Summary. The Fifth Amendment permits the government to take private property for public use on payment of just compensation, and almost every word in that clause has generated its own body of law. Direct condemnation is a procedure — the government files, deposits an estimate, takes title, and litigates value. Regulatory takings are harder, because a regulation that destroys value is sometimes compensable and usually is not, and the line between them runs through a multi-factor test the Supreme Court has repeatedly declined to make more predictable. This article covers the public use requirement after Kelo, the categorical rules for physical occupations and total economic wipeouts, the Penn Central balancing test, the exaction cases, the mechanics of a condemnation action, and how just compensation is actually measured.

The Takings Clause is twelve words long: "nor shall private property be taken for public use, without just compensation." It has generated a body of law that practitioners describe, without much exaggeration, as the least coherent in constitutional adjudication. The Supreme Court has said as much itself, repeatedly, in opinions that then decline to fix it.

The incoherence is not accidental. Two impulses pull against each other. One says that government must be able to regulate land — for safety, for the environment, for orderly development — without paying every owner whose plans are frustrated. The other says that when regulation goes far enough, it is functionally a taking, and forcing an individual to bear a burden that ought properly to be borne by the public is exactly what the clause forbids.

Everything below is an attempt to draw that line in a specific context.

Two very different practices

It helps to separate at the outset.

Direct condemnation is a lawsuit the government files to acquire property it has decided to take. The government's authority is rarely in doubt. The fight is about value. This is a valuation practice, conducted largely through appraisers, and it settles most of the time.

Inverse condemnation is a lawsuit the owner files, alleging that the government has taken property without formally condemning it — by flooding it, by occupying it, by regulating it into worthlessness, or by conditioning a permit on an unrelated concession. Here the fight is about whether a taking occurred at all, and the owner loses far more often than not.

Practitioners tend to specialize in one or the other. The doctrine overlaps but the skills do not.

Public use after Kelo

The Fifth Amendment permits taking only for "public use." For most of American history the phrase was read broadly to mean public purpose, and Berman v. Parker, 348 U.S. 26 (1954), upheld the condemnation of a non-blighted department store as part of a blight-clearance plan. Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984), upheld a scheme transferring title from lessors to lessees to break up land oligopoly.

Kelo v. City of New London, 545 U.S. 469 (2005), completed the arc, upholding the condemnation of unblighted homes for transfer to a private developer as part of an economic development plan projected to create jobs and tax revenue. The Court held that economic development qualifies as a public purpose and declined to adopt a bright-line rule against transfers to private parties.

The decision was extraordinarily unpopular, and the political response mattered more than the holding. Roughly forty-five states enacted legislation restricting eminent domain for economic development, by statute or constitutional amendment. The restrictions vary enormously:

  • Some prohibit condemnation for economic development outright.
  • Some permit it only for genuine blight, and tighten the definition of blight — which had, in many states, been broad enough to encompass ordinary older neighborhoods.
  • Some impose heightened procedural requirements, judicial review standards, or supermajority approvals.
  • Some require additional compensation — 125 or 150 percent of fair market value — for owner-occupied residences.

The practical consequence: state law is the operative constraint on public use in most cases, not the federal Constitution. A challenge based on Kelo alone will fail. A challenge based on a state constitutional provision or post-Kelo statute may well succeed. Always research the state provision first.

Note also County of Wayne v. Hathcock, 471 Mich. 445 (2004), which rejected the Kelo approach under the Michigan Constitution a year before Kelo was decided, and represents the model several states followed.

The categorical rules

Two situations produce a taking automatically, without balancing.

Permanent physical occupation

Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982), held that a permanent physical occupation of property is a per se taking regardless of how trivial the intrusion or how weighty the public interest. The statute at issue required landlords to permit installation of cable equipment occupying about one and a half cubic feet. That was enough.

The rule is narrow but absolute. Its boundary is "permanent," and the Court expanded the concept significantly in Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021), holding that a California regulation granting union organizers access to agricultural property for three hours a day, 120 days a year, was a per se physical taking. The Court reframed the inquiry: what matters is whether the government has appropriated a right to invade, not whether the invasion is continuous.

Cedar Point has substantial implications for inspection regimes, access requirements, and any regulation that grants third parties entry rights. The Court preserved exceptions for isolated trespasses, access required as a condition of a benefit, and traditional background limitations including health and safety inspections — but the boundaries of those exceptions are now being litigated actively.

