Expropriation is the compulsory taking of real property from a private owner by a statutory authority. It is an example of application of the general principle “Salus Populi Suprema Lex” which means that welfare of the public is the supreme law. An expropriation of land would be done only if the land is to be taken and used in the “public interest”. In application of this general principle, international law allows the interest of the State to take precedence over the proprietary rights of the individuals situated in the territory subject to its authority.
When a major public work or infrastructural development is announced, it almost immediately has effects on the local economy, real estate market and businesses. Economic aspects that are influenced by the announcement of a large public development include the following:
- The market value of the land in those areas is influenced by the development. The market value of commercial properties abutting a new major public thoroughfare will likely increase as a result of its announcement. Conversely, the market value of residences abutting a newly proposed sewage lagoon will likely decrease.
- The value of property is influenced by the potential scarcity of available lands, as a result of the demands a large public project has on a real estate market.
- Businesses are affected by the announcement of an expropriation, as some businesses will enjoy benefits from a development and others will suffer.
- Another effect on businesses, which corresponds with the increase or decrease on real estate values, is the change in rental rates for properties in or around the proposed development. The impact on rental rates is often a highbred between business impacts and real estate values.
When an owner is expropriated, he or she has the following entitlements to compensation under the Expropriations Act:
- Compensation for the market value of the lands expropriated.
- Compensation for injurious affection to the remaining lands
- Compensation for disturbance damages and business loss resulting from the expropriation and
- Compensation for relocation expenses, including the cost of equivalent reinstatement. The amount payable as compensation under section 534(5) of the Municipal Government Act may not exceed the difference between:
a) the appraisal value of the claimant’s land prior to the construction or erection of the public work or structure, and
b) the appraised value of the claimant’s land after the construction or erection of the public work or structure, together with an amount of not more than 10% of the amount of the difference.
Certain steps can be taken to ensure a just and fair result, which is predictable and minimizes unnecessary losses and damages. These steps include:
- Expropriated owners should engage in reasonable conduct following the announcement of expropriation to ensure that any losses that are suffered are reasonable and, therefore, compensable.
- Property owners and authorities should work together in order to minimize losses arising from an expropriation.
- The various ways in which this could done are by sharing information concerning the expropriation and the underlying development, early acquisitions of properties to avoid losses, advance payments of compensation to facilitate business relocation and redevelopment and communication between owners and the authority to ensure agreements exist regarding reasonable steps to mitigate damages.
The above steps may not put an end to all losses or disputed claims arising from an expropriation, but they can assist in mitigating unnecessary losses and reducing the complexity of claims with respect to the effect of expropriations and the public undertakings for which they occur.
Image Credit : freedigitalphotos.net