Yes, private companies can use eminent domain, but only when a government body has specifically delegated that power for a project serving a public purpose. No private company has an inherent right to force you off your property. In practice, delegated authority goes almost exclusively to companies building infrastructure the public depends on: natural gas pipelines, electric transmission lines, and railroads. A developer who wants your lot for a shopping center or an apartment complex cannot invoke eminent domain on its own. If a qualified private company does target your property, you keep the same constitutional protections you would have against a government taking, including just compensation and the right to challenge the taking in court.
Which Private Companies Actually Have This Power
Eminent domain is a government power rooted in the Fifth Amendment, which prohibits taking private property for public use “without just compensation.”1Congress.gov. Overview of Takings Clause The government doesn’t build every bridge, pipeline, or power line itself. It delegates authority to private companies whose projects serve the public, and without that delegation a private company has no legal mechanism to compel a sale.
The clearest federal example is the Natural Gas Act. When the Federal Energy Regulatory Commission issues a “certificate of public convenience and necessity” to a pipeline company, that certificate carries eminent domain power with it. If the company cannot reach a deal with a landowner, it can go to federal or state court to acquire the right-of-way needed for the pipeline.2Office of the Law Revision Counsel. 15 USC 717f – Construction, Extension, or Abandonment of Facilities The Supreme Court confirmed in 2021 that this delegation is broad enough to let pipeline companies condemn even state-owned land, not just private parcels.3Supreme Court of the United States. PennEast Pipeline Co. v. New Jersey
Electric utilities, telecommunications companies, and railroads receive similar authority through state legislation or other federal statutes. The pattern is always the same: a government body must affirmatively grant the power, and the project must serve a recognized public purpose.
The Public Use Requirement
Every exercise of eminent domain, whether by a government agency or a delegated private company, must serve a “public use.” For most of American history, that meant something the public would physically use: roads, bridges, public buildings. Courts eventually broadened the standard to include projects that provide a public benefit without direct public access, like a privately owned utility line delivering electricity to homes.
The most controversial expansion came in 2005, when the Supreme Court decided Kelo v. City of New London. The Court held that economic development, meaning increased tax revenue and job creation, qualified as a public use, even when the condemned property would be handed to a different private owner for redevelopment.4Justia. Kelo v. City of New London Justice Stevens, writing for the majority, acknowledged that states could impose tighter restrictions through their own laws. More than 40 states did exactly that in the years after the decision. The most common reform was a flat prohibition on using eminent domain solely for economic development or to boost tax revenue. Some states went further, requiring supermajority votes before any condemnation could proceed, increasing compensation requirements, or tightening the definition of blight so it couldn’t be used as a loophole. Several state supreme courts rejected Kelo outright as a guide for interpreting their own state constitutions.
The practical effect for you: while Kelo is still federal law, its reach in your state may be significantly narrower than the decision itself suggests.
What “Just Compensation” Actually Covers
The Fifth Amendment guarantees just compensation when property is taken.1Congress.gov. Overview of Takings Clause Courts read that phrase to mean fair market value: the price a willing buyer would pay a willing seller, with both sides reasonably informed and neither under pressure. The goal is to put you in the same financial position you would be in if the taking never happened.
Fair market value accounts for the property’s highest and best use, not necessarily how you happen to be using it today. If your five-acre lot is zoned for commercial development but you’re using it as a garden, the appraisal should reflect the commercial potential. Federal acquisition rules require the condemning authority to have the property professionally appraised before making any offer, and the initial offer cannot be less than the appraised fair market value.5Office of the Law Revision Counsel. 42 USC 4651 – Uniform Policy on Real Property Acquisition Practices Any change in the property’s value caused by the announcement of the project itself, up or down, must be disregarded when setting the offer price. You also have the right to accompany the appraiser during the property inspection.
Partial Takings
When only part of your property is taken, compensation covers more than the strip or parcel acquired. You’re also entitled to severance damages: the reduction in value of the land you keep. Courts typically use a before-and-after approach, comparing what the entire property was worth before the taking with what the remainder is worth afterward. Reduced access, awkward lot shape, noise from the new infrastructure, and changes in how you can use the remaining land all feed into that calculation.
Relocation Assistance
For projects involving federal funding or federal agency action, the Uniform Relocation Assistance and Real Property Acquisition Policies Act adds protections beyond the constitutional minimum. Displaced homeowners and businesses may qualify for relocation assistance payments based on the cost difference between the acquired property and a comparable replacement dwelling.6Office of the Law Revision Counsel. 42 USC 4601 – Definitions These benefits are separate from the fair market value payment for the property itself. Many states have adopted similar protections for state and local projects.