Total economic wipeout

Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), held that a regulation depriving land of all economically beneficial use is a categorical taking, subject to one exception: no compensation is owed where the prohibited use was not part of the owner's title to begin with, under background principles of state property law and nuisance.

The rule is rarely available in practice, because "all" means all. A regulation leaving the land worth ten percent of its former value is not a Lucas taking; it goes to Penn Central. And the denominator problem — whether to measure the loss against the affected portion or the whole parcel — usually defeats the claim. Murr v. Wisconsin, 582 U.S. 383 (2017), adopted a multi-factor test for defining the relevant parcel, considering the treatment of the land under state law, its physical characteristics, and the value of the property under the challenged regulation. In Murr itself the Court treated two contiguous commonly owned lots as a single parcel, which defeated the claim.

Penn Central: the default test

Everything that is not a physical occupation and not a total wipeout goes to Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), which is where most regulatory takings claims die.

The Court identified three factors of "particular significance":

1. The economic impact of the regulation on the claimant. Measured as diminution in value. The cases tolerate a great deal: Hadacheck v. Sebastian, 239 U.S. 394 (1915), upheld a regulation causing a 92.5 percent diminution; Euclid v. Ambler Realty Co., 272 U.S. 365 (1926), upheld a 75 percent loss. There is no threshold percentage, but claims below roughly 85 percent rarely succeed on impact alone.

2. The extent to which the regulation has interfered with distinct investment-backed expectations. This asks what the owner reasonably expected when they acquired the property, and whether those expectations were objectively reasonable given the existing regulatory environment. An owner who buys land already subject to heavy regulation has weak expectations. Palazzolo v. Rhode Island, 533 U.S. 606 (2001), held that acquiring title after a regulation is enacted does not automatically bar a claim — the transferee is not barred as a matter of law — but it remains a significant factor.

3. The character of the governmental action. Whether the regulation can be characterized as a physical invasion or instead as a public program adjusting the benefits and burdens of economic life to promote the common good. Regulations preventing harm fare better than those extracting public benefits, though the Court has acknowledged that the harm-preventing/benefit-conferring distinction is not workable as a bright line.

Penn Central itself upheld the denial of permission to build a fifty-story tower above Grand Central Terminal under New York's landmarks law. The building retained its existing use, the owner earned a reasonable return, and transferable development rights mitigated the loss.

Two later cases refine the test. Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), held that a temporary development moratorium is not automatically a taking and must be analyzed under Penn Central — rejecting the argument that any temporary total deprivation is categorical. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005), removed the "substantially advances a legitimate state interest" formulation from takings analysis entirely, relocating it to due process, and clarified that takings analysis concerns the magnitude and character of the burden on the owner, not the wisdom of the regulation.

The honest summary of Penn Central is that it is a standard rather than a rule, that it strongly favors the government, and that predicting outcomes under it is genuinely difficult. Counsel evaluating a regulatory takings claim should be candid with clients about the base rate.

Exactions: Nollan, Dolan, Koontz, and Sheetz

A distinct line addresses conditions attached to land use permits, where the government leverages its permitting power to extract concessions.

Nollan v. California Coastal Commission, 483 U.S. 825 (1987), required an essential nexus between the condition imposed and the legitimate state interest that would justify denying the permit outright. The Commission conditioned a rebuilding permit on a lateral public easement across the beach, justified by concern about blocked ocean views. The Court found no nexus — an easement along the shore does nothing about views from the road.

Dolan v. City of Tigard, 512 U.S. 374 (1994), added rough proportionality: the government must make an individualized determination that the condition is related both in nature and extent to the impact of the proposed development. The city required dedication of a greenway and bike path as a condition of expanding a hardware store, without quantifying the connection.

Koontz v. St. Johns River Water Management District, 570 U.S. 595 (2013), extended the framework in two directions: it applies to permit denials as well as approvals, and it applies to monetary exactions, not only demands for real property interests.

Sheetz v. County of El Dorado, 601 U.S. 267 (2024), resolved a long-standing split by holding that the Nollan/Dolan framework applies to legislatively imposed conditions, not only to ad hoc administrative demands. A traffic impact fee imposed by a generally applicable ordinance is not exempt from scrutiny simply because a legislature enacted it. The Court left open what the framework requires of a fee schedule applied across a class of properties, and that question is now the live one in impact fee litigation.

