Property Rights in the state of Indiana
Indiana eminent domain laws can be found in Article 24, title 32 of Indiana statutes. Like many states following the landmark U.S. Supreme Court decision in Kelo, the Indiana General Assembly acted quickly to create a state commission to study the use of eminent domain and measures that could be taken to help eliminate eminent domain abuse. Those efforts led to the adoption of House Bill 1010 (2006), which redefined public use and provided objective criteria for the acquisition of property in most situations. While not airtight, generally these reform measures have worked well to provide added protections and defenses for property owners in Indiana facing eminent domain takings, particularly for private redevelopment projects.
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A SUMMARY OF INDIANA’S EMINENT DOMAIN LAWS
The following responses are intended to provide general information about eminent domain laws in the featured state. Such information does not constitute legal advice. Anyone interested in learning more about eminent domain law and the impact it may have on a given set of facts should consult with an OCA attorney or another attorney experienced in handling eminent domain cases.
Who Can Exercise Eminent Domain Powers?
Eminent domain powers are delegated by statute to a variety of governmental bodies and agencies. Perhaps the most common State agency to exercise eminent domain in Indiana is the Indiana Department of Transportation. There are some privately-owned entities like pipeline companies or utilities that may also condemn property, although those entities may have procedures that are uniquely applicable to them. Under most circumstances, the condemning authority will follow the procedures outlined in Indiana Code Article 32-24-1.
What Are the Legal Pre-requisites for Exercising the Power?
Before any party may proceed to condemn property, the condemning authority must make an “effort to purchase” the property. A sufficient “effort to purchase” includes establishing a proposed price to purchase the property, providing the property owner with an appraisal that substantiates the proposed purchase price, and conducting good faith negotiations with the property owner. There is a low burden to meet the requisite “good faith” required to negotiate with the property owner. As long as the condemning authority provides an offer to purchase that is based upon a professional appraisal and the offer is drafted using the uniform letter found in Indiana Code Section 32-24-1-5(c), then the offer will have been provided in good faith under applicable law.
A condemning authority must wait 30 days from the date it communicated the offer to purchase before it may proceed to file a complaint with an Indiana court to condemn the property. This obviously assumes that either the property owner did not respond to the offer or the parties were unable to agree on a purchase price. If a complaint is filed, then the condemning authority is required to include some basic information consistent with Indiana Code Section 32-24-1-4(b), including the name of the party condemning the property, the names of all persons having a lien or claim to or against the property (all of whom shall be named as defendants), the intended use for the property upon acquisition, a description of the property or right-of-way to the taken, and a statement that the condemning authority and property owner could not reach an agreement for the purchase of the property being taken.
What Limitations or Defenses Exist?
Once a complaint is filed to condemn property, Indiana Code Section 32-24-1-8(a) identifies three objections that may be raised by a defendant. A defendant can object to the subject matter or personal jurisdiction, a defendant can object because the condemning authority lacks “the right to exercise the power of eminent domain for the use sought[,]” or a defendant can object under a catch-all provision based upon “any other reasons disclosed in the complaint or set up in the objections.” Unless an extension is granted by the court, a defendant has 30 days to raise its objections if it chooses. It is wise to consult with legal counsel experienced in eminent domain matters to determine whether to pursue objections to the action. The failure to file objections does not foreclose a defendant from later challenging the amount of just compensation.
What Constitutes a Public Purpose?
Indiana Code Section 32-24-4.5-1 includes a broad definition of “public use.” “Public use” is defined in this section to mean real property taken “for the purpose of providing the general public with fundamental services,” which could include highways, bridges, airports, ports, technology parks, parks, or utilities or pipelines. This statutory definition was enacted in response to the United State Supreme Court’s decision in Kelo v. City of New London and specifically excludes from the definition of “public use” “the public benefit of economic development, including an increase in a tax base, tax revenues, employment, or general economic health.” While the definition is enlightening, Indiana Code Section 32-24-4.5-1, et seq. does allow a condemnor to acquire private property and transfer ownership of that property to a private person for a non-public use. However, there are specific procedures and statutory safeguards that only allow such takings if, for example, the property constitutes a public nuisance or is deemed unsafe and unfit for human habitation. And, even if those conditions are met, any taking of residential property would require the condemnor to pay the owner 150% of fair market value for the property, plus relocation costs and other potential damages.
