Actual Damages in Real Estate
Actual damages refer to the financial compensation awarded to property owners for losses incurred directly due to the condemnation of their private property. When a government entity exercises eminent domain to take private property for public use, the property owner is entitled to just compensation for the actual value of the property taken. Actual damages solely focus on the tangible, direct losses and exclude any indirect, severance, or consequential damages.
Definition
Real estate actual damages are:
- The market value of the property taken: This reflects what the property would sell for under usual conditions and is assessed at the time of taking.
- Direct losses: These include any costs directly attributable to the loss and not covered under other damage categories.
Example
When the city took the Smiths’ land for a road right-of-way, the court awarded them:
- $100,000 for actual damages: This represents the market value of the land before the taking.
- $50,000 for diminished value: This is an additional amount awarded for the impact on the remaining portion of the land, commonly referred to as severance damages.
In this example, the Smiths received compensation not just for the exact portion of land taken but also for its devalued impact on their remaining property.
Frequently Asked Questions (FAQs)
Q: What do actual damages not cover? A: Actual damages do not cover compensation for indirect, severance, or consequential damages. They only account for real, direct losses.
Q: How is the market value determined in actual damages? A: The market value is typically determined by an appraisal, which evaluates what the property would sell for under normal market conditions at the time of taking.
Q: Can actual damages be negotiated between the property owner and the condemning authority? A: Yes, property owners and the condemning authority can negotiate the compensation. If an agreement cannot be reached, the issue may be resolved in court.
Q: Are business-related losses included in actual damages? A: No, business-related losses are usually not included in actual damages. These losses may fall under consequential damages, which are separate from the actual market value of the property.
Related Terms
Condemnation: The legal process by which government or another entity with the power of eminent domain takes private property for public use, subject to just compensation.
Eminent Domain: The right of a government to take private property for public use, with compensation to the owner.
Just Compensation: The requirement under the Fifth Amendment of the U.S. Constitution for the government to compensate property owners fairly when it takes private property for public use.
Severance Damages: Compensation awarded when only part of a property is taken, diminishing the value of the remaining property.
Consequential Damages: Damages that are not a direct result of an action but occur as a secondary consequence of the action.
Online Resources
- Investopedia: Just Compensation
- Nolo: Eminent Domain
- Cornell Law School: Legal Information Institute - Eminent Domain
References
- “Principles of Condemnation Law” by Julius L. Sackman
- “Eminent Domain: A Handbook of Condemnation Law” by William Scheiderich
- “Modern Real Estate Practice” by Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle
Suggested Books for Further Studies
- “Eminent Domain: A Comparative Perspective” by Iljoong Kim, Hojun Lee, Ilya Somin
- “The Law of Eminent Domain: Fifty-State Survey” by William Scheiderich, Editors of the Eminent Domain and Litigation Group.
- “A Practical Guide to Real Estate Practice” by Joshua Stein