Exaction claims are the most winnable category of regulatory takings claim, and counsel handling entitlements should preserve them carefully — object at the hearing, create a record on nexus and proportionality, and pay under protest.

The ripeness revolution: Knick

For thirty-four years, Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985), required a takings plaintiff to exhaust state compensation procedures before bringing a federal claim. Combined with San Remo Hotel, L.P. v. City & County of San Francisco, 545 U.S. 323 (2005), which gave preclusive effect to the resulting state judgment, this created a trap: a plaintiff had to go to state court, and having done so could never get to federal court.

Knick v. Township of Scott, 588 U.S. 180 (2019), overruled the state-litigation requirement. A property owner now has a ripe federal claim under 42 U.S.C. § 1983 as soon as the government takes property without paying, and may proceed directly to federal court.

What survives is the final decision requirement from Williamson County's first prong: the claim is not ripe until the government entity charged with implementing the regulation has reached a final decision applying it to the property. Pakdel v. City & County of San Francisco, 594 U.S. 474 (2021), clarified that this requirement is relatively modest — it demands only that the government have made clear its position, not that the owner exhaust every available administrative remedy.

Knick substantially changed the practice. Regulatory takings claims are now routinely filed in federal court, often paired with substantive due process and equal protection claims, and municipalities face § 1983 exposure including attorney's fees under 42 U.S.C. § 1988.

How a condemnation case actually runs

Before the filing

Most states require a pre-condemnation sequence: a resolution of necessity adopted after notice and hearing, an appraisal, a written offer of just compensation, and a period for negotiation. For federal projects and federally assisted ones, the Uniform Relocation Assistance and Real Property Acquisition Policies Act, 42 U.S.C. §§ 4601–4655, imposes similar requirements — appraisal before negotiation, an offer no less than the approved appraisal, and relocation assistance and payments.

Do not waive the appraisal. The condemnor's appraisal is the anchor for everything that follows, and an owner who negotiates without their own is negotiating blind.

Filing and the quick-take

The condemnor files a complaint describing the property and the interest sought. In federal court, Fed. R. Civ. P. 71.1 governs, with distinctive rules: the answer must state all objections and defenses, a defendant who fails to answer may still appear at the compensation trial, and there is no counterclaim practice.

Many jurisdictions permit quick-take: the condemnor files a declaration of taking and deposits its estimated compensation, and title and possession pass immediately. The federal Declaration of Taking Act, 40 U.S.C. §§ 3114–3118, is the model. The owner may withdraw the deposit without prejudicing the right to litigate value, and generally should — the money earns nothing in the registry, and withdrawal does not concede anything except the taking itself.

Where the owner contests the right to take, that challenge must usually be raised immediately and is resolved before valuation.

Valuation

The measure is fair market value: the price a willing buyer would pay a willing seller, neither being under compulsion, both being reasonably informed, as of the date of valuation.

Key principles:

Highest and best use. Value is measured at the property's highest and best use — the most profitable legally permissible, physically possible, and financially feasible use — not necessarily its current use. A farm on the edge of a growing suburb may be valued as development land if that use is reasonably probable rather than speculative. Establishing a reasonable probability of rezoning is often the highest-value work in a condemnation case.

The three approaches. Sales comparison, income capitalization, and cost. Appraisers use all three where applicable and reconcile.

The scope-of-the-project rule. Any increase or decrease in value attributable to the project itself is excluded. United States v. Miller, 317 U.S. 369 (1943). The owner is not paid for the value the project created, and not penalized for the value it destroyed.

Partial takings and severance damages. Where only part of a parcel is taken, compensation equals the value of the part taken plus damages to the remainder — severance damages — less any special benefits the project confers on the remainder, depending on the state's rule. Loss of access, changed grade, proximity to a highway, and irregular remainder shape are the usual severance theories.

What is generally not compensable. Business profits and goodwill are excluded in most states, on the theory that the business can relocate — a rule owners find incomprehensible and that California modifies by statute at Cal. Civ. Proc. Code § 1263.510, which does compensate lost goodwill. Consequential damages, relocation costs beyond statutory relocation benefits, and attorney's fees are also generally excluded, though many state statutes provide fees where the award exceeds the offer by a specified margin.

