In my last blog, I wrote about the shortcomings of compensating displaced property owners based on the ‘objective’ standard of the market value of their property. That standard ignores the owners’ ‘subjective’ losses, such as their sentimental attachments to the property or its community, and it also ignores many out-of-pocket expenses that property owners incur, such as relocation and closing costs. As that blog explained, as a result of these factors, property owners ‘subjectively’ value their property more than the open market (and would otherwise sell the property).
As that blog detailed, several jurisdictions provide additional benefits to displaced property owners in an attempt to place them in as good of a position as they would be absent the taking. For example, in Michigan, acquiring entities are required by statute to pay for the displaced owners’ reasonable attorney fees. See MCL § 213.66.
This blog provides more detail on how, when, and why some states require acquiring entities to compensate property owners for their attorney fees in eminent domain and condemnation cases. It begins by discussing the purpose behind laws that require condemning entities to pay the displaced landowners’ attorney fees. It then details Michigan’s law before surveying how all other states handle this issue.
Why condemning entities should reimburse property owners for their attorney fees:
One of the fundamental tenants of eminent domain is that just compensation should place “the owner of condemned property ‘in as good a position pecuniarily as if his property had not been taken.’” United States v. 564.54 Acres of Land, 441 U.S. 506, 510–11 (1979) (quoting Olson v. United States, 292 U.S. 246, 254 (1934)). The reasoning behind that principle is that individual owners should not bear the burden of paying for large-scale projects for which the public benefits. The requirement that property owners be compensated for their property also disincentivizes governments from executing “inefficient” takings in which the taken property is more valuable to its private owner than the public at large.
As explained above, compensation consisting solely of the fair market value of a property fails to ensure that property owners are truly made “whole.” In addition to the subjective losses detailed in my last blog, property owners also must pay attorney fees, relocation costs, and closing fees to obtain compensation for their property and purchase a replacement property.
This blog focuses on attorney fees.
Here’s an example of how attorney fees can leave a property owner in a worse position than they would otherwise be: An owner’s property is worth $10 on the open market. The local government decides that it needs the property for a public project and offers the owner $4. The property owner hires an attorney on a contingent-fee basis—say 1/3, which is standard in condemnation and even written into Michigan’s statute, see MCL § 213.66(3). The attorney litigates the case and successfully convinces the jury that the property is worth $10. After paying the attorney the $2 fee (1/3 of the $6 increase from $4 to $10), the property owner receives only $8. In the end, the owner is left with $2 less than the market value of the property, which already shortchanged the owner by failing to account for subjective factors.
Thankfully, many states—including Michigan—have mandated that condemning entities (“condemnors”) reimburse persons subject to eminent domain (“condemnees”).
The primary purpose behind this is to ensure that the condemnees are made whole. As a secondary rationale, the attorney fee—which is typically based on the increase between the condemnor’s offer and the final just compensation award—incentivizes condemnors not to low-ball condemnees. Viewed another way, the attorney fee penalizes the condemnor for making an insufficient offer to the property owner.
More on Michigan’s law:
In Michigan, condemning agencies are required by statute to reimburse property owners for certain fees and costs:
First, when a property owner successfully challenges the condemning agency’s right to acquire the property, the court “shall order” the agency to reimburse the owner for the reasonable attorney fees and other expenses incurred in defending against the improper acquisition. MCL § 213.66(2); see also, e.g., Grosse Ile Twp. v. Grosse Ile Bridge Co., No. 291255, 2010 WL 3767578, at *7 (Mich. Ct. App. Sept. 28, 2010) (affirming an order that granted attorney fees to a toll bridge owner who successfully challenged the necessity of the government’s taking based, in part, on testimony that his attorney Alan “Ackerman is the preeminent attorney specializing in condemnation law in the state of Michigan”).
Second, in Michigan, the condemning agency is required to submit a good faith offer based on a certified expert’s appraisal before litigating an eminent domain case. If the final award exceeds the condemning agency’s written offer, the court “shall order” the agency to reimburse the owner’s “reasonable attorney fees, but not in excess of 1/3 of the amount by which the ultimate award exceeds the agency’s written offer.” MCL § 213.66(3).
Attorney fees in other states:
The federal constitution does not mandate that condemnors pay the condemnee’s attorney fees or litigation expenses, so the issue is left to the discretion of individual states. Cf. United States v. Bodcaw Co., 440 U.S. 202, 203 (1979) (“[C]ompensation to cover a landowner’s litigation costs is a matter of legislative grace rather than constitutional command.”). As detailed below, states vary greatly in how they use that discretion.
