Be sure to check this out. The Practical Real Estate Lawyer has published an article by colleague Matthew Ackerman (who has since become a Michigan Court of Appeals judge).
In “The Pitfalls of Objectively Measured Just Compensation: When Market Value Isn’t Enough” (pdf here), he writes about the ways that “just compensation” isn’t truly just. Those of you who have been around even a short time know how this works (or doesn’t). Market value as the measure when, by definition, eminent domain isn’t a free market transaction. The refusal to include fees and costs in the concept of just compensation (indemnity only for the property, not the property owner). Lack of relocation and business losses.
He also suggests some ways to deal with this. Here’s his summary of the piece:
This article explains why a subjective approach to just compensation would lead to more just outcomes for property owners, along with why implementing such an approach would be impractical. It then discusses ways some jurisdictions compensate property owners beyond the market value of their property to capture some of the intangible losses and make property owners closer to whole. Following that discussion, the article summarizes some of the more creative reforms academics have proposed to target this compensation conundrum.
The article concludes by suggesting that states pay displaced homeowners a multiple of fair market value based on how long the owners have occupied the home. That multiplier—based on the average difference between property owners’ subjective value and fair market value—would, on average, fairly compensate property owners and also incentivize condemnors to take property only when the value of the public project exceeds the owners’ subjective losses.
Read it.