Based in Winston-Salem, BB&T Corporation is the nation’s ninth largest financial holding company, an entity with some $109.2 billion in assets. Last Wednesday the company said “it will not lend to commercial developers that plan to build condominiums, shopping malls and other private projects on land taken from private citizens by government entities using eminent domain.”

While public pressure has forced governments at every level to run from the Supreme Court’s radical Kelo decision, BB&T is the first and only major lender to join with Kelo opponents.

Until Kelo et al v. City of New London eminent domain worked this way: Under the “taking” clause of the Fifth Amendment government is allowed to acquire private property for “public use” but not “without just compensation.”

As one example, most people would agree that government can take property to complete a road, something where there is no private profit and where everyone potentially benefits.

Under Kelo the Supreme Court gutted centuries of precedent and said that government could take your home if a “public purpose” was served.

What’s a public purpose? With the Kelo decision the Supreme Court said the city of New London could take property from 15 local citizens and then re-sell the land to a private developer. When re-developed, the land will generate more tax dollars and those bigger tax revenues, said five Supreme Court justices, was a dandy and wonderful “public purpose.”

Of course, if you’re a contributor to political campaigns you can see the instant beauty of the Kelo decision. The folks you support can use the power of government to acquire land that you’re unable to buy in the open marketplace. You can then develop the property and make huge sums of money.

To quote the insightful Russian-born comedian, Yakov Smirnoff, “is this a great country or what?”

“The idea that a citizen’s property can be taken by the government solely for private use is extremely misguided, in fact it’s just plain wrong,” said BB&T Chairman and Chief Executive Officer John Allison.

“One of the most basic rights of every citizen is to keep what they own. As an institution dedicated to helping our clients achieve economic success and financial security, we won’t help any entity or company that would undermine that mission and threaten the hard-earned American dream of property ownership.”

By cutting off funds to private developers who use eminent domain condemnations, BB&T has yanked the financial lifeline required to make such projects work. You can bet that BB&T is turning away substantial business, something which will aggravate bean-counting shareholders and Wall Street analysts. No doubt some of the folks at local country clubs and banker’s conventions will shun those who work for the North Carolina bank. And among the “smart growth” crowd there must be consternation and outrage because here, finally, a huge bank has acted with common sense.

BB&T did not have to raise its voice. It did not have to get involved. No other major bank has taken such a stance.

And yet it did. It was first, the hardest place to be. BB&T deserves recognition for acting in a way that is fair and moral at a time when the gulf between those who have much and those who do not seems to be widening. Whether any other major lender will follow the path opened by BB&T has yet to be seen.

I can’t tell you anything about BB&T or how it ever got billions of dollars — but I do know that BB&T has some branches near me. I would certainly like to chat with them the next time I have a banking need.

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Published originally by Realty Times on January 31, 2006 and posted with permission.

BB&T Takes The Moral High Ground is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Amendment, BB&T, domain, eminent, Fifth, Kelo, taking

The 2005 case, Kelo et al v. City of New London, over-turned 200 years of real estate law and thinking. While previously the government had the right to seize private property under the “taking” clause of the Fifth Amendment, it also had an obligation to pay “just compensation.” Moreover, it could not just take property willy-nilly, there had to be a clear “public use” to justify the seizure of someone’s home.

The Fifth Amendment standard offered a balance between public and private interests. It allowed government to acquire private property when the public would benefit, but it assured that owners would be paid for their land. Thus if government wanted to build a road, it could take private property because the road would benefit everyone.

Kelo turned all of this on its head. The 5-4 decision said government could take your home when that “taking” served a “public purpose.” For instance, a local government could condemn your property and sell it to a private developer. This would be okay under Kelo because the “public purpose” could be nothing more than the attainment of larger tax revenues for the local government.

You can see where this could lead. Elected officials could grab land under the concept of eminent domain from numerous owners, assemble it and then re-sell the property as a single package to private developers. The tax base would be enlarged — thus creating a “public purpose” — and developer profits would also grow. In effect, land would be taken from one private owner and given to another; developers would not have to deal with holdouts who did not want to sell and while properties would be purchased on the basis of their individual value, when combined and assembled that value would be much greater — but the original owners would not get the benefit of the higher value.

The good news about the Kelo decision is that it set off a public uproar. People of all political views understood that Kelo was a nasty, awful decision. Even Congress did the right thing: By a vote of 376-38 the House passed the Property Rights Protection Act of 2005. The beauty of this bill was that it would withhold federal development funds for two years from any state or local government that acquired property for private development under Kelo. (The bill now awaits committee assignment in the Senate.)

The message from the House was clear and now we have a summer-time gift from the Ohio Supreme Court.

In 2002 the city of Norwood said it would take possession of 70 homes in a “deteriorating area” and then re-sell the properties to a private developer who would construct more than 200 apartments or condominiums and over 500,000 square feet of office and retail space plus two large public-parking facilities that would be owned by Norwood. The project was expected to generate $2 million a year for the city.