On one end of the spectrum, some states are even more generous under certain circumstances in awarding attorney fees than Michigan.
Consider Minnesota, for example, which mandates by statute that where the final judgment for damages is 40% greater than the condemning agency’s last written offer prior to the lawsuit, the court “shall award the owner reasonable attorney fees” (in addition to “litigation expenses, appraisal fees, other expert fees, and other related costs in addition to other compensation and fees”). Minn. Stat. Ann. § 117.031(a) (West). If the just compensation award is only 20–40% greater than the condemnor’s last written offer, then the court “may” award reasonable attorney fees. Id. Property owners are also entitled to attorney fees if they successfully challenge the public use or necessity of a taking. Id. § 117.031(b).
Unlike Michigan, Minnesota does not cap attorney fees at one-third of the amount by which the ultimate award exceeds the good faith offer. In fact, in a recent case, State v. Schaffer, No. A23-0036, — N.W.2d –, 2023 WL 5006256, at *1 (Minn. Ct. App. Aug. 7, 2023), the court of appeals affirmed an award of attorney fees that exceeded both the just compensation award and the amount the landowner was responsible for paying his attorney under the applicable contingency-fee agreement. See id. (“The district court determined the landowner’s fee award using the lodestar method, ordering the state to pay the landowner an amount that exceeded the contingency-fee amount. . . . Because [the applicable statute] does not limit attorney-fee awards to the amount a landowner agreed to pay his attorney, the district court acted within its discretion when it determined the fee award, and we affirm.”).
There are several states on the other end of the spectrum. In Mississippi, for example, condemnors do not reimburse property owners for their attorney fees based on the rationale that “just compensation is for the property and not to the owner.” Maples v. Miss. Hwy. Comm’n, 617 So.2d 265, 271 (Miss. 1993) (citation omitted).
I couldn’t find a full survey of state laws online, so I made one myself. Here are how states treat attorney fees in condemnation cases (*some statutes and cases may be incorrect or outdated, so please consult an attorney if you are subject to a condemnation or eminent domain action *):
- Alabama: Attorney fees are not recoverable in direct condemnation actions unless the condemnor fails to acquire the property or abandons the action. See, e.g., White v. State, 319 So.2d 247 (Ala. 1975); Ala. Code § 18-1A-232. Condemnees are entitled to litigation expenses in inverse condemnation cases. Id. § 18-1A-32.
- Alaska: The condemnee is entitled to attorney fees when the final just compensation award is at least 10% greater than the amount deposited by the condemnor or the court rules that the condemnor cannot take the property through eminent domain. Alaska R. Civ. Pro. 72(k).
- Arizona: The court “may” award residential property owners who live in the subject property reasonable attorney fees in direct condemnation actions. Ariz. Rev. Stat. § 12-1130(D). It also “may” award reasonable attorney fees in inverse condemnation cases and “shall” award reasonable attorney fees if the taking is for slum clearance or redevelopment or is found not to be necessary for public use. Id. § 12-1135.
- Arkansas: Condemnees are entitled to reasonable attorney fees when the final just compensation award exceeds the condemnor’s initial offer by at least 20%. Ark. Code Ann. § 18-15-103(11)(A).
- California: Prior to trial, the condemnor and condemnee exchange a final offer and demand. Following trial, the court may award attorney fees when, in light of the jury’s verdict, the condemnee’s final demand was reasonable and the condemnor’s final offer was unreasonable. Cal. Civ. Proc. Code § 1250.410.
- Colorado: Condemnees may recover reasonable attorney fees if the condemnor abandons the condemnation, lacks authority to condemn, or the condemnee obtains a just compensation award that exceeds the agency’s final offer by at least 30%. Colo. Rev. Stat. § 38-1-122.
- Connecticut: Condemnees are only entitled to reasonable attorney fees if the acquiring entity abandons the condemnation or the condemnee makes a successful inverse condemnation claim. Conn. Gen. Stat. §§ 48-17a, -17b.
- Delaware: The condemnee “may apply” for reasonable attorney fees if the just compensation award is closer to the condemnee’s demand than the condemnor’s offer. Del. Code Ann. tit. 10, § 6111(2).
- Florida: The court “shall” award attorney fees based on the difference between the final judgment and the condemnor’s last written offer before the condemnee hired the attorney. Fla. Stat. Ann. § 73.092(1).