Who Pays Your Attorney and Appraiser
In many states, you’re responsible for your own legal and appraisal costs under the “American Rule.” Some states take a different approach: if the final court award exceeds the government’s last pre-lawsuit offer by a certain percentage, the condemning authority must reimburse part or all of your attorney fees. A handful of state constitutions require fee reimbursement as part of making the property owner whole. The rules vary enough that checking your state’s specific statute before hiring professionals is important.
How to Push Back
You are not required to accept a condemnation quietly. Property owners have several avenues to challenge one, and the earlier you engage, the more options you have.
Challenge the Public Use
The most fundamental challenge is arguing that the project doesn’t actually serve a public purpose. If a private company is using delegated authority to acquire land that primarily benefits the company’s profits rather than provide infrastructure or services the public relies on, you have grounds to contest the taking. Post-Kelo state reforms have strengthened this argument in many states by narrowing what qualifies as public use and specifically prohibiting takings for pure economic development.
Challenge the Necessity
Even if the project serves a public purpose, you can argue that your specific property isn’t necessary for it. Maybe the pipeline could follow an alternative route. Maybe the road could be narrower. Courts give the condemning authority some deference on project design, but they don’t rubber-stamp everything. An experienced attorney may also negotiate a smaller acquisition footprint, taking a portion of your land instead of all of it, or preserving your access rights.
Challenge the Compensation
The most common fight is over money. Government appraisals often come in low, especially when they don’t fully account for the property’s highest and best use or fail to adequately measure severance damages to the remainder. Getting your own independent appraisal from a qualified professional is the single most important step you can take. In court, the judge or jury weighs both sides’ appraisal evidence, and final awards significantly higher than the government’s offer are not unusual.
Procedural Defenses
Condemning authorities must follow specific procedural requirements: proper appraisal, written offer, good faith negotiation. If the authority skipped steps or failed to comply with its statutory obligations, you may be able to delay or defeat the condemnation on procedural grounds. These arguments don’t always stop the taking permanently, but they can force the authority back to the starting line and give you additional negotiating leverage.
One Practical Warning About Quick-Take
In some jurisdictions, the condemning authority can take possession of your property before the compensation question is resolved. This is called a quick-take. The authority deposits the appraised value with the court, and you can withdraw that deposit while the case continues. If the court ultimately awards you more, you receive the difference. Quick-take is particularly common for highway and pipeline projects with tight construction timelines. The practical reality is that you may lose possession well before the final compensation check arrives, so raising challenges early matters.
When There’s No Formal Taking but You’ve Still Been Harmed
Sometimes the government, or a private entity acting with government authority, effectively destroys your property’s value without ever filing a condemnation action. A new drainage project floods your backyard. A highway ramp makes your commercial building inaccessible. Regulations eliminate nearly all economically viable use of your land. In these situations, you can file an inverse condemnation claim. The word “inverse” reflects that the usual roles are flipped: you bring the lawsuit against the government, rather than the government bringing it against you.
In a standard condemnation case, the government acknowledges it’s taking your property and the only dispute is the price. In an inverse condemnation case, the government hasn’t admitted to any taking at all. You bear the burden of proving that the government’s actions caused a substantial and direct interference with your property rights, amounting to a taking for which you’re owed just compensation. These cases are harder to win than standard condemnation disputes, but they exist as a backstop when government action inflicts real damage without going through the formal process.
Tax Consequences to Plan For
Condemnation proceeds are generally treated as the sale price of your property. If the payment exceeds your tax basis, you have a taxable gain. Under Section 1033 of the Internal Revenue Code, you can defer that gain if you purchase replacement property similar in use within the replacement period.7Office of the Law Revision Counsel. 26 USC 1033 – Involuntary Conversions For most property, the replacement period ends two years after the close of the first tax year in which you realized any part of the gain. Real estate held for business or investment purposes gets three years.8Internal Revenue Service. Publication 544 – Sales and Other Dispositions of Assets
Not every component of a condemnation award qualifies for deferral. Interest payments, lost business profits, compensation for property destruction, and relocation cost reimbursements are all taxable in the year received; Section 1033’s deferral applies only to payment for the property itself.7Office of the Law Revision Counsel. 26 USC 1033 – Involuntary Conversions If your main home is condemned, you may also be able to exclude up to $250,000 of gain ($500,000 for married couples filing jointly) under the standard home sale exclusion before even considering Section 1033. A large condemnation payment usually warrants professional tax advice, because the interaction between exclusions, deferrals, and different categories of compensation gets complicated quickly.