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Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki 201 HM

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Page 1: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Compulsory acquisition(expropriation, compulsory purchase, eminent

domain)

Do we need compulsory acquisition methods?See classical photos below!

Helsinki 2015HM

Page 2: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Reasons for compulsory acquisition (why are not voluntary agreements sufficient?

1. Property owner may veto transfer of property, when the property is needed for new use

2. Seller is in a monopolistic position3. Distribution of wealth between seller and buyer in favour of

the community/municipality or developer

But it is in principle important with a balance between public and private interests

Public interests can be expressed as the acquisition benefits (not always expressed as monetary value) must exceeds its costs and the acquisition must be important

Following lecture4. Sweden (as a specific example)5. International overview (also only with examples)Nationalization is not included in the lecture but it is allowed in some countries in Europe, e.g. France and Germany

Lecture: Compulsory acquisition and taking; Hans Mattsson, KTH, Stockholm

Page 3: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Purpose type Permission government sometimes takes over)

Taking possession Compensation

Expropriation Government Land and environment court

Land and environment court

Water enterprises Land and environmental court

Land and environment court

Land and environment court

National roads Traffic authority Traffic authority Land and environment court

Rail road Traffic authority Cadastre surveyor Cadastre surveyor

Municipal street Municipality (detailed plan) Cadastre surveyor Cadastre surveyor

Oil-, el-, telecom lines Government or authorities Cadastre surveyor Cadastre surveyor

Joint facility Cadastre surveyor Cadastre surveyor Cadastre surveyor

Compulsory purchase between land owners in a detailed plan (reallotment)

Municipality (detailed plan) Cadastre surveyor Cadastre surveyor

Mining Mining authority Mining authority Mining authority

Cultural heritage Cultural authority Cultural authority Land and environment court

Land consolidation Cadastre surveyor Cadastre surveyor Cadastre surveyor

Regulations/takings (will not be discussed here!)

Government, local government, authority

At legal force Land and environmental court (if compensation)

Examples of combinations of Swedish decision makers for compulsory acquisition and taking

Remark: The table assumes that there are no agreements

Page 4: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Institutional Model for Land AcquisitionInitiation Who may initiate?

Investigation Responsible authority?

Who provides information, evidence etc.?

Specific procedures?

Decision Decision-making authority?

Decision-type?

Participation-/Bargaining rights?

Appeal Judicial or administrative?

Remark:Three main decisions are normally needed1. permission2. taking possession3. compensation

Taking possession and compensation can be decide by another organization(s) than the permission giving organization. In such a case, the steps in the model are repeated.

Source: Peter Ekbäck Lecture: Compulsory acquisition and taking; Hans Mattsson, KTH, Stockholm

Page 5: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Initiation Summons application

Investigation Land and Environment Court

Parties of expropriation present claims and evidences before the Court

Decision Land and Environment Court

Judgment on acquisition and compensationParties free to negotiate and settle out-of-court

Appeal Land and Environment Court of Appeal

Supreme Court

Initiation Application

Investigation County Administrative Board

Applicant: Technical and economical data

The Board: Investigation of public interests

Decision National GovernmentExpropriation permit

Appeal Governmental decisions cannot be appealed

Expropriation permission (Swe)(Government normally)

Expropriation trial (taking possession and compensation)(Land and Environment court)

Model test applied on Swedish expropriation

Page 6: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Accepted purposes for expropriation (Sweden)(to take different land rights and to create land rights)

⁻ land for future urban development if the land shall be used in a foreseeable future⁻ land for infrastructure needs⁻ land for industry of great public importance⁻ for security and health protection⁻ military purposes⁻ exchange of land with another country⁻ gross neglect in property management⁻ fishing conservation and fishing science⁻ cultural heritage⁻ nature conservation and recreation⁻ enhanced land values due to public investments

In reality, expropriation is extremely rare, instead other specified acts are used with permission from the government, local government or cadastre surveyor authority (see second slide above)

Page 7: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Initiation Application

Investigation Cadaster surveyor

Parties are heard at meetings

Decision Cadaster surveyor

Permission (if that is not handled earlier by other authority), acquisition (taking possession)

and compensationParties free to negotiate but the CS has to check

the agreement

Appeal Land and Environment Court of Appeal

Supreme Court

Initiation Application

Investigation Relevant authority responsible

Authority or applicant (depending on case) makes the investigation

Decision Authority

Permit

Appeal Authority (if governmental decisions it cannot be appealed)

Permission (if permission case)

Cadastral procedure(if non-permission case)

Compulsory acqusition through cadastral procedure, e.g. , utility easement, joint facility, reallotment(Sweden)

Page 8: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Three types of taking possession1. Normal taking possession: After the compulsory purchase procedure is completely finalized

(order, money paid)2. Advanced taking possession: Before the compulsory purchase procedure is completely

finalized, so construction activities can start. However, not full ownership right, so ownership right can´t be registered. The future owner has no right to mortgage the property

3. Qualified advanced taking possession: Full ownership rights with registration possibility, even if the compulsory purchase procedure is not completely finalized . The new owner can mortgage the purchased land

Taking possession (Sweden)

Application to court

Court order: Taking possession and

compensation

Full possessionType 1

Court order: Advanced taking possessionPreliminary compensation

Full possessionType 2

Right to construct but not to register ownership

Court order: Qualified advanced taking possession

Preliminary compensation

Full possessionType 3

Court order: Compensation

Court order: Compensation

Remark: Assumption, no appeal

(sometimes additionalcompensation decision after 10 years)