- Georgia: Condemnors are generally not responsible for attorney fees, even if the final award exceeds its offer. See, e.g., Dep’t of Transp. v. Woods, 269 Ga. 53 (1998). By contrast, condemnees may be entitled to attorney fees if they successfully pursue an inverse claim for a federally funded project. Ga. Code Ann. § 22-4-8. Condemnees also may recover attorney fees if the acquiring entity abandons the condemnation or the condemnee successfully challenges whether the taking is necessary for public use. Id. § 22-1-12.
- Hawaii: Condemnees are generally not entitled to attorney fees in direct condemnation actions. See, e.g., State v. Davis, 53 Haw. 582, 587 (1972) (ruling that attorney fees are not included in just compensation based on Hawaii’s constitution). Property owners may be entitled to reasonable attorney fees, however, where the condemnation is abandoned or dismissed. Haw. Rev. Stat. § 101-27.
- Idaho: Trial courts may in their discretion award attorney fees if the just compensation award exceeds the condemnor’s last timely offer by at least 10%. Idaho Code Ann. § 7-711A(8); see also, e.g., Ada County Hwy Dist. ex rel. Fairbanks v. Acarequi, 105 Idaho 873, 876 (1983).
- Illinois: Condemnees are entitled to attorney fees if the acquired property will be controlled by a private entity and the just compensation awarded exceeds the condemnee’s final written offer prior to trial. 735 Ill. Comp. Stat. § 30/10-5-110. Otherwise, condemnees are entitled to attorney fees only if they successfully pursue an inverse claim, the acquiring party abandons the condemnation, or the court dismisses the eminent domain action. 735 Ill. Comp. Stat. §§ 30/10-5-65, 30/10-5-70.
- Indiana: The condemnor is responsible for paying the condemnee’s reasonable attorney fees when the final damages at trial exceed the final settlement offer, but the reimbursed attorney fees (and other litigation costs) are capped at the lesser of $25,000 or the fair market value of the property. Ind. Code § 32-24-1-14.
- Iowa: The acquiring agency “shall” pay all reasonable attorney fees and costs if the award of the commissioners exceeds the acquiring agency’s final offer prior to condemnation by at least 10%. Iowa Code § 6B.33.
- Kansas: Courts have the discretion to award attorney fees if the jury’s verdict exceeds the court-appointed appraisers’ award. Kan. Stat. Ann. § 26-509.
- Kentucky: Condemnees are generally not entitled to attorney fees in direct condemnation actions. See Ky. Rev. Stat. Ann. § 453.260(6)(c); Dep’t of Transp. v. Knieriem, 707 S.W.2d 340, 341 (Ky. 1986)
- Louisiana: Courts have the discretion to award reasonable attorney fees if the final compensation exceeds the condemnor’s highest offer. La. Stat. Ann. §§ 19:8(A)(3), 19:109(A).
- Maine: Property owners are entitled to reasonable attorney fees actually incurred when the acquiring entity abandons a condemnation action. Me. Rev. Stat. tit. 23, § 154.
- Maryland: Maryland does not provide for the recovery of attorney fees in defending a condemnation action unless the acquiring entity abandons the action or judgment is entered against the acquiring entity on the right to condemn. Md. Code Ann., Real Prop. §§ 12-106(b)(5), 107(b), 109(e).
- Massachusetts: Attorney fees are not recoverable in direct condemnation actions and cost reimbursements are limited to filing, trial exhibit preparation, and service fees. Mass. Gen. Laws ch. 79, § 38.
- Michigan: As described in more detail above, property owners are entitled to reasonable attorney fees up to one-third of the increase between the condemning agency’s good faith written offer and the final just compensation. Mich. Comp. Laws Ann. § 213.66(3).
- Minnesota: As described in more detail above, property owners are entitled to reasonable attorney fees when the final judgment for damages is 40% greater than the condemning agency’s last written offer prior to the lawsuit. Minn. Stat. Ann. § 117.031(a). Property owners “may” be entitled to attorney fees when the judgment is 20–40% greater than the last written offer prior to suit. Id.
- Mississippi: Condemnees are not entitled to attorney fees because “just compensation is for the property and not to the owner.” Maples v. Miss. Hwy. Comm’n, 617 So.2d 265, 271 (Miss. 1993).
- Missouri: The condemnor is responsible for actual and reasonable attorney fees when it fails to negotiate in good faith or abandons the condemnation. Mo. Rev. Stat. §§ 523.256, .259.
- Montana: Condemnees are entitled to attorney fees if the award at trial exceeds the final offer or the owner successfully challenges the taking. Mont. Const. art. II, § 29 (1972); Mont. Code Ann. §§ 70-30-305(2), 306(1)–(2).
