The US government must pay just compensation, or fair market value, to individuals if their property is seized for public use under the Fifth Amendment. This does not apply to property seized for tax evasion or criminal activity. The eminent domain doctrine allows the government to take property for public good, but compensation must be paid. In some cases, loss of income may also be compensated.
Just compensation refers to the monetary payments the US government must make to individuals if the government takes or seizes their property. It is mandated by the Fifth Amendment to the US Constitution. The just compensation rules are designed to ensure that no individual is unjustly deprived of her property without having been paid a fair price.
The Fifth Amendment, among other things, states that “neither private property may be used for public use, without just compensation.” Therefore, this is an inalienable right in the United States and in any situation where the government seizes property for public use, compensation must be paid. This rule does not apply if a government seizes property for tax evasion, property paid for with money from illegal criminal activity, or property used to commit a crime.
Instead, it only applies if the government takes the property to use it for the public good. The government has the right to take property for such purposes according to the eminent domain doctrine. For example, if the US government needs to build a highway and needs to take someone’s land to do it, the government has the legal right to take that land for the public good. This eminent domain doctrine is necessary and important because it is sometimes in everyone’s interest if the government is able to do its job by taking a given piece of land, even without the owner’s permission.
When the government takes land, however, it would be grossly unfair if the person were not compensated. This Fifth Amendment protection guarantees that will never happen. In general, courts have interpreted “fair price” as the fair market value of a given piece of property. This is determined on a case-by-case basis in light of the price a reasonable buyer would pay to acquire the property on the open market. An independent appraiser is typically used to determine the fair market price.
In some rare cases, another measure other than the actual value of the property is used to determine just compensation. For example, if the government seizes land on which a business is located, the government can pay for the loss of income as a result of the seizure until the business is able to find a new parcel of land on which to operate. The reason this alternative measure of just compensation may be used is because the courts recognize that there is sometimes additional value to owning a piece of property over and above the simple value of the land and property.
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