North Carolina Business Condemnations: What You Should Know

Here in North Carolina, the state government, governmental agencies, local governments and some private parties have the power to take private land for public uses under what is called the power of eminent domain. To do so lawfully, the taking authority must pay "just compensation" for the land taken. This is defined as the fair market value of the land. Generally, the process of taking private land is called land "condemnation."

The power of eminent domain applies to ANY land, even land owned by businesses and corporations. When land owned by a business is taken, technically, it is not proper to call it a "business condemnation" since the government is not condemning the business -- only the land where the business operates. But since the business can no longer operate at that location, many times, the effect of condemning land owned by a business is to condemn the business. Many businesses can relocate and continue operating. But, as every business knows, a new location can severely impact revenues and profit. Indeed, some businesses are highly reliant on their location and associated foot and vehicular traffic. For some businesses, a forced relocation can result in the demise of the business.

Just as bad, the "just compensation" that is paid by the condemning authority does not cover loss of business income or lost profits. The fair market value that must be paid when private land is taken is the value of the LAND. Thus, courts in North Carolina have routinely and consistently held that the value of lost business and lost profits are NOT recoverable when business land is taken. The stated justification is that use of the power of eminent domain to take private land only requires payment of the value of the land. According to the legal justification, the value of a business is not based on the value of the land on which it operates, but on its business model, the talent of its owners, the supply and demand for the products/services, market forces and the like.

Note that there is a limited exception where business operations are directly related to the land in the form of rents. Examples would be a business operating a motel or a place of accommodation in exchange for rents. Rents have been traditionally associated with value that runs to the land. However, the value of rents cannot be a separate claim from the value of the land in calculating the just compensation. In other words, North Carolina courts will not allow a claim for, say, $100,000 in lost rents PLUS a claim for the value of the land at $500,000. The lost rents must be included in the calculation of the fair market value of the land.

Business fixtures and improvements that are attached to the land are not separately compensatable when the condemning authority takes private land owned by a business. However, those attached fixtures and improvements can be included when calculating the value of the land (since such are part of the land being taken).

Under North Carolina (and federal) law, there are some other forms of compensation available when a condemning authority takes land owned by a business that is forced to relocate. These are provided by a statute separate and apart from the power of eminent domain and are an attempt to cover relocation expenses. See NC Uniform Relocation Assistance and Real Property Acquisition Policies Act at NC General Stat. § 133-5 et seq.

In North Carolina, the amount that can be claimed for relocation expenses caps out at about $20,000. The actual amount is based on actual expenses incurred. Only "reasonable" expenses will be covered. The business owner submits proof of the expenses and, in general, receives reimbursement from the condemning authority. Reimbursement can be obtained for these types of relocation expenses:

• Actual reasonable moving expenses
• Actual reasonable expenses necessary to reestablish the business or find a replacement business capped at $10,000 -- expenses in this category can include utility connection costs, new signage, advertising and more
• Actual reasonable expenses in searching for a replacement business location capped at $2,500

For more information, and to schedule a confidential consultation with experienced and dedicated eminent domain and condemnation attorneys in Charlotte, contact Arnold & Smith, PLLC. Use our “Contact” page or give us a call at 704-370-2828. We handle land use, zoning and condemnation legal matters in federal court, in Mecklenburg County and elsewhere in North Carolina. We have offices in Charlotte, Lake Norman, and Union County.