What is pre-judgment interest on an eminent domain award?

Books stacked on a desk with a lawyer's gravel.Pre- judgement interests are accrued interest on judgement amounts. Eminent domain is when the government “takes” private property for the public’s use and then owes fair and just compensation to the original private property owners. An eminent domain award is the court-ordered judgment amount that is based on the fair market value of the property owed to the private property owner. 

Generally speaking, eminent domain awards must be paid out to the private property owner before a property’s title can be transferred or the government can take physical possession of the property. Read on to understand what both pre-judgment interests are and eminent domain awards contain.

What is a pre-judgement interest?

Pre-judgment interest starts to accrue on the number of costs stemming from a judgment from the court-ordered date. The purpose of pre-judgment interest is to compensate the plaintiff for the loss of use of his or her property, and for loss of use of the award during the prejudgment period, or to make the plaintiff whole as of the date of the injury. (Union Pacific Railroad Company v. Santa Fe Pacific Pipelines, Inc. (2014) 231 Cal.App.4th 134.) 

Accrued interest on an unpaid judgment amount by the legal amount from the date of the court order or a court’s judgment entry. The legal amount is currently 10 percent a year in 2022. 

Some courts look at the relationship between pre-judgment interests in eminent domain cases and view interest accrued as the interest owed to the private property owner. This means that pre-judgment interest could potentially be owed to the private property owner if there are reasonable expenses occurred during the court proceedings. Another situation in which courts ruled that prejudgment interest could potentially be owed to the private party is if there is a difference between the government’s “good faith” offer based on their perception of the “fair market value” and the trial judgment amount.

What is eminent domain?

Eminent domain is the power of local, state, or federal governmental agencies to take private property for public use so long as the government pays “just” compensation.  The government’s authority to do so derives from the Fifth Amendment to the United States Constitution, and Article I, section 19, of the California Constitution. Notably, Code of Civil Procedure states that private property shall be taken by eminent domain only when there is a clearly stated public use for the property in question. 

Examples of public uses can be libraries, highways, roads, fire stations, police stations, schools, and other similar public areas. In some eminent domain situations, the entire property does not need to be “taken” to serve the government’s public use interest, but rather a segment of the property. You can think of this example via a newly built road or highway through an existing neighborhood.

According to California Code of Civil Procedure 1245.220, the government agency wishing to enact an eminent domain over private property must first adopt a formal resolution to acquire the property before starting the eminent domain proceeding in court. This formal resolution must be stated and then adopted via the avenue of a public hearing before any eminent domain action takes place in court. 

What is an eminent domain award?

An eminent domain award or an offer by the governmental agency for the value of your property serves to give the private property owner(s) an award or an offer based on the fair market value of the property.

The court uses several different avenues of determining the fair market value of the property in question. These include the rarely used “cost” approach, the “income” approach, and the “comparable sales” approach. The cost approach is only used for unique or special purpose property. The income approach looks at the value from the point of perspective of an investor. The comparable sales approach determines the sale or listing prices from similar properties to calculate what the fair market value is. 

All eminent domain awards are not the same. Some factors that courts use for judgments for eminent domain awards are the location of the property in question, the current use requirements or zoning laws, if there are any naturally growing issues, if there are any leases in place for the property, and how the property has been used historically and what it is slated for use in the future. 

A private property owner or a set of private property owners are not required to accept the governmental agency’s offer. Alternatively, they may counter the offer or assert the legal argument in court that their property is worth a higher value. Before countering or bringing the action in court, it may be worthwhile for a private property owner to receive an appraisal of the fair market value price to counter the government’s first offer.

If a settlement between the government agency and the private property owner(s) can not be reached, then there will be a jury trial that takes place that determines the fair market value of the property in question. 

After this judgement is entered into by the court, then the government has 30 days following the entry of judgement to pay out the ordered compensation to the private property owner. 

In some situations, the government may wish to “take” only a part of the property in question for the public’s use, such as for a new road or highway. In these scenarios, then damages will be awarded in addition to the compensation owed as the fair market value. These damages are meant to recuperate the costs for any of the residual property left behind in a partition eminent domain action. Damages seek to make the private property owner’s interest “whole” again because the property would then have less value because of its severance in whole or in part. 

How Underwood Law Firm can assist you?

Eminent domain and pre-judgement interests are very complicated and tricky legal situations. There may be a lot of feelings involved when the government attempts to “buy you out” from your home and it may prove fruitful to consult with an attorney. The attorneys at Underwood Law Firm have demonstrated years of experience working with eminent domain legal issues and pre-judgment real estate issues. Let these knowledgeable attorneys assist you with the many steps and deadlines to meet for these types of real estate issues and others.


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