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Compensation for land and loss of goodwill

Eminent domain can be described as the government's power to buy property without consent by the landowner to the transcaction. The authority is not a one-way street, however. The law declares "just compensation" be made to the owner for the loss. The value of that compensation is what makes eminent domain and related issues dense and complex.

In California, just compensation is not limited to the real property taken. It can also be quantified in terms of fixtures, equipment, machinery, furniture, and even intangible assets, such as loss of business goodwill. For example, if you own a business on a parcel taken by eminent domain or inverse condemnation, forcing you to lose the benefits of that location and resulting in increased operating expenses and/or decreased profits, you could be entitled to compensation for loss of business goodwill. The factors to be measured can be as dense and complex as the real property portion of an eminent domain matter.

Business goodwill defined

At its heart, goodwill is the reputation you have built up within the community over the years you have been in business. It might best be gauged by determining the loyalty of your customer relationships. If you can show that moving to a new location because of the taking of your existing site will cost you a significant loss of recurring business, you have a right to be compensated for that anticipated loss.

Here is how state code frames the issue:

"Goodwill" consists of the benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in probable retention of old or acquisition of new patronage.

Clearly, establishing the existence of goodwill can be a challenge. Yet that is not all that is required. First the court must agree that there is sufficient evidence to warrant compensation. Then, a jury must be convinced and persuaded to grant an award. That is why obtaining the maximum value depends on having experienced counsel at your side.

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