If you are like most people, you are aware of the term “eminent domain,” but you may not fully understand the concept and what is involved in the process. There can be confusion about what constitutes appropriate compensation to a Florida property owner whose property is taken.
What is eminent domain?
The eminent domain process is constitutionally authorized and permits a governmental body to take private property for public use provided the owner is provided with “just compensation.”
Defining just compensation
Defining just compensation in an eminent domain case is often the most heated and disputed matter between the government and property owner. The amount of money paid to a property owner typically depends on the fair market value of the real estate at the time of the taking.
There are three commonly utilized methods of property valuation applied in an eminent domain case:
- Market approach
- Income approach
- Cost approach
At its essence, the market approach involves a consideration of comparable property sales to project or ascertain the fair market value of the subject real estate. When revenue-generating real estate is subject to eminent domain, that valuation of the property involves consideration of projected future income.
The cost approach is used when the market and income alternatives are inadequate. This might be applicable if there is something like a unique structure on the premises that can only be “replaced”. In this scenario, the property initially is valued as if vacant. On top of that dollar amount, an additional sum is added based on the anticipated cost to replicate the unique component of the premises.