In a typical Indiana eminent domain action where property is not being acquired for ultimate transfer to a private person, a public purpose is likely to be found provided the purpose is constitutional and there is no fraud, bad faith, pretext, or subterfuge that would actually result in the property being acquired or conveyed for a private purpose. It can be difficult for a defendant to contest a condemning authority’s public purpose for a taking, especially since a large portion of eminent domain actions in Indiana are brought by the State of Indiana or its Department of Transportation for roadway projects. According to Krause-Franzen Farms, Inc. v. Tippecanoe Sch. Corp., 173 N.E.3d 694, 699 (Ind. Ct. App. 2021), “[o]ur policy [in Indiana Courts] should not be such as to place an undue burden upon the State in acquiring land for such public improvements as highway construction when such improvements are considered to be in the public interest.”
How is Just Compensation Determined?
If a condemning authority proves it has the right to take property for the intended public purpose, then eminent domain litigation transitions to the damages phase of the proceedings. A court appoints three disinterested appraisers to value the property in its highest and best use. Once the court-appointed appraisers have provided their valuation report, any of the parties to the lawsuit can file written exceptions to the appraisers’ assessment within 45 days. At that point, litigation will proceed to a trial on damages to determine just compensation owed.
The four primary categories of damages determinative of just compensation in Indiana are found in Indiana Code Section 32-24-1-9(c) and are summarized as follows:
∙ The fair market value of the land being taken and any other interests in the land (i.e., easements);
∙ The fair market value of any buildings or improvements on the land; ∙ Any damages to the portions of the landowner’s property that are not subject to the taking but are otherwise negatively impacted by the taking (e.g., lost access rights);
∙ A catch-all category for “other damages, if any, that will result to any persons from the construction of the improvements in the manner proposed by the plaintiff.”
The latter two categories are implicated in partial (and not total) takings. They are intended to compensate a property owner for any residual damages caused by loss of the property actually acquired by the condemning authority.
In Indiana, the date on which damages are calculated is the date the condemning plaintiff served its notice to the defendant(s) that they appear and show cause why the property should not be condemned. That date is typically on or about the same day the lawsuit was filed.
Is the Landowner Entitled To Recover Reasonable Attorney Fees? Expert Fees? Litigation Costs?
Unlike some other states, in Indiana each party is typically responsible for its own fees for attorneys and experts. Indiana Code Section 32-24-1-14 does allow a defendant to recover “the defendant’s litigation expenses, including reasonable attorney’s fees,” but those expenses are (1) capped at $25,000 and (2) only recoverable if there is a trial on damages and the amount recovered by the defendant exceeded the last settlement offer that the condemning plaintiff is required to provide not later than 45 days before trial. Eminent domain lawyers are sometimes willing to handle such matters on a contingent fee basis, so that the property owner only pays legal fees if the lawyer is able to increase the just compensation paid.
Can the Government Take Possession of a Landowner’s Property Before Final Compensation is Paid?
Yes. A condemning plaintiff may deposit with the court clerk the amount of damages assessed by the court-appointed appraisers. Once that payment has been made, the plaintiff can take possession of the property and use it for the public purpose intended, even though one or both parties have filed exceptions to the amount of damages assessed by the court-appointed appraisers. The landowner has the right to withdraw the money deposited with the clerk under the procedure prescribed in Indiana Code Section 32-24-1-11(d).
Of course, to the extent there is a trial on damages and the amount of just compensation is higher than the amount previously deposited with the clerk, the condemning plaintiff will still be responsible for the difference. Similarly, if the amount of just compensation determined at trial is less than the amount withdrawn by the landowner, the landowner is obligated to repay the excess.