Understanding Eminent Domain Law and Compensation for Access Rights under Indiana Law
How does the State acquire land to build highways? How is the utility company able to run sewer lines and fiber optic cables through private property? These are familiar questions asked by anyone who has had work done outside their house or along their commute to work. The answer underlying these questions is eminent domain.
Indiana’s eminent domain power is rooted in the Indiana Constitution, which allows public entities to take property for public use but prohibits the “taking” without just compensation.[1] The Indiana General Assembly has codified two primary eminent domain statutes in Title 32, Article 24 of the Indiana Code: I.C. § 32-24-1 (General Procedures), which applies broadly to any person or entity authorized by law to exercise the power of eminent domain, and I.C. § 32-24-2 (Procedures for Cities and Towns), which provides an alternative administrative process specifically available to municipalities. As the Indiana Court of Appeals has confirmed, the fundamental purpose of the eminent domain act is to ensure that landowners receive just compensation for property taken for public use.[2]
Constitutional and Statutory Foundation
The authority for eminent domain in Indiana derives from Article I, Section 21 of the Indiana Constitution, which provides that “[n]o person’s property shall be taken by law, without just compensation; nor, except in case of the State, without such compensation first assessed and tendered.”[3] Both the Indiana Constitution and the Fifth Amendment to the United States Constitution require just compensation when the government exercises its inherent authority to take private property for public use.
A critical feature of Indiana’s eminent domain framework is that municipalities are not required to use I.C. § 32-24-2. Specifically, I.C. § 32-24-2-5 provides that if a municipality has the power to acquire property under Chapter 2, or if another statute provides for municipal acquisition proceedings, the works board may instead proceed under I.C. § 32-24-1. The Indiana Court of Appeals confirmed in Michael v. City of Bloomington, Indiana Bd. of Public Works, 804 N.E.2d 1225 (Ind. Ct. App. 2004), that the plain meaning of this provision allows municipalities to choose which eminent domain act to use when acquiring property for a public purpose. The court held that the general eminent domain act is broad enough to permit cities and towns to follow the procedure in either chapter, and that there is no requirement that municipalities use the Chapter 2 process. This was reinforced in Kozicki v. City of Crown Point, where a federal court applying Indiana law noted that a city’s condemning authority has the option of proceeding under either the general statute or the statute for cities and towns.[4]
The primary procedural distinction between the two statutes is the nature of the process: I.C. § 32-24-2 is an administrative process conducted entirely before the works board, with the board itself determining damages and benefits, while I.C. § 32-24-1 is a judicial process initiated by filing a complaint in circuit court, with court-appointed appraisers determining compensation. Under Chapter 2, the municipality’s works board plays the central role, whereas under Chapter 1, the state circuit court oversees the proceedings and appoints independent appraisers.
General Procedures
I.C. § 32-24-1 is the primary and broadly applicable eminent domain statute in Indiana. Any entity authorized by Indiana law to exercise the power of eminent domain for any public use must exercise that power only in the manner provided in this article, except as otherwise provided by law. Below are the standard steps in the condemnation procedure under I.C. § 32-24-1.
Step 1: Pre-Condemnation Good Faith Offer. Before filing a condemnation action, the condemnor must make a genuine effort to purchase the property. This effort must include: (1) establishing a proposed purchase price; (2) providing the property owner with an appraisal or other evidence used to establish that price; and (3) conducting good faith negotiations with the owner.[5] Indiana courts have held that a good faith offer must be fair and reasonable, not wholly inadequate, and that a perfunctory offer is insufficient to satisfy the statutory requirement.[6] Notably, the Indiana Department of Transportation (INDOT) is expressly exempt from proving that a purchase offer was made to the property owner in a condemnation action.[7]
Step 2: Filing the Complaint. If the condemnor and the property owner cannot reach an agreement on compensation, the condemnor may file a complaint with the clerk of the state circuit court in the county where the property is located.[8] The complaint must identify the plaintiff (condemnor) and all defendants (owners, claimants, and lienholders), describe the intended public use, provide a specific legal description of the property to be acquired, and state that the plaintiff has been unable to agree on a purchase price with the owner. The filing of the complaint alone constitutes constructive notice to all subsequent purchasers and encumbrancers of the property.In general, a condemnor must file its complaint within two (2) years of its written acquisition offer to the landowner.[9] If the condemnor fails to file within such timeframe, the condemnor is prohibited from initiating an action through the power of eminent domain for at least three (3) years after the date the 2-year period expires.Defendants may object to the proceedings on the grounds that the plaintiff lacks the right to exercise eminent domain for the stated use.[10] Exceptions to the proceedings must be filed within thirty (30) days after the notice to appear is served.
Step 3: Appointment of Appraisers. Once the circuit court is satisfied of the regularity of the proceedings and the plaintiff’s right to exercise eminent domain for the stated public use, it appoints a panel of three appraisers: one disinterested freeholder of the county and two disinterested appraisers licensed under Indiana Code § 25-34.1.[11] One of the appraisers must reside within fifty (50) miles of the property. Each appraiser must take an oath that they have no interest in the matter and will honestly and impartially make the assessment.[12] The judge then instructs the appraisers on their duties and the applicable measure of damages and benefits.
