Eminent domain in Texas is the power of government agencies and certain legislatively authorized private companies to take privately owned land for public use, subject to the Texas Constitution’s guarantee of adequate compensation and the step-by-step procedures in Chapter 21 of the Texas Property Code. If you have been contacted about a taking, the law gives you specific rights at every stage: a written offer backed by an independent appraisal, a hearing before three special commissioners who set the compensation amount, a right to appeal that award to a jury, and, in some cases, a right to buy the property back if the project never happens.
Who Can Take Your Property
Two categories of entities hold condemnation authority in Texas. Government bodies exercise the power directly: the state (mainly through the Texas Department of Transportation), counties, cities, school districts, and special-purpose districts like water and flood-control authorities.
Private companies can also condemn land, but only when the Legislature has specifically granted that authority. Pipeline companies operating as common carriers are the most common example. The Texas Supreme Court has confirmed that common carriers hold this delegated right, recognizing the role pipeline development plays in meeting the state’s energy needs.1Supreme Court of Texas. Hlavinka v. HSC Pipeline Partnership, LLC Electric utilities, railroads, and telecommunications providers hold similar authority. The Railroad Commission of Texas notes that whether a pipeline company can exercise eminent domain is governed by state law enacted by the Legislature, not by the Commission itself.2Railroad Commission of Texas. Pipeline Eminent Domain and Condemnation
Whether the condemnor is TxDOT or a pipeline company, the same statutory procedure applies.
What Counts as a Valid Public Use
Article I, Section 17 of the Texas Constitution prohibits taking, damaging, or destroying a person’s property for public use without adequate compensation. When anyone other than the state itself takes property, that compensation must be paid or secured by a deposit of money before the taking occurs.3Justia. Texas Constitution Article 1 Section 17 – Taking, Damaging, or Destroying Property for Public Use
Texas Government Code Section 2206.001 bars certain takings outright. A government or private entity cannot use eminent domain if the taking confers a private benefit on a particular private party, uses public use as a pretext for such a benefit, is for economic development purposes (unless the development is a secondary result of municipal efforts to eliminate slum or blighted conditions), or lacks a genuine public use. The same statute lists categories that are permitted, including transportation projects, water supply and flood control, public buildings, hospitals, parks, utility services, and common carrier pipelines.4State of Texas. Texas Government Code Section 2206.001 – Limitation on Eminent Domain for Private Parties or Economic Development Purposes
The Offer Process Before a Lawsuit
Before a condemning entity can file suit, it must complete a multi-step offer process. Missing any step can give a landowner grounds to challenge the proceeding.
Landowner’s Bill of Rights
The entity must give you a copy of the Landowner’s Bill of Rights statement at least seven days before making a final offer, and it must also be provided before or at the same time the entity first tells you in any way that it has eminent domain authority. This requirement comes from Texas Property Code Section 21.0112 and applies to both government agencies and private companies.5State of Texas. Texas Property Code Section 21.0112 – Provision of Landowners Bill of Rights Statement Required If you never received this document, raise the issue immediately.
Initial and Final Offers
Under Texas Property Code Section 21.0113, the initial offer must be in writing and include a copy of the Landowner’s Bill of Rights, a statement indicating whether the compensation includes remainder damages, a conveyance instrument, and the name and phone number of a representative.6State of Texas. Texas Property Code Section 21.0113 – Bona Fide Offer Required
The final offer cannot be made until at least 30 days after the initial offer. Before making the final offer, the entity must obtain a written appraisal from a certified appraiser, include that appraisal with the offer, and set the offer at or above the appraised amount. Once you receive the final offer, you have at least 14 days to respond before the entity can file a condemnation petition.6State of Texas. Texas Property Code Section 21.0113 – Bona Fide Offer Required
Read the appraisal carefully. Appraisers sometimes undervalue improvements, overlook income-producing features, or use comparable sales that don’t reflect your property’s highest and best use. Document omissions in writing. Your own surveys, recent tax assessments, and income records will pay off later if the case goes to a hearing.
The Special Commissioners Hearing
When negotiations fail, the condemning entity files a condemnation petition in the county court where the property is located. The petition must describe the property, state the specific public use, and confirm compliance with the Landowner’s Bill of Rights and bona fide offer requirements.7State of Texas. Texas Property Code Section 21.012 – Condemnation Petition
Within 30 days after the petition is filed, the judge appoints three disinterested real property owners who live in the county to serve as special commissioners, plus two alternates. If the parties agree on individuals beforehand, the judge gives those names preference. Each side may strike one of the three appointed commissioners; struck commissioners are replaced by the alternates in the order originally listed.8State of Texas. Texas Property Code Section 21.014 – Special Commissioners
The commissioners’ only job is to set the dollar amount of compensation. They do not decide whether the taking itself is lawful. Both sides present evidence, usually through competing appraisers and land-use experts. The commissioners can compel witnesses, require production of documents, administer oaths, and punish contempt in the same manner as a county judge.8State of Texas. Texas Property Code Section 21.014 – Special Commissioners After the hearing, they issue a written award filed with the court.
