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House not for sale
Can the government force you to sell your house in the name of new development?
January 6, 2005: 12:30 PM EST
By Sarah Max, CNN/Money staff writer

Salem, Ore. (CNN/Money) The neighborhood of Fort Trumbull in New London, Conn., isn't on the National Register of Historic Places. But it is historically significant to the people who live there.

Bill Von Winkle made a nice living off his rental income in New London, Conn.  
Bill Von Winkle made a nice living off his rental income in New London, Conn.

Wilhelmina Dery, 87, was born in her century-old house near the Thames River.

Her son, Matt, and daughter-in-law, Suzanne, live next door with their teenage son, Andrew. Among their most precious possessions: the garden planted by Matt's grandmother, and the kitchen doorway where they've charted Andrew's height over the years.

The Derys' neighbors have their own, similar stories.

Bill Von Winkle bought his first building in the neighborhood 20 years ago, and went to work making sandwiches in the downstairs deli and renovating the upstairs apartments.

Susette Kelo meticulously restored her small pink Victorian house.

So when the New London Economic Development Corporation, a non-profit organization appointed by the city, approached about 70 property owners in Fort Trumbull about selling their homes to make space for a luxury hotel, condominiums and office space, these and a handful of other owners declined.

Their property, they said, is not for sale.

In November 2000, however, the city invoked eminent domain a government right to seize property for public use and sent out condemnation notices to owners refusing to sell. The city planned to pay the owners fair market value, take possession of the buildings and tear them down.

According to Daniel Krisch, one of the attorney's representing New London and its economic development arm, the city had several good reasons for razing the well-kept middle class neighborhood to replace it with a new, private development.

Krisch contends that the new development would create jobs, boost tax revenue, improve the city's infrastructure and provide public access to the river. It's for the benefit of the entire community, he said.

Taking for the greater good

In February, the Institute for Justice, a libertarian public interest law firm that is representing seven Fort Trumbull owners for free, will argue in the U.S. Supreme Court that the city of New London has abused its use of eminent domain.

Susette Kelo's house has been condemned for economic development.  
Susette Kelo's house has been condemned for economic development.

The case, Kelo v. City of New London, will decide whether the U.S. Constitution's definition of "public use" includes private developments like condos and casinos. The decision will have implications through the country.

The Institute for Justice argues that displacing property owners for private development is not legal. "The Constitution says [eminent domain] should be used for a public use -- a road, a court house, a military base. Not a Wal-Mart," said Scott Bullock, a senior attorney with the institute.

According to a study of court papers and published accounts covering a five-year period, the institute found more than 10,000 examples of property being condemned under eminent domain for the benefit of private parties.

The city of New London and other cities using eminent domain in the interest of urban renewal argue that such private projects are for public use, even if the public only benefits indirectly.

"This is a tool that is important to local governments because it allows them to revitalize areas that otherwise would not get revitalized," said Tom Grundhoefer, general counsel for the League of Minnesota Cities, which is filing a "friend of the court" brief on behalf of New London.

Cities want to attract new businesses and developers to their urban centers rather than contributing to sprawl by building in the suburbs, he said. But they can only do so if they can get existing owners to sell.

"Often times there might be one or two owners who will not go along with the voluntary sales situation," he said. "The question comes up, 'Do you stop the entire project because one or two won't sell, or do you use eminent domain to encourage that activity?'"

Encourage isn't a word that Joy and Carl Gamble of Norwood, Ohio associate with eminent domain.

The retirees are scheduled to be evicted from their home of 35 years in early February to make way for Rookwood Exchange, a $125 million development with offices, shops, housing and restaurants.

In this case, the city of Norwood voted to exercise eminent domain after a study -- which was funded by the developers of Rookwood Exchange -- determined that the Gamble's neighborhood is blighted.

The Gambles say they're proud of their house.  
The Gambles say they're proud of their house.

"Blight 50 years ago entailed serious problems and neglect," said Bullock, citing cracked sidewalks and weeds as examples of blight given in the study. Now, he said, blight is just an excuse for the government to take land from one party and give it to another.

"The easy story is to wrap the Gambles in the American flag and say, 'It's not right,'" said Richard Tranter, an attorney representing Rookwood Partners, adding that it's not unusual for cities to ask developers to pay for studies and other expenses related to development. "But it's not that easy."

Norwood is a doughnut hole in the middle of Cincinnati that is about to declare a fiscal emergency, according to Tranter. What's more, the Gamble's neighborhood is cut off from the rest of the city by a major freeway and roads feeding into that freeway.

"With the exception of the Gambles, every resident is saying they want to get out of the neighborhood," he said. "An 80-year old blind widow called it a blessing."

Tranter says the developer has signed contracts with 65 residents to buy their property for no less than 25 percent above market value, pending the outcome of the Gamble's appeal.

Still, the Gambles don't want to sell for any price.

"We're very proud of this house. It's extremely well built," said Joy.

"We raised our children here. All of our memories are here," she said. "We don't want to move, especially for a shopping mall."  Top of page




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.