What is Expropriation?

Expropriation is like striking a deal to buy something that wasn’t necessarily for sale…

Suppose that the government wanted to purchase land that wasn’t on the market, but is key to completing a project for a public service. The owner may not really want to sell, but the government decided the value of the project to the public is more important than the current ownership. In exchange for claiming the property, the government pays the owner for their property.

The purpose of expropriation is to allow the government the ability to force the sale of private property when there is a legitimate public need. Federal, state, and local governments have the power of expropriation.

Most often, the government uses expropriation for infrastructure purposes. Common examples include roads, railways, public utilities, parks, schools, or public health buildings.

It might be the case that the government wants to build a new road, but the property they want to use is privately owned. They could use expropriation to force the property owners to sell the land for them. The owner doesn’t have to agree to the sale. In fact, there have been many cases of people who sue the government as a result of expropriation, sometimes successfully and sometimes not.

The government doesn’t need the owner’s permission to proceed with expropriation, but they do have to pay for the property. The Fifth Amendment includes a clause that says governments cannot take land for public use without just compensation. In most cases, “just compensation” is considered to be the fair market value of the property.

Expropriation is not the same as confiscation, in which the government takes an individual’s private property without consent or compensation.

Constitutionally, the government can’t confiscate property for public use, but they can take it during a criminal proceeding where the property owner is the defendant — This process is known as asset forfeiture.

The concept of expropriation (aka eminent domain) dates back to 1876 when the Supreme Court first took up the issue in the case Kohl v. the United States. Kohl sued the government for using his land in Ohio for public purposes.

The Court ruled in favor of the government, with Justice William Strong stating that the authority of the federal government to appropriate property for public uses was “essential to its independent existence and perpetuity.”

The framers of the U.S. Constitution included a stipulation that private property couldn’t be taken for public use without just compensation. This clause suggests that if the price was right, they believed it was acceptable for the government to take property for public use.

Since that first Supreme Court case nearly 150 years ago, the Court has continued to rule in favor of the government’s right to expropriate land for necessary public use. Most often, expropriation has occurred for infrastructure projects such as roads and bridges, public utilities, and public health centers, among other purposes. There have also been several instances of the government using expropriation to set aside public space for parkland.

When a government decides to take someone else’s property, the first step is condemnation. In this part of the process, the government declares that the property has a legitimate public use and that they intend to purchase it.

Next, the government organizes an appraisal. Since the Constitution requires that the owner receives just compensation, an appraisal is required to figure out the fair market value.

After the appraisal, the government makes an offer to the property owner based on the appraised value. At this point, there might be room for negotiation. The property owner could accept the offered amount, or they could counter with a higher number.

Regardless of the price that the government offers, the property owner can file a lawsuit to contest the sale. They might do this because they don’t feel like the offer that the government makes qualifies as just compensation. It could also be that they don’t believe there’s a legitimate public benefit for the expropriation.

Individuals can contest the expropriation of their property, but the results of historical rulings have been mixed. In many of these cases, courts (including the U.S. Supreme Court) have upheld the government’s right to force the sale of private property for the public good.

A well-known case in Connecticut involved a contentious lawsuit that went all the way to the Supreme Court. In 1998, a large pharmaceutical company announced plans to build a research facility in the city of New London, Connecticut — a town which had been in economic decline. The neighborhood chosen for the facility was a residential one where people still lived.

The city decided to use the government’s powers of expropriation to force the sale of the land so that the pharmaceutical corporation could build its facility. Most of the homeowners agreed to the deal, but a handful did not.

They claimed that the city’s use of eminent domain was not in keeping with its intended purpose, given that they were expropriating the property to sell to a private company rather than for public use.

The case made its way through the state trial court and the Connecticut Supreme Court before it finally landed in the U.S. Supreme Court. The Court ruled that because the facility would provide economic development to the city, there was a legitimate public benefit.

Expropriation laws vary in different parts of the world. Many other countries, including the United Kingdom, Canada, Australia, and New Zealand, have similar provisions to the United States that allow the governments to expropriate land for the sale of private property for the public good.

The issue has also been taken up in international human rights courts. Those courts have upheld the property rights of owners insofar as they have enforced the idea that property owners should be fairly compensated for their property.

The laws of the European Court of Human Rights apply to those 47 countries states that are members of the Council of Europe, who oversee the Court.

The Court has held that all people have the right to maintain their property. But, similar to court rulings in the United States, they have also upheld that in cases of significant public interest, the government has to compensate the property owner justly.

In countries who don’t fall under the jurisdiction of the human rights court, the international expropriation risk might be higher. The risk of expropriation is also an international concern in cases where governments have a property in another country as a result of foreign investment in natural resources or some other purpose. In that case, the country making the investment elsewhere wants to ensure the host country won’t make an effort to seize the property.

The risk of expropriation on an international scale is higher in many Middle Eastern, African, and Latin American countries, and generally lowest in the United States and Western European countries.

Expropriation can be classified as either direct or indirect. Direct expropriation refers to cases where the government takes the property and transfers ownership away from the current owner. This is the most common type of expropriation, where the government forces the sale of private property for public use.

Indirect expropriation occurs when the government deprives the property owners of their ability to use the property without entirely taking ownership of it. This is more common in indirect expropriation, and could refer to an example where an increase in regulation prevents a foreign government or corporation from being able to use their asset.

Treaties currently in place allow a country to challenge the legitimacy of another country’s actions in the case of indirect expropriation. Those countries can still use direct expropriation, but just like in the United States, existing treaties require them to compensate the owner.

If the government has used its power of expropriation to force the sale of your private property, you’ll have to relocate. Depending on the type of real estate, there could be even more significant implications than if it’s just a single-family home.

Suppose that an apartment building is in a space where the state government wants to build a highway. They use eminent domain to seize the property, providing just compensation to the building’s owner.

Unfortunately, this has enormous implications for the tenants of the building as well. Not only are they forced to relocate from the property, they also don’t receive any compensation from the government for their troubles or moving expenses.