Appealing the Award to a Jury
Either side can challenge the award by filing written objections. The deadline is strict: on or before the first Monday following the 20th day after the commissioners file their findings. Miss that window and the award stands.9State of Texas. Texas Property Code Section 21.018 – Appeal From Commissioners Findings
Once objections are filed, the case becomes a standard civil lawsuit tried fresh. The commissioners’ award is set aside, both sides can present updated appraisals and new evidence, and a jury decides the final compensation. Arguments about whether the entity had the right to take the property at all can also be raised at this stage.9State of Texas. Texas Property Code Section 21.018 – Appeal From Commissioners Findings
What Adequate Compensation Actually Covers
If the entire property is taken, compensation equals local market value at the time of the commissioners’ hearing. If only a portion is taken, the commissioners must estimate both the value of the land acquired and the effect of the condemnation on what remains.10State of Texas. Texas Property Code PROP 21.042 – Assessment of Damages
Remainder damages cover injuries specific to the owner’s use and enjoyment of the land. A key example written into the statute is material impairment of direct access to a public road. If the taking cuts off your driveway or forces a difficult new route onto your remaining acreage, that loss affects market value and must be compensated.10State of Texas. Texas Property Code PROP 21.042 – Assessment of Damages What the commissioners cannot weigh are injuries shared by the community generally, such as increased traffic or longer travel times affecting everyone equally.
Business losses are where many owners are blindsided. Texas compensation focuses on the value of the real estate. Lost profits and goodwill are generally not recoverable unless the taking effectively destroys a business that cannot realistically relocate, and proving that is exceptionally difficult and fact-specific. If you operate a business on the condemned property, the compensation fight should center on maximizing the appraised value of the real estate and improvements.
One exception: when federal money is involved in the project, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 may require the condemning agency to provide relocation assistance, advisory services, and relocation payments to displaced residents and businesses. If federal highway funds are in the mix, those protections apply on top of state law.
Possession and the Deposit Trap
After the commissioners issue their award, the condemning entity can usually take possession by depositing the full award amount into the court registry. Construction can then begin while the compensation dispute continues.
You can typically withdraw the deposited funds during litigation, but doing so carries a serious consequence. Under Texas law, withdrawing the award waives your right to contest the legality of the taking itself. You can still fight over whether the amount is adequate, but you lose the ability to argue the entity had no right to condemn the property at all. If you believe the taking fails the public use requirement or that the entity lacks proper authority, do not withdraw the deposit without talking to an attorney first.
If a court later determines the entity did not have the right to take the property, it can award damages for the period of temporary possession, and any excess funds already received must be returned.11State of Texas. Texas Property Code Section 21.044 – Damages From Temporary Possession
Getting the Land Back If the Project Dies
Texas Property Code Section 21.101 gives original owners a right to repurchase condemned land if the entity doesn’t follow through. The right is triggered when the public use is canceled before the property is used for it, when no actual progress is made toward the public use within 10 years of acquisition, when the property becomes unnecessary for the stated public use (or a substantially similar one) before the 10th anniversary of acquisition, or when the entity fails to pay property taxes on the acquired land for three or more years after they become due.
The statute defines “actual progress” specifically, requiring completion of at least three out of five listed actions such as performing significant labor, providing significant materials, hiring professionals to prepare plans, or applying for state or federal funds or permits.12State of Texas. Texas Property Code Section 21.101 – Right of Repurchase The right extends to the original owner’s heirs, successors, and assigns. If you lost land to eminent domain years ago and the promised project never materialized, this provision is worth checking.
Tax Treatment of a Condemnation Award
The IRS treats a condemnation award as proceeds from an involuntary conversion, and any gain over your adjusted basis in the property is taxable. Section 1033 of the Internal Revenue Code lets you defer that gain if you reinvest the proceeds into qualifying replacement property within the statutory window.13Office of the Law Revision Counsel. 26 USC 1033 – Involuntary Conversions
For most property, the replacement period is two years from the end of the tax year in which you first realize the gain. For real property held for business use or investment that is condemned or taken under threat of condemnation, the period extends to three years. The clock starts on either the date you disposed of the property or the date the threat of condemnation first arose, whichever is earlier.13Office of the Law Revision Counsel. 26 USC 1033 – Involuntary Conversions
Replacement property generally must be similar or related in service or use, but for condemned real property used in a business or held for investment, Congress loosened the standard to “like kind.” A rancher whose grazing land is taken for a highway could reinvest in different agricultural land or other investment real estate and still qualify. Miss the reinvestment deadline and the full gain becomes taxable in the year the award was received. Given the dollar amounts typically at stake, talk to a tax professional before spending any of the proceeds.