North Carolina Eminent Domain Takings: What Happens if I Litigate 'Just Compensation' and the Court Says the Government Overpaid?

In short, if you litigate the question of "just compensation" and the court determines that the government has overpaid, the government is entitled to a refund. If you have already withdrawn the money that was deposited with the court, then the government will be entitled to a personal judgment against you for the overpayment. Here is some quick background information.

In North Carolina, the government can take private land for public use as long as the government pays "just compensation." This is generally defined as the fair market value. Various governmental units and agencies have the power of eminent domain here in North Carolina. This includes local governments and municipalities as well as the State. Further, by statute, some private entities (like utilities and railroad companies) have been delegated the power of eminent domain. So, they too, can take private land for public use.

In general, those who are taking private land for public use -- called "condemnors" -- must pay over to the local Superior Court the amount of "just compensation" that they believe is the fair market value for the land being taken. See, for example, N.C. Gen. Stat., § 136-103(d) (involving condemnation proceedings by the NC Department of Transportation), § 40A-28(d) and § 40A-41.

This is the most often used procedure, although some condemnors either must or choose to wait until a court officially determines the amount of "just compensation" before making payment. For example, assume that the local city or town is using eminent domain to take land for a road or to construct a government building. Before beginning, the local municipality has the property appraised and believes the value is $200,000. Under the typical procedures, when the municipality begins the eminent domain process of taking, it must deposit $200,000 with the local county court.

Under North Carolina statutes, the person whose land has been taken has a right to obtain the money deposited without giving up the right to contest the amount that was paid. See, for example, N.C. Gen. Stat., § 136-105 and § 40A-44. How is this done? The process involves asking the assigned judge to turn over all or part of the money deposited. A judge can order all of the money turned over or withhold some of the money if there are encumbrances, liens, rents, taxes, assessments, insurance, or other types of claims against the funds deposited. The court will want to ensure that there is sufficient money still on deposit so that all claimants to the money can be paid.

As noted, landowners can litigate the question of valuation. That is, in our example, maybe the landowner thinks the property has a fair market value of $300,000. Under those circumstances, the landowner should insist upon a trial before the assigned judge and present evidence of the proper fair market value.

But, if you want to litigate the issue of valuation, it is essential to seek the legal advice and counsel of experienced North Carolina eminent domain attorneys like the ones at Arnold & Smith, PLLC. This is because litigation is complex and requires an understanding of the law and what is needed to succeed. Moreover, advice and counsel should be sought before attempting to take possession of the money deposited. Landowners should be aware that there is some legal risk if you begin to litigate the question of value and, at the same time, you withdraw the money deposited. This is because, by statute, if the court determines that the amount deposited by the government is too much, then the government is entitled to a refund. If too much money has been removed from the deposit, then the government has a right to a personal judgment against the person or persons that received the money from the deposit. See, e.g., N.C. Gen. Stat., § 136-121 and § 40A-56.

There are no reported cases in North Carolina, but the rule is the same in most states. Thus, Elpa Builders, Inc. v. State of New York, 196 AD 3d 541 (NY Appellate Div., 2nd Dept. 2021) provides a good example of what to avoid. In that case, there was a partial taking of real property. The State of New York deposited slightly over $300,000 as the "just compensation." The landowner took possession of the funds and began litigation claiming the land was worth more than $2 million. In the end, however, the court held the land worth about $282,000. Because the landowner had taken possession of the money deposited, the trial court issued a judgment against the landowner in favor of New York for the approximate $18,000 difference.

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.