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Eminent Domain Law: Highest and Best Use Valuation

The damages that property owners are entitled to receive under the rules of eminent domain law are based on a term that’s called highest and best use.

Highest and Best Use is defined as the use for a parcel of property that produces the highest value for that property in the marketplace.  Eminent domain law dictates that just compensation be determined by the property’s highest and best use.  Let’s say for example you have a piece of vacant land that is zoned residential that could be developed into a commercial shopping center.  If this land is being acquired from you by the condemning authority, you are entitled to receive compensation based upon the property’s highest and best use, which in this scenario would be commercial development, even if you are not using it to that level.

In another example, let’s say you are a homeowner with an extra large lot that abuts a four-land highway.  Although you are still using your property for residential purposes, the vast majority of the properties around you have been converted into some kind of commercial use.  Although your property is still zoned residential, under the highest and best use rules, if you sold your property in the market place, the likely buyer would not continue using it as such.  They would recognize that converting the property into a commercial use consistent with everything else in the neighborhood would bring the most value to the land.

This example helps explain highest and best use and how it relates to eminent domain law.  In this scenario, if just compensation as determined by the condemning authority was based upon the residential use and not the most valuable commercial use, then you the property owner are justified in pursuing a claim for additional compensation because the rules for determining damages were not followed correctly.

Read more about eminent domain law in your state.


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