Page 9: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Market value related to other approaches

Price

Number of transactions

Most probable price

D. Market value

C. Seller´s reservation price

B. Profit-sharing

A. Buyer´s maximum willingness to pay

E. Compensation below market value

Source: Based partly on Kalbro and Paulsson 2014, adapted from Werin 1978

Page 10: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

+25%Market value

Reservationprice

Swedish expropriation compensation (also for situations similar to expropriation)

+25%

Compensation before

Compensation since May 2011

(we can call it safety margin)

Page 11: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Constitutional protection of ownershipAll countries mentioned later in the lecture follows European Convention on Human Rights that protects private ownership but also accepts that property can be compulsory purchased if it is important from public point of view

A lot of countries share common strands of legal history that effects legislation and it is also interesting that the countries have similarity in defining the acceptable limits of expropriation, even before the European convention was introduced. Then with legal authorisation, elements of public good and fair compensation

Common law countriesEngland and Ireland have a piecemeal nature of their compulsory acquisition legislation. Ireland has a constitutional protection for ownership

French influenced civil law tradition (France, the Netherlands, Belgium, Spain and Sweden)Compulsory acquisition must be for public purposes and for fair compensation. In Sweden the public purpose is not general, instead defined

Germanic civil law tradition (owners have social obligations)Strong property protection and at the same time must property owners accept that there must be a balance between public and private interests

Post-Socialist/Post-Communist Era Countries (Poland in this case)Has a list of public purposes and the legislation require a just compensation to be paid

The following part of the lecture is based on Expropriation law in Europe, edited by Jacques Sluysmans, Stijn Verbist and Emma Waring, 2015 (the book has compared 16 European countries, Finland is not included in the survey)

Page 12: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Accepted purposes (examples)- Broad general statements in some countries- Norway have stipulated 55 potential grounds for expropriation- Sweden specifies purposes and expropriation is supplemented by about 20

special enactments that take precedence over general rules- England and Ireland have a piecemeal and complex combination of

legislation and government guidance documents

- Several countries allow compulsory acquisition for private parties if it serves public goods. Some countries do not allow compulsory acquisition for “speculative economic benefits”

Page 13: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

ProceduresQuite different in different countries but all surveyed countries require that negotiations are undertaken before compulsory acquisition

In all surveyed countries, the owners must be noticed before the procedure starts and there must be an element of publicity. Time for notification varies between countries

The procedure can be administrative or a combination of administrative and judicial procedures (England is an example of the first one and Sweden of the second). If a dual procedure then the permission is given by an administrative body and compensation by court (in the Netherlands the court also judge if the administrative body has followed the rules)

In some countries the permission can be checked by administrative or civil courts. But in Italy, Norway and Sweden it is highly unlikely to be successful. In the rest of the surveyed countries there is a better substantial safeguarding mechanisms to protect property owners from compulsory acquisition. The grounds can be:1. No public interest2. There is no proportionality/balance between public and private interests3. No need of compulsory acquisition 4. No legal basis for compulsory acquisition procedural problems (legal procedures are not

followed)

Taking possession of the property must be preceded by at least a substantial advance on the compensation for the compulsory acquisition. In Sweden it must be paid before taking possession (see however advance taking possession above)

Page 14: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

CompensationCompensation rules are influenced by the political nature of the country

Liberal oriented countries have more generous compensation rules based on the principle that the property owner shall be in the same economic position after the compulsory acquisition - Full compensation for market value is the general view- Sweden adds 25%

Socialistic or social-democratic countries highlight the social function of properties and have more restricted compensation rules- Italy has no rule for compensation of market value (25% under market value if

the property is intended to be used for social and economic reforms)- Germany emphasis social obligation and can compensate below market value

All countries do not compensate for damageMoral damage (reservation price) is normally not compensated

Compensation decided by - A board (Italy, Spain, Germany)- Judge, sometimes supported by expertise (France, the Netherlands, Greece,

Sweden)

Valuation methods Comparative, yield or cost methods depending on case

Page 15: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

FIG recommendations(38 sections for own studies)

1. Compulsory purchase shall not be preferred tool for the acquisition of land2. The compulsory purchase shall be implemented with respect for the rights of affected

parties3. The compulsory purchase shall be legitimate4. The compulsory purchase process shall be an inherent part of the process of land

acquisition and be exercised in an objective, impartial, independent and ethical manner5. The compulsory purchase process shall be transparent6. The costs of the compulsory purchase process are to be carried by the expropriator7. The right to appeal to an independent court shall be ensured8. Affected parties have the right to represent themselves and/or use an attorney, expert, or

agent to do so9. Compulsory purchase can only be used for public interests10. The basis for compulsory purchase shall be legitimate11. Etc.

Source: FIG , 2010, Compulsory Purchase and Compensation – Recommendations for good practice, FIG publication, no 54

Page 16: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Compensation if reallotment/land consolidation/joint facility

Owner A Owner B Owner A Owner B Owner A Owner B Owner B

Owner A

Owner ??

Owner A Owner B

Owner C

Joint facility road for A and C

Reallotment cases

Reallotment (land consolidation case) Joint facility case

Page 17: Compulsory acquisition (expropriation, compulsory purchase, eminent domain) Do we need compulsory acquisition methods? See classical photos below! Helsinki

Value for property owner who loose land or right

Profit-sharing

Value for property owner who gets additional land or right

Compensation if reallotment/land consolidation/joint facility