Eminent Domain: Can I Get Paid if the Government

Under some circumstances, a business owner CAN receive payment when land is taken and the business can no longer operate at that location. The amount of compensation might be woefully insufficient, but at least SOME compensation is available. Here is what you should know.

The government (and some private third parties like utility companies) can take private property for public use through the legal power of eminent domain. The proceedings are generally called "condemnation" proceedings. Sometimes, when private land is taken, a business is threatened with destruction since the business might be required to vacate the land. Technically, the government has not "taken" the business, but has "taken" the land. But, if a business has to relocate, the difference is unimportant to the business owner whose livelihood is endangered.

When the government takes private land, by law and under constitutional requirements, the government must pay "just compensation" for the land taken. Just compensation is generally defined as the fair market value of the land. The federal government can take land in this manner as well as the State of North Carolina and its various subdivisions like local and county governments and the North Carolina Department of Transportation.

With respect to just compensation, the legal rule is that loss of business and lost profits from a business that is destroyed because of the taking are NOT part of the just compensation that must be paid. That is because the value of a business does not generally relate to the land, but rather to issues like the market, capitalization, etc.

But, businesses CAN receive compensation through various statutes that provide money to reimburse for relocation expenses. To be eligible for relocation expenses, a business must meet these requirements:

• Be lawfully occupying the land in question -- that is, not squatting or holding over after the expiration of a lease
• Be an ongoing business at the time of the taking of the land in question
• Be required to vacate the land because of the taking -- that is, not for other reasons like the natural termination of a lease
• Be expected to continue operations at a new location
• Be able to find a new location to restart operations

If the land in question was taken by the State of North Carolina, the maximum amount of relocation assistance is from $12,500 to about $15-20,000. Under the federal statute, the amount could be as high as $40,000. The relevant statute in North Carolina is the NC Uniform Relocation Assistance and Real Property Acquisition Policies Act. See NC General Stat. § 133-5 et seq. The actual amount will depend on your actual expenses and the categories of expenses that can be submitted to the State. The categories are these:

• Actual reasonable moving expenses -- these could be a few thousand dollars
• Actual reasonable expenses necessary to reestablish the business or find a replacement business, but this capped at $10,000 -- this also includes the cost of any "direct losses of tangible personal property" resulting from the moving or discontinuing a business
• Actual reasonable expenses in searching for a replacement business location -- this is capped at $2,500

Some examples of "necessary" relocation and reestablishment expenses might include:

• New utility connection costs
• Repair costs for the new location -- to, for example, bring the new location up to code
• Costs of modifications or remodeling
• Costs of signage
• Costs related to advertising and marketing for the new location
• Costs associated with increased operational costs like higher utilities, taxes, etc.
• And more

If the federal government has taken the land in question, the federal relocation assistance law is more generous. See Federal Uniform Relocation Assistance Act -- 42 U.S.C. § 4622. The federal law, however, only applies to "small businesses" which are defined as businesses with less than 500 at the displaced location. The same reimbursement categories are available which are:

• Actual reasonable moving expenses -- no cap
• Actual reasonable reestablishment expenses -- $25,000 cap
• Actual reasonable expenses in searching for a replacement business or replacement location -- no cap

The federal statute has a lump sum payment option which can be no more than $40,000.

For more information, and to schedule a confidential consultation with experienced and dedicated eminent domain and condemnation attorneys in Charlotte, contact Arnold & Smith, PLLC. Use our “Contact” page or give us a call at 704-370-2828. We handle land use, zoning, and condemnation legal matters in federal court, in Mecklenburg County and elsewhere in North Carolina. We have offices in Charlotte, Lake Norman, and Union County.