- Nebraska: The condemnor is required to pay “reasonable” attorney fees if the condemnee appeals and the final judgment is 15% greater than the initial appraiser’s award, the condemnor appeals and the final judgment is at least 85% of the initial appraiser’s award, or if both parties appeal and the final judgment is greater than the initial appraiser’s award. Neb. Rev. Stat. § 76-720. The condemnor also must pay the condemnee reasonable attorney fees actually incurred if it abandons the project or the condemnee successfully challenges the condemnation. Id. § 76-726.
- Nevada: Condemnors are not responsible for condemnees’ attorney fees in direct takings, Nev. Rev. Stat. § 37.120, but condemnors must pay reasonable attorney fees for successful inverse condemnation claims, id. at § 37.185, and when the acquiring entity abandons the condemnation, id. § 37.180.
- New Hampshire: Condemnors are not required to pay attorney fees in direct condemnation cases but are responsible for attorney fees if the condemnees successfully challenge the taking. N.H. Rev. Stat. § 498-A:26-b.
- New Jersey: Property owners are not entitled to attorney fees in direct condemnation actions. Property owners are entitled to reasonable attorney fees, however, if they succeed in an inverse condemnation claim or challenge to the taking itself or if the condemnor abandons the condemnation action. N.J. Stat. § 20:3-26(b)–(c).
- New Mexico: Property owners are generally not entitled to attorney fees in direct or inverse condemnation actions. See, e.g., Primetime Hosp., Inc. v. City of Albuquerque, 142 N.M. 663, 675 (Ct. App. 2007), rev’d on other grounds, 146 N.M. 1 (2009).
- New York: Courts have the discretion to award condemnees reasonable attorney fees where the just compensation award “is substantially in excess of the amount of the condemnor’s proof” and the attorney fee is “necessary … to achieve just and adequate compensation.” N.Y. Em. Dom. Proc. Law § 701.
- North Carolina: Condemnors are responsible for paying reasonable attorney fees when they abandon the condemnation or the court rules that the condemnor is not authorized to condemn the property. N.C. Gen Stat. § 40A-8(b).
- North Dakota: The court has the discretion to condemnees award fees. N.D. Cent. Code § 32-15-32. In practice, most courts order the condemnor to pay the condemnee’s “reasonable” costs and attorney fees. See Drew H. Wrigley, North Dakota Attorney General, Landowner Rights Under Eminent Domain Laws, available at https://attorneygeneral.nd.gov/consumer-resources/landowner-rights-under-eminent-domain-laws/.
- Ohio: See detailed explanation below.
- Oklahoma: Condemnees are entitled to reasonable attorney fees actually incurred when the jury award exceeds that of the court-appointed commissioners by at least 10%, the condemnation is abandoned, or the final judgment is that the property cannot be condemned. Okla. Stat. tit. 27, § 11(3).
- Oregon: The condemnee may recover attorney fees if the jury award exceeds the condemnor’s highest written offer. Or. Rev. Stat. §§ 35.300, 35.346(7).
- Pennsylvania: Property owners are entitled to reasonable attorney fees actually incurred if they prevail in an inverse condemnation action. 26 Pa. Cons. Stat. § 709. Property owners are also entitled to attorney fees when they successfully challenge the condemnation, id. § 306(g)(1), or the condemnor abandons the condemnation action, id. § 308(d). Property owners also may be entitled to a $4,000 reimbursement for reasonably incurred fees. Id. § 710.
- Rhode Island: Rhode Island’s statute excludes attorney fees from recoverable costs in condemnation actions. R.I. Gen. Laws § 45-29-24(c).
- South Carolina: Condemnees are entitled to attorney fees as a litigation expense when the just compensation award is at least as close to the condemnee’s highest valuation as it is to the condemnor’s highest valuation. S.C. Code Ann. § 28-2-510(B).
- South Dakota: Condemnees are entitled to reasonable attorney fees when the just compensation awarded at trial is at least 20% higher than the condemnor’s offer at the commencement of the trial and at least $700. S.D. Codified Laws § 21-35-23.
- Tennessee: Property owners are entitled to attorney fees where the final judgment is that the acquiring party cannot acquire the property by condemnation or the acquiring party abandons the condemnation. Tenn. Code Ann. § 29-17-912(b). Property owners are also entitled to recover reasonable attorney fees actually incurred if they prevail in an inverse condemnation case. Id. § 29-16-123(b).
- Texas: Condemnees are generally responsible for paying their own attorney fees, Tex. Prop. Code Ann. § 21.047, even in inverse condemnation cases, see City of San Antonio v. El Dorado Amusement Co., Inc., 195 S.W.3d 238, 249 (Tex. App.—San Antonio 2006, pet. denied).