Step 4: Appraisal and Compensation Determination. The appraisers must determine and report: (1) the fair market value of each parcel of property and each separate estate or interest; (2) the fair market value of all improvements on the portion to be acquired; (3) damages, if any, to the residue of the owner’s property caused by the taking; and (4) any other damages resulting from the proposed construction.[13] The right to compensation accrues as of the date of service of notice, and the actual value at that date serves as the measure of compensation. For condemnations by the state, county for public highways, or municipal corporations for public use, appraisers must deduct assessed benefits from certain damage categories, though the total award may never be less than the fair market value of the property actually taken and the value of improvements thereon. Just compensation for an easement taken by eminent domain is no less than the difference between the fair market value of the property before the easement is taken and its market value as burdened with the easement.[14]
Step 5: Payment and Possession. If the plaintiff pays the amount of damages assessed by the appraisers to the circuit court clerk, the plaintiff may take possession of and hold the interest in the property for the stated public use.[15] Upon payment, the plaintiff must file a certificate with the county auditor, who then transfers the property on the county tax records.
Step 6: Exceptions and Final Offer. Either party may file exceptions to the appraisers’ report, challenging the amount of compensation awarded.[16] Exceptions to the appraisers’ report must be filed within forty-five (45) days after the clerk mails the report to the parties. If exceptions are filed and the plaintiff has paid the assessed damages, the defendants may withdraw their proportionate share of the deposited funds, subject to a written undertaking to repay any excess if the final judgment awards less than the amount withdrawn. No written undertaking or surety is required if the defendant moves to withdraw only the amount previously offered by the plaintiff.
Within forty-five (45) days of the trial on just compensation, the condemnor must make an offer of settlement to the defendant.[17] Within five (5) days of the offer, the defendant may accept or send a counteroffer of settlement. The offer must specify the amount, exclusive of interest and costs, that the party serving the offer is willing to accept as just compensation and damages for the property sought to be acquired. The offer or counteroffer supersedes any other offer previously made. If the offer is rejected, it may not be referred to for any purpose at the trial, but it may be considered solely for the purpose of awarding costs and litigation expenses.
Notably, both direct and indirect condemnation actions fall under the general provisions of Indiana’s Eminent Domain Code. I.C. § 32-24-1-16 extends the processes to inverse condemnations — situations where property has been acquired for public use without following the statutory procedures — in substantially the same manner as direct condemnations.[18] In other words, when the government informally takes property without just compensation, and a landowner seeks recovery, the procedures under I.C. § 32-24-1 for determining just compensation still apply.
Indiana Precedent on the Compensability of Access Rights
One of the more nuanced and contentious areas of condemnation law revolves around compensation for access rights and the resulting loss of business. Under Indiana law “the mere reduction in or redirection of traffic flow to a commercial property is not a compensable taking of a property right.”[19]Importantly, there is a distinction between cases dealing with the elimination of rights of ingress and egress and those dealing with traffic flow issues. While a property owner does not have a property right in the free flow of traffic past his or her property, a property owner does have a property right in any land or easement physically taken.
In Kimco, the plaintiff was a shopping center in Evansville, Indiana with access points on the north and south of the affected property. As a result of the State’s condemnation, the access point at the south entrance was impaired, and an unsafe congestion was created at the north entrance. The State-appointed appraisers found that the value of property actually acquired (including a strip of land and a temporary construction easement) was worth around $100,000. Nevertheless, the jury awarded the plaintiffs $2,300,000, including the value of the impaired access and any damage to the residual property.
The Indiana Supreme Court reversed the judgment of the trial court, finding that “physical takings and coincident roadway improvements are distinct actions, even if concurrent.”[20] The court upheld the principal set forth in State v. Ensley, stating that “any impaired value derived from some action that does not ‘encroach upon the property’ is not compensable.”[21] Notably, in Kimco, neither of the existing access points were eliminated due to the condemnation, nor did the State deprive the owners of their rights of ingress or egress. Therefore, while plaintiffs are not entitled to loss of business or other damages resulting from the changes in traffic flow, plaintiffs are entitled to compensation for the physical taking of their easement rights.
Conclusion
The condemnation procedure in Indiana is procedural in nature, but it oftentimes involves substantive arguments regarding what rights are being condemned and what rights ought to be compensated. A governmental entity or public utility that needs to condemn within a specific timeframe must diligently adhere to the statutory requirements or risk losing funding and derailing their project. Likewise, an individual landowner or business facing condemnation must accurately assess the value of their case and the property interests at risk and thoughtfully negotiate or litigate the matter. Whether you are government entity or public utility seeking to complete a project, or a landowner seeking to protect your interests, each condemnation case is different and the experienced real estate group at SKO is ready to help you navigate the issues.
[1] IN CONST Art. 1, § 21.
[2] Hutchinson v. City of Madison, 987 N.E.2d 539 (Ind. Ct. App. 2013).
[4] Kozicki v. City of Crown Point, Ind., 560 F. Supp. 1203, 1204 (N.D. Ind. 1983).
[6] Chambers v. Public Service Co. of Indiana, Inc., 265 Ind. 336 (1976).
[9] I.C. § 32-24-1-5.5. (The timeframe to file a complaint after submitting a good faith offer differs for certain public utilities and INDOT. See I.C. 32-24-1-5.8; I.C. 32-24-1-5.9.)
[14] N. Indiana Pub. Serv. Co. v. McCoy, 239 Ind. 301 (1959).
[17] I.C. § 32-24-1-12.
[18] State v. Koorsen, 181 N.E.3d 327 (Ind. Ct. App. 2021).
[19] State v. Kimco of Evansville, Inc., 902 N.E.2d 206, 214 (Ind. 2009).
[20] Id. at 216.
[21] Id. at 213.
