How Government Land Seizures Work for Landowners

Property rights and related impacts of government land seizure

Reviewed by Michael J Boyle

Property ownership may represent the traditional version of the American Dream for many but it’s not always a reality. The homeownership rate was 65.6% as of Q3 2024, according to United States Census Bureau data. A sizable chunk of the population doesn’t own a home.

Those who are fortunate enough to own land or property could potentially see some or all of it seized through a process known as eminent domain. Federal law allows the government to claim private property for public use on the condition that suitable compensation is provided to its owner.

Key Takeaways

• Eminent domain entitles the government to take land for public use.
• Property owners are rarely successful in stopping governments from taking their property under eminent domain.
• The U.S. Constitution does give property owners the right to “just compensation,” however.
• Property owners can dispute the price offered by the government and try to negotiate a better deal.

How Governments Can Seize Private Property

Eminent domain has a lengthy history in the U.S. as a means of allowing the government to claim private property for public use. Some of the earliest instances of eminent domain being exercised include the use of private land to construct public buildings, the facilitation of water supply to populated areas, and the manufacturing and production of war materials.

The eminent domain process begins with the government identifying private property that it may be necessary to seize. Maybe there are plans to expand a publicly maintained interstate that will take the new road through a plot of farmland you own. The government will then work with appraisers to determine an appropriate value for the piece of land or property in question.

Important

Eminent domain isn’t exclusive to federal government use. State governments can also use it to seize private property for public use.

What Eminent Domain Means for Landowners

Property rights are theoretical and legal ownership of resources and how those resources can be used. The term property rights is used in the context of land or buildings with regard to eminent domain. Someone who has property rights can do what they like with the property with regard to how it’s used, whether for business, residential, recreational, or investment purposes.

The government doesn’t have free rein to take someone’s property. The Fifth Amendment to the Constitution states that “nor shall private property be taken for public use, without just compensation.”

Just compensation means that a property can’t be seized unless the individual or entity that holds property rights to it is given full and adequate compensation in return.

The eminent domain process involves an appraisal of the property. The government will make an offer to the property owner to purchase it when the appraisal has been determined. They receive payment and the government assumes ownership of the land if the property owner accepts the offer. The process continues with condemnation proceedings if they choose not to accept. The property owner may attempt to do one of two things at this stage:

• Secure an independent valuation of the property if they believe the price offered by the government is unfair
• Protest the seizure because they disagree with what the property is intended to be used for

The government must be able to prove that the proposed use is public, that the public interest requires it, and that the property is necessary for that purpose if the property owner contests the grounds for the seizure. It’s typically very difficult to stop an eminent domain seizure assuming these conditions are met.

Important

The compensation received through an eminent domain proceeding is subject to the same tax treatment as the proceeds of any other sale of real estate.

Impact of Eminent Domain on Non-Landowners

You might assume that eminent domain is something you need never worry about if you don’t own land or property but you could be affected if you rent a property for residential or business purposes, however.

Maybe you rent an apartment in a building that’s owned privately. The government decides to seize the building and turn it into public housing as part of an urban renewal project. You would have to find a new place to live and it could also introduce sticky financial and legal issues if your lease agreement guarantees you some form of compensation due to an eminent domain seizure.

You may be able to recover your security deposit and any advance payments made against rent if your lease is terminated because eminent domain is being exercised. You may also be eligible to receive compensation for any costs related to being displaced as a result of the seizure. Talking to an attorney can help you determine your rights and entitlements.

Be sure to get a copy of your lease to review your tenant rights and eligibility for compensation if you’re notified by your landlord that an eminent domain proceeding has begun.

Native Americans and Land Seizures

Some of the earliest cases of eminent domain involved the seizure of tribal lands held by Native Americans beginning in the 1700s and continuing throughout the 1800s. Some of these seizures were conducted through military force and others involved treaty agreements.

One of the most well-known eminent domain events was the forcible removal and relocation of members of the Choctaw, Chickasaw, Creek, Seminole, and Cherokee tribes from the southeast United States in the mid-1800s to the area that is now Oklahoma.

The U.S. government agreed to pay the tribe $5 million along with compensation for houses and property as part of a treaty agreement. The terms were rejected by the Cherokee Nation who refused to leave their lands. Members of the tribe were rounded up under order by President Martin Van Buren and were forced to walk cross-country. This “Trail of Tears” resulted in the deaths of approximately 25% of the tribe.

There are now specific laws in place governing the use of eminent domain for the seizure of tribal lands. Federal law allows state governments to take allotments held by the United States in trust for individual tribal citizens when necessary for public use. States can claim these allotments if they’re necessary to allow for a utility easement.

States cannot claim tribal lands outright under eminent domain, however. Tribal governments also hold the power of eminent domain to seize private property.

How Government-Sponsored Land Appraisals Work

The appraisal process is important for determining that a property owner is provided with fair compensation following an eminent domain seizure. Government agencies must follow specific appraisal standards and guidelines when determining a property’s value. The federal government’s appraisal process is very detailed. It requires that appraisers determine:

• What the property is intended to be used for
• Its estimated market value
• When that value should take effect

Appraisers will review the details of the property in terms of its dimensions, any improvements made to it, the condition of buildings located on the property, and its geographic location. They’ll also inspect the property to determine how things like soil conditions, topography, road access, and water access may affect its value.

Important

Choose an appraiser who specializes in eminent domain versus general appraisals when seeking an independent appraisal as a property owner.

Sales history, use history, rental history, and zoning requirements are taken into account. Government appraisers will also conduct a market analysis to determine what similar properties are selling for in the area, similar to the appraisal process when someone is buying a home. The appraiser will prepare their final valuation report when all of the relevant information has been gathered. This is what the government uses to determine just compensation.

What Is Eminent Domain?

Eminent domain is the government’s right to seize private property for public use. The Fifth Amendment to the Constitution specifies that eminent domain can only be carried out if property owners are provided with fair and just compensation to make up for the property they’re losing.

Can the Government Truly Seize Private Land?

Yes, the federal government and state governments have the authority to seize private land. Tribal governments also possess eminent domain powers. State governments can’t exercise eminent domain in the case of tribal lands but they may lay claim to certain allotments held by the United States.

Property owners can challenge land seizures but it’s difficult to stop the process after it’s begun.

What Are the Potential Impacts of Property Seizures?

Having part or all of your property seized can result in tax implications if you’re required to pay capital gains tax on the compensation you receive. You may have to pay compensation to tenants if you rented out property that’s seized through eminent domain. You may be displaced from your home if you’re a renter and this could affect you financially if you’re unable to find replacement housing at a similar price.

Eminent domain can be abused if a property is seized without compensation being provided.

The Bottom Line

Eminent domain is a right that can be exercised by the federal government as well as state and tribal governments. The Biden administration seized private land along the Texas-Mexico border in mid-2021, ostensibly for the construction of a border wall.

Water supply shortages in the West and other parts of the country have brought up discussions about eminent domain. Property owners do have the right to receive compensation for property seizures in most cases but there’s very little they can do to halt the process. Understanding how eminent domain can impact you as a landowner or a renter is critical for protecting your rights.