Eminent Domain
By Richard R. Hammar, J.D., LL.M., CPA
© Copyright 1991, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m41
Eminent domain refers to the power of the government to take private property for a public purpose without the owner's consent. It often is referred to as condemnation. A property owner whose property is taken by a governmental exercise of eminent domain is entitled to compensation. Obviously, attempts to take church property by this process have generated controversy. The relatively few courts that have addressed this issue generally have concluded that church property is not immune from a proper exercise of eminent domain.1 However, they also have concluded that the government's power of eminent domain must be balanced against the interests of the church, and that in some cases the church will prevail. For example, the Colorado Supreme Court rejected an attempt by a municipal urban renewal authority to condemn a church building that served as “the mother church and fountainhead” of a religious sect.2 The court observed:
The first amendment protects freedom of religion which has its roots in the hearts and souls of the congregation, not in inanimate bricks and mortar. Yet, religious faith and tradition can invest certain structures and land sites with significance which deserves first amendment protection. We recognize that church property is private property which can be taken by eminent domain for paramount public use, just as religious conduct is subject to appropriate regulations for the public good. When regulating religious conduct, however, the state may be challenged to justify its infringement of the totally free exercise of religion. We hold that under these circumstances, the state may be so challenged to justify a use of its power of eminent domain. The [trial court] must weigh the plans and goals of the [city] as they bear on the particular land in question, against the right of the [church] to maintain a brick structure which the church claims is unique and does not conform to the general plan for development of the block or the area. . . .The only conclusion which we can draw is that we must balance the interests involved in the controversy before us and recognize that the state must show a substantial interest without a reasonable alternate means of accomplishment if the state is to be constitutionally allowed to take the birthplace of the [sect].3
The same court later rejected an attempt by a city to condemn the parking lot of a church that had been declared a historic landmark.4 The court emphasized that the trial court had
a duty to weigh and balance the competing interests, public and religious. Only after such a hearing and upon finding that there is a substantial public interest involved which cannot be accomplished through any other reasonable means, can the court proceed with the condemnation of [church] property.5
Assuming that the government has the authority, in a particular case, to take church property through the process of eminent domain, the fifth amendment to the United States Constitution requires that the church be given “just compensation” for its property. The United States Supreme Court has noted that “the fifth amendment provides `nor shall private property be taken for public use, without just compensation,' and applies to the states through the fourteenth amendment.”1 But what is “just compensation”? In many cases, cities and churches come to widely differing interpretations of this critical term. Most courts have rejected “fair market value” as the standard for computing just compensation. The United States Supreme Court has observed that just compensation means “the full and perfect equivalent in money of the property taken,” and, that “[w]here, for any reason, property has no market, resort must be had to other data to ascertain its value.”2
In a leading case, a California state appeals court was asked to determine the value of an old but ornately--decorated, 2,000--seat sanctuary that had been condemned by a city government for urban renewal purposes.3 The city's appraiser valued the church at $1 million, a figure obtained by reducing the replacement cost of the building by a “depreciation” factor of 75 percent. The appraiser used a 75 percent depreciation factor since the only other comparable church in the community had sold for little more than the value of the land on which it stood. The church's appraiser valued the church at $4.6 million, a figure obtained by reducing the replacement cost by a depreciation factor of 40 percent. The court agreed with the trial court's finding that a fair value of the property was $3 million. It observed:
The ultimate goal in any eminent domain proceeding is of course to determine constitutionally required “just compensation.” That compensation is to be measured by what the owner lost and not what the condemnor has gained. . . . Generally speaking, the most widely used and perhaps most easily applied concept is that of “fair market value.” But even that test, which is described as what a willing buyer would pay to a willing seller under circumstances totally free from external pressures, may not, in every case achieve a correct result . . . . The economic reality of course is that certain types of buildings such as churches are not, as such, regularly bought and sold in the commercial market and to ordinary buyers of real estate have no greater value than the use which can be made of the land free of the building. The constitutional mandate of just compensation, of course, would not be met if public agencies could thus exercise the power of eminent domain by simply paying for the value of the raw land when it is occupied by some special type of building. . . . Recognized alternatives to the market data approach to valuation are reproduction or replacement costs less depreciation or obsolescence. These methods, in reality, provide a more just and equitable approach in evaluating special use buildings such as churches.4
Similarly, another court has observed that
Where there is proof that there is no market value of property with a specialized use, such as a church . . . the general rule is that resort may be had to some other method of fixing the value of property. . . . Depending on the nature of the property, the authorities have supported different methods of determining value in these situations. Expert testimony as to reproduction of replacement cost, less depreciation, has been approved in many cases as competent foundation evidence to support an opinion as to valuation.5
A federal appeals court has noted that
In the case of nonprofit, religious or service properties, cost of replacement is regarded as cogent evidence of value although not in itself the only standard of compensation. But people do not go about buying and selling country churches. Such buildings have no established market values. Consideration must be given to the elements actually involved and resort had to any evidence available, to prove value, such as the use made of the property and the right to enjoy it.6
Occasionally, a church's property is “taken” by a city or governmental agency through a process known as “inverse condemnation.” This refers to some regulatory action, short of a formal condemnation proceeding, that has the effect of making a church's property of little or no value. The United States Supreme Court addressed this issue in an important ruling.7 In 1957, a Lutheran church in California purchased a 21--acre parcel of land in a canyon along the Mill Creek. The church constructed several buildings on the property, including a dining hall, two bunkhouses, a lodge, and a chapel, and used the improved property as a campgrounds known a “Lutherglen.” In 1977, a fire destroyed the forest upstream of the campgrounds, creating a serious flood hazard. A severe storm in 1978 flooded Lutherglen and destroyed its buildings. In response to the dangerous conditions in the area, the County of Los Angeles adopted a temporary ordinance prohibiting anyone from building any structure within a flood zone that included Lutherglen. The church thereafter sued the state of California, arguing that the state's prohibition of any further use of the campgrounds violated the fifth amendment to the United States Constitution, which specifies that “private property [shall not] be taken for public use, without just compensation.” The fifth amendment, argued the church, does not require that the government seize private property by condemnation. It can also be violated by governmental regulations that effectively deny a landowner the use of his land, even on a temporary basis. The California state courts rejected the church's contention, but the United States Supreme Court agreed that the county's ban on further development of the campgrounds amounted to a “regulatory taking” of the church's property without compensation in violation of the fifth amendment.
For related information on this topic see the following articles:Regulation of Charitable Solicitations
Limitations on Charitable Giving
Federal and State Securities Laws
Judicial Resolution of Church Disputes
The Civil Rights Restoration Act of 1987
Americans with Disabilities Act
Political Activities by Churches and Other Religious Organizations