This term refers to the money someone gets when their property is taken by the government for public use. It is called just compensation because the individual is being paid fairly and another word for fair is "just" and another word for a repayment of some kind is "compensation."
So, for example, if someone's land is bought by the government so that the government can build a highway, that person will receive a fair payment for that land. This fair payment is usually calculated by the current market value of the property.
This is also a term that can be used in a settlement case where an at-fault party pays an injured party. This settlement money can sometimes be referred to as just compensation, because it is meant to be a fair payment for whatever injuries the plaintiff may have experienced.
The just compensation clause is found in the Fifth Amendment to the US Constitution. It is called the “Takings Clause” and it outlines this concept along with eminent domain, and how they work. Basically, this clause outlines the general rule that if the government wants to use private property for public use, the property owner must be compensated fairly.
Eminent domain refers to the just compensation process. It is the process the government goes through when it buys private property for public use.
Both of these terms are a part of the Fifth Amendment to the US Constitution. They are found in the "Taking Clause" of the Fifth Amendment. This clause states that, "private property shall not be taken without just compensation.” This means then that personal property taken for public use without just compensation is illegal. This concept also includes instances when there is only a temporary seizure of property for a public purpose.
This amendment and clause help protect citizens from seizing personal property unfairly or without paying a fair price for the property.
One example is when the government was building the national highway in the 1950s. In order for this highway to be seamlessly constructed across all of the states, the government needed to use just compensation and eminent domain to buy personal property from homeowners whose homes and land were along the route of this highway.
United States v Pewee Coal Co.
This example took place when the Pewee Coal Company, a coal mine operator, was temporarily seized an operated by the government. In this case, the coal company used the Fifth Amendment to seek out fair repayment for the use of this personal property.
Compensation for someone’s personal property is calculated in one of three ways: through the fair market value approach, the income approach, or the cost approach. These three approaches are the three different kinds of methods used in how to calculate just compensation.
The market method is simple and a common way for the government to evaluate someone’s personal property during the eminent domain process. It involves using the current fair market value of the property to ascertain the monetary value the individual should receive for their seized property.
The income method is used for personal property that generates someone’s income. This value is calculated by looking at the income this property generates as well, and not just the market value of the property.
The cost method is used to calculate unique costs involved in replacing something on the property. For example, the property could have a unique or necessary structure that the owner would need monetary compensation for to recreate.
Another cost calculation that could apply to a situation where eminent domain is being used, is residue damage. Residue damage is included in the cost calculations when only a portion of someone’s personal property is bought by the government.
For example, if only a portion of land is bought and the remaining land is damaged or otherwise affected due to the seized property, then the original property owner may be eligible for residue damage costs. This could happen if someone’s property is now going to be much closer to public infrastructures like a highway, or if less agricultural land is now available for farming purposes.