Eminent Domain FAQ

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Eminent Domain FAQs about Eminent Domain Condemnation Law.

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A) The Valuation Standard

When property is taken under the power of eminent domain, the property owner is entitled to “just compensation” at its “highest and best use”. This is the fair market value of the acquired property taking into account all its reasonable development potential irrespective of whether the property is being used for that purpose.

In re Town of Islip [Mascioli], 49 N.Y.2d 354, 426 N.Y.S.2d 220 (1980); Keator v. State, 23 N.Y.2d 337, 296 N.Y.S.2d 767 (1968).

Highest and best use consists of four elements which are a combination of physical practicality, legality, feasibility and valuation:

  1. "[Physical Practicality] Physically possible, based upon topography, land area and site configuration;
  2. [Legally Possible] Legally permissible, in compliance with zoning, deed restrictions or other constraints;
  3. [Feasibility] Economically feasible and fulfilling an identifiable demand in the market, and
  4. [Valuation] Maximally productive thus, resulting in the highest present land value.”
B) Highest and Best Use is not “As Is” Valuation

Highest and best use is not “as is”. It is the value of the property taking into account all the potentialities of the property, including the likelihood of obtaining approvals for rezoning, variances or special exception to realize the full development potential under the highest and best use.

The technical elements of highest and best use overlap somewhat. For example, the “practicality” and “feasibility” aspects – certainly in common usage (see Webster’s Third New International Dictionary, 1993 Ed.) and even in their technical appraisal definition. Appraisal of Real Estate, 12th Ed., pps.313-314.

That the literal zoning or building regulations may not permit a certain use, or the extent of a permitted use without a variance or special exception, does not preclude imputing value to the market potential of obtaining approval of that use. An appraiser (and the Court) in determining just compensation may rely on (and adjust accordingly) comparables for valuation of that potential use recognizing the enhancement for the probability of obtaining approval of that enhancement. In re Town of Islip, supra. See also, Matter of City of New York [Jomar Real Estate Corp.], 94 A.D.2d 724, 462 N.Y.S.2d 260 (2d Dept. 1983), aff’d, 61 N.Y.2d 843, 473 N.Y.S.2d 963 (1984). See also, Matter of City of New York [Rudnick], 25 N.Y.2d 146, 303 N.Y.S.2d 47 (1969).