- Utah: Condemnees can recover up to $50,000 in litigation expenses if the total just compensation award less interest and litigation expenses exceeds the amount the condemnee made in a formal written settlement offer that the condemnor rejected. Utah Code Ann. § 78B-6-509(7). Conversely, the condemnor may recover up to $50,000 of litigation expenses, including attorney fees, when the total just compensation awarded to the condemnee is less than the amount of total just compensation specified in the condemnee’s final settlement offer. Id. § 78B-6-509(8). Property owners are also entitled to reasonable attorney fees actually incurred when the acquiring entity abandons the condemnation. Id. § 78B-6-517.
- Vermont: Property owners are entitled to reasonable attorney fees actually incurred when the acquiring entity lacks the authority to condemn or abandons the condemnation proceeding. Vt. Stat. Ann. tit. 19, § 505(D)(1).
- Virginia: Condemnees are not entitled to reimbursement of attorney fees in direct condemnation actions, even if the award exceeds the condemnor’s offer. See Va. Code § 25.1-245.1(c)(i). By contrast, property owners may recover reasonable attorney fees actually incurred when the acquiring entity abandons the taking, id. §§ 25.1-249, 25.1-419(ii), the court rules that the acquiring entity is not entitled to acquire the real property through condemnation, id.§ 25.1-419(i), or the condemnee succeeds in an inverse condemnation claim, id. § 25.1-420.
- Washington: Condemnees are entitled to reasonable attorney fees if the judgment awarded at trial exceeds the condemnor’s highest written offer by at least 10%. Wash. Rev. Code § 8.25.070(1)(b).
- West Virginia: Condemnees are generally not entitled to attorney fees in “traditional condemnation action[s].” Dep’t of Transportation v. Newton, 238 W. Va. 615, 622 (2017).
- Wisconsin: Condemnees are entitled to certain reasonable attorney fees if the just compensation award exceeds the condemnor’s highest written offer by at least 15%, the property owner prevails in an inverse condemnation claim, the court determines that the condemnor does not have the right to condemn all or part of the property, or the condemnor abandons the taking. Wis. Stat. § 32.28(3).
- Wyoming: Condemnees are entitled to reimbursement of reasonable attorney fees incurred after the condemnee’s receipt of the condemnor’s final offer if the just compensation awarded exceeds that offer by at least 15%. Wyo. Stat. Ann. § 1-26-509(j). Condemnees may also obtain reasonable attorney fees if the acquiring entity abandons the condemnation, id. § 16-7-116, or the property owner prevails in an inverse condemnation case, id. § 16-7-117.
Nothing is stopping states from amending their laws.
In Ohio, for example, State Representatives Darrell Kick and Rodney Creech recently introduced House Bill 64, which would “[e]xpand[] required attorneys’ fee, cost, and expense awards due to property owners in appropriation actions.” See H.B. 64, 135th Gen. Assemb., Reg. Sess. (Ohio 2023) (available here). As it currently stands, Ohio property owners are entitled to recover attorney fees in three circumstances:
- First, if a property owner successfully challenges the public necessity of a taking, “the court shall award the owner reasonable attorney’s fees, expenses, and costs.” Ohio Rev. Code § 163.09(G).
- Second, property owners are entitled to attorney fees when the acquiring entity abandons the condemnation proceedings. Id. § 163.21(A)(2).
- And, third, owners are entitled to fees when the jury’s just compensation award is more than 125% of the condemnor’s last written offer and the property is not taken for a public road or public exigency (unless the property was previously used for agricultural purposes and the jury’s award is more than 150% of the good faith offer). Id. § 163.21(C)(2). There are other restrictions, such that the fees are capped at 25% of the difference between the condemnor’s final written offer and the jury’s award. Id. § 163.21(C)(5)(b)
Michigan is a good example of what states should do:
Michigan gets it right by mandating that condemnors reimburse condemnees for reasonable attorney fees not exceeding one-third of the increase from the good faith offer to the final judgment.
We already shortchange property owners by compensating them based on the market value of their property. Reimbursing property owners for the legal expenses they necessarily incur fighting to obtain the market value of their property ensures that we do not shortchange them even further.
Requiring acquiring entities to pay displaced property owners reasonable attorney fees also enables the owners to obtain representation and protect their fundamental right to own property. And lastly, because of the traditional contingent-fee structure of attorney fees in eminent domain cases, mandatory reimbursement incentivizes condemnors to provide adequate offers to property owners.
