What constitutes “just compensation”?
Assuming that there is a taking and that the taking is for a public purpose, the only question that remains is how much the government has to pay the property owner to compensate for the taking. The general rule is that “just compensation” means that the government must pay fair market value for the property that was taken. Fair market value is not the same thing as the value that the owner places on the property or the amount that the property is actually worth to the owner.For example:
1) Bob’s ancestors have lived in his house for four generations and Bob considers his house to be priceless because of its sentimental value. On the open market, Bob’s house would command about $150,000. If the government condemns Bob’s house, they will only have to pay Bob $150,000, regardless of the fact that Bob would not agree to sell his house even for $1,500,000.
2) Jane’s house is worth $250,000 on the open market. However, Jane runs a business that produces revenue of $500,000 per year. For whatever reason, Jane cannot transfer her business to a different location. Nevertheless, if the government takes the house, its liability will be limited to $250,000.
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