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Ohio Law Says Private Property Sometimes Can Be Taken for Economic Development


Q: What is eminent domain? 
A: 
Eminent domain is the power of the government to acquire private real property from its owner--even over the owner's objection. The exercise of eminent domain (sometimes called a “taking”) must be necessary for a public purpose. Frequently, eminent domain is used by a governmental entity or agency (such as the Ohio Department of Transportation) to acquire property for  projects like expanding roads, installing sewers, or other similar public projects. But sometimes a governmental entity (often a city) can exercise eminent domain to promote economic development. This use of eminent domain has been generally disfavored by the public, perhaps because of a belief that the government can take private property on a whim. HOwever, Ohio law imposes specific restrictions on the government’s power to take private property when doing so to promote economic development.

Q: What is economic development?
A: Economic development can be described as activity that seeks to improve the economic well-being and quality of life for a community by creating jobs and bringing new opportunities.

Q: How can economic development be considered a public purpose when the property is sold to a developer or other private party?
A: 
For more than 50 years, Ohio law considered the promotion of economic development alone to be a public purpose warranting the exercise of eminent domain. But the law changed in 2007 to ensure that private property cannot be taken on the basis of economic development alone. Instead, the property involved must be deemed “blighted.” This change ensured that the public purpose for taking property on the basis of economic development is tied to the elimination of blight and the redevelopment of property for the public's benefit. 

Q: What is “blight”?
A: Under Ohio law, a property can be considered “blighted” if it is unsafe for human habitation or use, poses a direct threat to public health or safety, or has unpaid taxes or assessments that exceed the fair value of the land. If an entire area is targeted to be taken through eminent domain, at least 70 percent of that area must be deemed blighted. 

Q: Who decides that a property is blighted?
A: 
Before property can be taken based on “blight,” the government entity seeking to take the property must approve a comprehensive development plan that describes the public need for the property. Then, the city council (or other appropriate legislative body) must review the plan and ultimately determine whether blight exists and whether eminent domain is appropriate. The comprehensive plan must be publicly financed to prevent an interested party, such as the developer, from paying for it.

Q: Is there an an example of where eminent domain is directly related to economic development?
A: 
Imagine a four-block square near a city's downtown that used to be a vibrant residential and commercial area 50 years ago, but is now considered to be rundown. Vacant houses dot the area, a few of the businesses have boarded-up windows, and many of the buildings are covered in graffiti. City residents complain about the area and wish that it could be restored to benefit, rather than burden, the city's resources. A developer comes along with a vision to transform the area into an old fashioned city-square development, and finds the four-block area to be the perfect location for it. The city agrees that the new construction would revitalize the area, increase the property tax base, and bring new jobs. The city then negotiates with each property owner to buy up  the businesses and homes with the intent of ultimately selling all of the property to the developer. However, some businesses and a few residential owners don’t want to sell. Now the city must decide whether the property owned by the “hold-outs” can be taken by eminent domain for the project. To do so, the area or specific property must meet the law's criteria for blight.

Q: What happens if the city decides blight exists and eminent domain can be imposed?
A: 
At least 30 days before filing an eminent domain action, the city must notify the owner of its intent to acquire the property and must make a “good faith offer” to buy the property based on a recent appraisal. If the parties cannot agree on a price, the city may ask the court to order the property to be taken. In court, the city must establish that either the property is blighted or that the property is located in a blighted area by a “preponderance of the evidence” (meaning it is more probable than not that the property or area is blighted). 

Q: Can an owner get paid for property taken by eminent domain even if he has let his property fall into “blight”?
A: 
Yes, every owner of property taken by eminent domain is entitled to receive “just compensation” for his or her property. Just compensation means “fair market value,” the price that a willing owner would voluntarily sell to a willing buyer in the open market. Property owners also may be entitled to certain costs associated with the taking, such as relocation expenses, goodwill payments and/or economic damages for a business that must relocate.

5/15/2013

Law You Can Use is a consumer legal information column provided by the Ohio State Bar Association. This article was originally prepared by Akron attorney Barbara A. Sanchez. It was updated by attorney Christopher L. Ingram of the Columbus office of Vorys, Sater, Seymour and Pease LLP.

Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

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