50 Pages Posted: 24 Feb 2017 Last revised: 13 Apr 2017
Date Written: February 23, 2017
Incomplete takings are vital and extremely common. Yet, they present unique challenges that cannot be resolved by standard rules of eminent domain. In particular, incomplete, or partial, takings may result in the creation of suboptimal parcels, and even unusable and unmarketable ones. Additionally, partial takings create nettlesome assessment problems that do not arise when parcels are taken as a whole. Finally, incomplete takings engender opportunities for inefficient strategic behavior on the part of the government after the partial taking has been carried out. Current partial takings jurisprudence fails to resolve these problems, and, in some instances even exacerbates them.
In this Article, we offer an innovative mechanism that remediates the shortcomings of extant partial takings doctrines. Specifically, we propose that whenever the government engages in a partial taking, the affected property owner should be given the power to force the government to purchase the remainder (or, untaken part) of the lot at fair market value. Exercise of this power by the private owner would lead to the reunification of the land in its pre-taking form, while transferring title to the entire parcel to a new single owner, namely the government.
Implementation of our proposal would yield several important benefits: First, it would allow for the preservation of the current configuration of parcels, enabling them to remain highly usable and marketable. Second, it would lower the cost of determining compensation for private property owners and thereby of the adjudication process as a whole, in those cases in which private owners choose to exercise their entitlement to sell the remainder to the government. Third, it would significantly reduce the ability of the government to behave strategically and externalize costs on private property owners. Fourth, it would create opportunities for more efficient planning and land use by the government as the government would be free to re-parcel, develop and re-sell the parcels sold to it.
Keywords: Partial Takings, Incomplete Takings, Asset Fragmentation, Eminent Domain, Takings, Takings Compensation, Just Compensation, Options Theory, Put Option, Assessment, Valuation
JEL Classification: H82, P14, P16, K11, K49
Suggested Citation: Suggested Citation
Bell, Abraham and Parchomovsky, Gideon, Incomplete Takings (February 23, 2017). Columbia Law Review, Forthcoming; U of Penn, Inst for Law & Econ Research Paper No. 17-12; San Diego Legal Studies Paper No. 17-277. Available at SSRN: https://ssrn.com/abstract=2922756