As communities expand, so do eminent domain cases – and the trend is causing big problems for small businesses.
Simply put, eminent domain is the right of a government to require the compulsory sale, or in extreme cases expropriation, of land by a property owner so public officials can put that private property to public use.
It’s supposed to be for the common good. It’s used so governments can build roads or expand its services to a community. But in many cases, individual property owners – and business owners – are forced out of their locations, which can cause irreparable harm.
In Pennsylvania, for example, the owner of a diner for more than 35 years is now facing extinction, as the state plans to build a highway through his property. “I told them I’m begging to let me keep what I have,” the owner, Bill Katsifis, told Penn Live.
In neighboring New Jersey, a borough plans to use eminent domain to punt a popular local pizzeria in order to make room for a future supermarket chain. The pizza owner, as you can imagine, is not happy. “I’m confused how they would make the corner eminent domain; that’s what we are trying to understand,” he told NJ Advance Media. “We’re part of the community. They can’t just throw us out in the street.”
Sometimes it’s not even being forced to move that’s the problem.
A third-generation Mexican restaurant in San Antonio, Texas, is facing months of sewage smells and potential spills right outside their eatery as a local water utility plans to put a sewage pump station in front of it. “It will just drive people away just from the stench of it,” the owner, who is contesting the project, told the San Antonio Report. “How come he [the sewage company’s chief executive] didn’t choose McDonald’s? It’s too strong of a company. I’m a small man.”
According to an investigation by the Texas Tribune and ProPublica, it seems that Texas, because of its growth, has been ground zero for eminent domain cases – and abuses over the past decade. The investigation found that “homeland security cut unfair real estate deals, secretly waived legal safeguards for property owners, and ultimately abused the government’s extraordinary power to take land from private citizens”.
These abuses included circumventing laws, giving priority to wealthier property owners and haphazardly condemning land that caused aggravation and costly lawsuits by smaller property owners.
In some cases, big businesses have used eminent domain to further their interests. In Belfast, Maine, for example, opponents are battling a recent town-council vote to use eminent domain to allow Nordic Aquafarms, a Norwegian-owned salmon farm, to take over a disputed mudflat. The US supreme court is allowing an energy company to use eminent domain to take land away from the state of New Jersey in order to build a pipeline.
Trust me when I say that you’re not going to see small businesses win these kinds of battles.
In most cases, business owners that are forced to leave a property under a typical eminent domain scenario are offered “fair value” for their property. That amount is supposed to be determined by an independent appraiser. I’m sure that in some cases the appraised value exceeds the value that a business owner would receive. But there is always an intangible. For many, their businesses are not just their livelihoods. It’s their history, their family, their life’s work. Imagine how you would feel if you were forced to sell or even move your business against your will. It can’t be easy. But then again, that’s the price some have to pay so that others can progress.
So what to do? The answer is to be proactive, not reactive. I’ve found that eminent domain claims by a government usually don’t come completely out of the blue. There is oftentimes some advance warning and time allowed to make alternative plans. Many of the clients I have who have faced this situation have also known about the risk for quite some time. You can fight if you’ve got the resources, but in the majority of cases the government will win, so at best putting up a fight can buy more time. But in the end, if you believe your business is at risk of this you’ve got to be ready. You must have a plan, you have to give yourself time to adapt. You must be prepared to make a change.