for more jobs and more services that commercial businesses can provide.

Developers can also investigate and locate areas that the city has deemed blighted. Most cities do not have the time, money and manpower needed to redo all the areas that need renovation. Private developers should look for such areas and work with local governments to rebuild. This creates new jobs and renews the housing stock.

How can businesses move into areas that are growing because of eminent domain without violating new regulations?

Activity spurred by eminent domain can be very positive by creating a focus on developing the boundary areas between the more affluent areas and the depressed areas. Businesses must be aware of other regulations such as zoning laws that restrict land uses. For example, businesses might be able to move into locations on the edge of previously renovated areas under eminent domain regulations to provide services to the new residents. These businesses will attract consumers and workers and help an area grow even faster.

As housing developments are revitalized and property values increase, neighborhoods become more attractive. Businesses may be able to work with a community to use eminent domain to acquire inexpensive property while making a large investment for the future of their company. It is important for business owners to work with a team of people, including local government officials, to determine the economic potential of an area and the potential benefits for the business.

What steps must developers and businesses owners complete to take advantage of eminent domain regulations?

Developers and business owners should show how the proposed development will benefit the larger community and not merely be intended to increase tax revenue. Rezoning determinations may be needed so a business meets local regulations.

To be prepared, businesses should study the government’s comprehensive or master plan to know how their plans coincide with the plan of the city.

Demographic research should also be completed before attempting to move into an area. Go to the area, drive around and talk to people.

Why is eminent domain a concern for existing business owners?

Current owners may be concerned with new developers coming in and working through the system to find ways to obtain the land for private development.

Local government and zoning ordinances can be used by current owners to protect against private developers obtaining their land. Local ordinances can have their own definition of economic development zones that better suit the community. Specific areas can be determined as eminent domain zones through the comprehensive plan to encourage eminent domain in appropriate areas and discourage it in other areas.

City and local governments may ‘grandfather’ existing businesses to provide a greater level of protection. Government can justify such actions by stating that the purpose of eminent domain within their land development planning is to solve problems.

What is the appeals process if local government determines a business’s property would be better utilized for public use?

Under the new statutes, if the government would like to take your property to give to another private business, it is required to give you prior notice and give you a good faith offer. A business owner can reject the offer and go to court to challenge the determination. Typically, it is argued in court that the new use of the land will not fit the definitions of public use. If a business owner is successful, he or she gets to keep the land and local government is required to pay any attorney fees.

LARRY VANORE is a director at Sommer Barnard PC. Reach him at lvanore@sommerbarnard.com.