Fixtures and trade fixtures are compensable as part of the realty where they are attached and would pass with a sale.

Interest runs from the date of taking to the date of payment, at a rate set by statute or by the constitutional requirement of just compensation.

Trial

Valuation is tried to a jury in most states, and in federal court under Rule 71.1(h) it is tried to the court unless a party demands a jury and the court does not appoint a commission. Commissions of three appointed members are common in federal takings cases and in several states.

The trial is a battle of appraisers. The owner's case turns on establishing highest and best use, selecting comparable sales the jury finds persuasive, and quantifying severance damage credibly.

Inverse condemnation in practice

The owner-initiated case arises in recognizable patterns.

Flooding and physical invasion. Arkansas Game & Fish Commission v. United States, 568 U.S. 23 (2012), held that temporary government-induced flooding is not categorically exempt from takings liability. Recurrent flooding from a public project is one of the more successful inverse theories.

Regulatory denial of all use. Lucas, above, with the difficulties described.

Physical damage from public works. Landslides caused by road construction, subsidence from utility work.

Precondemnation conduct. Where a public entity announces an intention to condemn and then delays for years, blighting the property in the market, some states recognize a claim. Klopping v. City of Whittier, 8 Cal. 3d 39 (1972), is the leading authority.

Access impairment. Substantial impairment of access to an abutting road is compensable in most states; mere circuity of travel is not.

Utility and easement overburden. Use of an easement beyond its granted scope.

Procedurally, an inverse claim in federal court proceeds under § 1983 after Knick. In state court it proceeds under the state constitution's takings clause, which in many states is broader than the federal — several state provisions require compensation for property "taken or damaged," which reaches consequential injury the federal clause does not.

Statutes of limitations vary and are frequently short. For a continuing physical invasion, the claim may accrue anew; for a regulatory taking, it typically accrues on the final decision. Under the Tucker Act, 28 U.S.C. § 1491, claims against the United States exceeding ten thousand dollars go to the Court of Federal Claims with a six-year limitations period under 28 U.S.C. § 2501.

Primary authority

What an owner should do on receiving a notice

The letter arrives with a map, an appraisal summary, and an offer. Most owners' instinct is to negotiate the number. That is the third thing to do, not the first.

Confirm what is being taken. Fee simple, or an easement? Permanent or temporary construction easement? The legal description and the exhibit map frequently disagree with each other, and with what the project engineer actually needs. An owner who accepts a fee taking where a permanent easement would suffice has given away the reversion for nothing.

Get your own appraisal, from someone who does condemnation work. A general commercial appraiser will value the property. A condemnation appraiser will value the part taken, quantify severance damage to the remainder, address highest and best use, and write a report that survives cross-examination. The difference is routinely six figures on a partial taking.

Interrogate highest and best use before anything else. The condemnor's appraiser almost always values the property at its current use. If there is a reasonable probability of rezoning, a pending entitlement, an assemblage value, or a use the current zoning would permit but the owner never pursued, that is where the money is. Reasonable probability is a factual question supported by comparable rezonings, planning documents, and market evidence — not by the owner's optimism.

Map the remainder. After the taking, is the remainder still a viable site? Does it still meet setback, parking, and access requirements? Does the driveway still work for delivery trucks? A remainder that no longer functions may support an uneconomic remnant claim, requiring the condemnor to take the whole parcel.

Document the business. Even in states that do not compensate goodwill, document relocation costs, fixture values, and any statutory relocation benefits under the Uniform Act. In California and the other states that do compensate goodwill, the record has to be built from the business's own financials, and it takes months.

Withdraw the deposit. In a quick-take jurisdiction, take the money. It does not waive the valuation claim, and leaving it in the registry costs the owner the time value.

Watch the deadlines. The window to challenge the right to take, to answer, and to demand a jury are all short and are frequently jurisdictional. So is the deadline to seek fees where the statute allows them.

Ask about the fee statute early. Many states shift fees and costs to the condemnor where the final award exceeds the last offer by a defined margin — often ten or twenty-five percent. Where such a statute exists, it reframes the economics of litigating value entirely, and it should be modeled before the owner decides whether to settle.

Evaluating a regulatory takings claim: an honest checklist

Owners arrive convinced that a regulation destroying their plans must be compensable. Usually it is not. Working the analysis in order saves everyone a great deal of money.

