Government Liability for Public Improvement and Repair

Under the United States Constitution, the government is permitted to take and use the property for a public purpose so long as they provide the property owner with just compensation. In general, federal and state governments have delegated this power of eminent domain to local governments and municipalities.

What is a Public Purpose for Eminent Domain Matters?

In order for a government to take private property under the power of eminent domain, it must show that the property will be used for a public purpose. Generally, the government is provided with a lot of leeway regarding what constitutes a public purpose.

Likewise, a court is typically unwilling to question the government’s purpose as the reason for taking an individual’s land.

What is a Public Utility?

A public utility provider is an entity that provides an essential service to the community. These types of services include:

• Electricity;
• Heat;
• Trash removal; and
• Road repair.

Public utility companies include:

• Cable;
• Internet providers;
• Telephone providers;
• Natural gas providers;
• Oil delivery services;
• Waste management providers; and
• Electricity providers.

What are the Public Utilities’ Duties?

A public utility is a company that is either owned by a municipality or is privately owned. The private owners are the companies’ shareholders of a privately owned public utility.

A privately owned public utility has a twin responsibility. They are required to satisfy shareholder concerns.

These types of public utilities make money through a process called rate of return regulation. In this process, the government, in exchange for giving the utilities a monopoly, sets the price the utilities can charge customers.

A privately owned public utility, which the government keeps free of competition, is permitted to earn a profit, called return on equity. This profit is given to the shareholders of the public utility.

These public utilities also provide essential public services. Public utilities are heavily regulated by the state, local, and federal government authorities to ensure these services are provided.

With these privately owned public utilities’ arrangement with the government, they have several obligations to the customers they serve. They must serve their communities by providing services to any community member who made the request.

In other words, the utility cannot engage in racial or other discrimination when providing services. It must serve all individuals who request and pay for the services.

A public utility is required to provide a minimum level of service. With this obligation, the service provided is required to be safe for customers to use.

If an issue with the service develops, the public utility has a duty to correct the issue. For example, if a storm causes a downed power line and a blackout, the utility is required to perform tree and power line removal and restore the service.

A public utility is required to charge customers only as permitted by the rate the utility has provided with the regulatory authority. The law requires that a public utility is required to file a document that the public is permitted to inspect, which outlines its:

• Services;
• Charges; and
• Rates.

Public utilities are required to provide services in good faith and deal fairly with their customers. The obligation to act in good faith is implied by the law, or reads into, the service contract between the public utility and the customer.

Acting in good faith and dealing fairly requires a public utility to:

• Respond to customer complaints;
• Respond to customer questions about bills; and
• To make the terms of service clear.

Who Regulates Public Utilities?

A privately owned public utility may be regulated at any level of government, including:

• State;
• Local, including:
  • county;
  • municipality;
  • township; and
• Federal.

Government agencies regulate public utility at the state and local levels. State agencies may have names, including:

• Public Service Commission;
• Board of Public Utilities;
• Public Utility Regulatory Authority; and
• Similar designations.

Local authorities which regulate a public utility have similar names. State authorities regulate these local authorities, or they operate independently.

When services are provided that cross state lines, the federal government acts as a regulator—for example, cable, televisions, and radio work by transmitting signals throughout the country.

The name of the federal agency which regulates cable networks and internet service providers is called the Federal Communications Commission (FCC). Another example of a federal agency regulator is the Nuclear Regulatory Commission (NRC).

The NRS agency regulates nuclear power providers to protect public safety and health.

Can the Government be Liable for Failing to Improve Public Utilities?

The majority of courts permit recovery based on eminent domain, so long as the construction or repair of the public improvement was:

• Unlawful;
• Unjustifiably prolonged; or
• In any other way unreasonable.

Eminent domain laws govern the taking or use of property by the government. For example, suppose that the government closes a street off for repair and limits Bob’s access to his home.

If the repairs only take a day or two and Bob still has access to his driveway, it is not likely that Bob can recover. If, however, the construction lasts the entire year and Bob’s driveway is rendered inaccessible, it is more likely that Bob should be compensated.

How is This Different from Eminent Domain?

Eminent domain occurs when the government takes and uses another individual’s property for public purposes. In contrast, the effect on private property is more indirect when dealing with a public improvement or repair.

For example, if the government closed off the sidewalk next to the home instead of the home itself. Therefore, although the government is not taking over private property, it may affect the individual’s right to free use and enjoyment of their property.

What Types of Public Improvements or Repairs Can Lead to Liability?

Although the list of situations may vary, there are several common cases where liability has been found for interfering with private property, including:

• Highway repairs restricting property access;
• Construction of:
  • railways;
  • subways; or
  • other public transportation restricting property access;
• Repair or construction of sewer and/or water facilities that restricts property access;
• Repair or construction of telephone or power lines that restricts property access; and
• Dust, smoke, or noise entering onto private property as a result of a public improvement or repair.

Liability may also be found if the governmental interference creates a toxic exposure situation or if it involves pollution or other similar issues with the property. An example of this would be where the governmental entity’s conduct results in water being contaminated on private property.

Can I Recover for Lost Sales or Profit if My Property is a Business?

Whether or not an individual can recover for lost sales or profit if their property is a business will depend upon the situation. Although there are some states and local municipalities which allow for recovery for lost sales due to public improvement or repair, there are also some that do not.

Additionally, each situation may be different because of:

• The unique nature of the land;
• Natural features; and
• Other elements of the property are involved.

Therefore, it is best to consult the state’s local laws regarding these issues.

How Can a Lawyer Help Me?

If a public improvement or repair is interfering with the use or enjoyment of your property, it may be helpful to consult with a real estate attorney, who can inform you of your legal options. Your lawyer will be able to inform you regarding local eminent domain laws as well as assist you in obtaining proper compensation from your local government.