Is there a physical invasion or an appropriation of a right to enter? If yes, Loretto and Cedar Point supply a categorical rule and the claim is strong. This is the best possible posture and it is worth searching hard for a physical component — a required public easement, an inspection right, a forced accommodation of third-party equipment.

Has all economically beneficial use been eliminated? Not most. All. If the parcel retains any viable economic use — agricultural, recreational, even holding for future appreciation — Lucas is unavailable. And before relying on it, define the parcel under Murr, because an adjacent lot in common ownership will usually be aggregated and defeat the claim.

Is this an exaction? If the government conditioned a permit on a concession — land, money, or a fee — Nollan, Dolan, Koontz, and now Sheetz apply, and the burden is on the government to show nexus and rough proportionality. This is the most favorable framework available outside the categorical rules, and it now reaches legislatively imposed fees. Preserve it by objecting on the record and paying under protest.

Otherwise, run Penn Central honestly. Quantify the diminution with an appraisal, not an estimate. Below roughly eighty-five percent, be candid that the claim is difficult. Examine what the owner knew and when they acquired — a purchase made after the regulatory scheme was in place substantially weakens the expectations factor even after Palazzolo. Characterize the government action: a broadly applicable program adjusting burdens across many owners fares far better than a measure singling out one parcel.

Check the state constitution. Several state clauses require compensation for property "taken or damaged," and several state courts apply more owner-favorable tests than Penn Central. The state claim is frequently stronger than the federal one and should be pleaded alongside it.

Check ripeness and limitations. After Knick, the state-litigation requirement is gone, but the final decision requirement survives. Has the agency made clear its position? Has the owner sought a variance where one might have been granted? Pakdel lowered this bar but did not remove it.

Consider whether a different claim fits better. Substantive due process, equal protection under a class-of-one theory, a state statutory vested rights claim, or an ordinary administrative appeal may deliver more, faster, and with less doctrinal risk than a takings theory. A regulatory takings claim is often the last resort dressed as the first.

Blight, redevelopment, and the condemnation nobody expected

A recurring pattern deserves its own treatment, because it catches owners who never imagined their property was at risk.

A municipality designates an area as blighted, adopts a redevelopment plan, and creates a redevelopment authority with condemnation power and tax-increment financing. Individual properties within the area — including well-maintained ones — become subject to acquisition. The owner learns about it from a letter, years after the designation was adopted at a meeting nobody attended.

The critical point is that the blight designation, not the condemnation, is the decision that matters, and it is usually the only point at which the taking can be stopped. Once an area is validly designated and a plan adopted, the necessity determination is entitled to substantial deference in most states, and a challenge at the condemnation stage is generally too late.

Post-Kelo statutes changed this landscape considerably. Many states tightened blight definitions that had previously encompassed criteria as vague as "diversity of ownership," "faulty lot layout," or "economic underutilization." Several now require parcel-specific findings rather than area-wide ones, impose evidentiary standards on the designating body, and provide for de novo rather than deferential judicial review. Some impose sunset provisions requiring redesignation after a period of years.

For counsel representing an owner in a designated area, the practical steps are:

  • Obtain the designation record. The blight study, the resolution, the plan, and the notice and hearing record. Defects in notice are the most common vulnerability.
  • Check the statutory criteria against the parcel. Where the statute requires parcel-specific findings, an area-wide study may be insufficient as to a well-maintained property.
  • Check the timing. Designations that have lapsed, or plans whose implementation period has expired, may no longer support condemnation.
  • Participate in every hearing. Both to preserve the record and because redevelopment plans are frequently amended, and amendments reopen challenges.
  • Consider the compensation enhancement. Several post-Kelo statutes provide 125 or 150 percent of fair market value for owner-occupied residences taken for redevelopment, plus relocation benefits beyond the Uniform Act minimum.

For owners of commercial property in an area under study, the single most useful early action is unglamorous: read the agenda packets, and show up.

Related articles

This article is provided for general informational purposes and does not constitute legal advice. Public use limits, compensation measures, the availability of goodwill and fee recovery, and inverse condemnation procedures are governed principally by state constitutional and statutory law and vary substantially. Deadlines to challenge a taking or to file an inverse claim are frequently short and may be jurisdictional. Consult qualified condemnation counsel promptly on receipt of a notice of intent to acquire.