However, in Norwood v. Horney, the Ohio Supreme Court unanimously said no deal. The problem? Several, according to the jurists.

First, no one can define a “deteriorating area.” What’s deteriorating to you could be a palace to me.

“The use of the term “deteriorating area” as a standard for a taking is unconstitutional,” said the Ohio court, “because the term inherently incorporates speculation as to the future condition of the property to be appropriated rather than the condition of the property at the time of the taking.”

Second, there is the matter of “public use.”

“Although economic factors may be considered in determining whether private property may be appropriated, the fact that the appropriation would provide an economic benefit to the government and community, standing alone, does not satisfy the public-use requirement of Section 19, Article I of the Ohio Constitution.”

The Ohio Supreme Court got it right, and perhaps the real reason has little to do with politicians, developers, legalisms or cash. As the option said:

“Appropriation cases often represent more than a battle over a plot of cold sod in a farmland pasture or the plat of municipal land on which a building sits. For the individual property owner, the appropriation is not simply the seizure of a house. It is the taking of a home — the place where ancestors toiled, where families were raised, where memories were made. Fittingly, appropriations are scrutinized by the people and debated in their institutions.”

Imagine that, individual citizens have rights — and those rights count.

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Published originally by Realty Times on August 1, 2006 and posted with permission.

Ohio Court Moves To Protect Homeowners is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Amendment, Fifth, Kelo, Norwood, Property Rights Protection Act, taking

Given more than two centuries of public policy it’s difficult to comprehend the radical nature of the just-decided Supreme Court decision, Kelo et al v. City of New London.

The Kelo case is about the right of government to seize your home under the “taking” clause of the Fifth Amendment. Under the Fifth Amendment, government can acquire private property for public use, but not “without just compensation.”

The point the Founding Fathers tried to make was this: Unlike other countries where your home could be taken away at the whim of government, the U.S. would be different. Here private property ownership was a right that government was required to respect.

In just a few words the Fifth Amendment provides a logical and reasoned balance of interests. Government, on rare occasion, may need to acquire private property for public use. Acquiring private land with fair compensation to construct a highway, as one example, is typically okay because a road benefits society in general rather than one particular party.

But what if government takes your property so that someone else can profit from its development? Is that an allowed “public use” within the meaning of the Constitution?

Under Kelo, five of the nine justices think it’s just dandy that 15 property owners will lose their homes so that New London can use the land for private development, development which will also produce larger tax revenues for the city. Instead of a “public use” test — the one found in the Constitution — Kelo instead offers a “public purpose” standard.

Using such logic as Kelo provides, it might make sense for a local government to take your house so the land beneath it can be used for townhouse development. The nice garden you have might make a great micro park. The farm you wanted to save for your children despite encroaching development can now be seized by local bureaucrats to create another tax-paying subdivision.

Kelo essentially allows government to raise taxes without the discomfort of recorded votes. If a local government needs money, under Kelo it can assemble property from private owners, pay owners fair market compensation based on current usage, change the zoning, assemble the land as a single parcel, re-sell it at a substantial profit to private parties and then generate new fees and taxes.

What leverage do property owners have to fight such takings? Just about none under the Kelo decision.

The hope now is that Congress, the states and the courts will quickly enact legislation to protect the right to own property without fear of expropriation for the benefit of others.

As of this writing, bills have been introduced in several states to prevent unwarranted government seizures. At the federal level, the House — by a vote of 231 to 180 — approved a measure last week which would prevent the use of federal funding for eminent domain projects designed to produce a profit. In other words, projects which are not for “public use” in the traditional sense. This legislation, however, does not apply to all federal funding and if passed can simply be reversed by a future Congress. Additional measures covering all federal funding are likely in the future.

As well, over many years the court system has earned a reputation for reasoned decisions involving complex and contentious issues, but when decisions are shown over time to make little sense courts can and do change direction.

For instance, in 1981 the Michigan Supreme Court ruled in Poletown Neighborhood Council v. Detroit that government could take more than 1,000 homes to develop an auto manufacturing plant because there was a “clear and significant” general benefit in the form of new jobs and greater tax revenues. Kelo largely followed the logic of this decision. (See: Michigan Should Alter Property Grab Rules, Detroit News, January 8, 2004)

At this point some might ask: What about land use planning? Why limit the right of eminent domain? Do not Poletown and Kelo help communities make better use of local property?

Better for whom? Why should private ownership be trumped automatically by land use planning? If it’s okay to tear down 1,000 homes to build an auto plant, is it also okay to require the operation of that plant even though it runs at a loss? After all, local jobs would be maintained even if private property owners — the shareholders — suffered. Isn’t keeping local jobs an important public purpose?

Interestingly, in 2004 Poletown was overturned. In County of Wayne V. Edward Hathcock, the Michigan Supreme Court ruled that the county could not take private property to create a 1,300-acre business park even though such development would create additional employment and generate new taxes. In effect, it ruled that when it comes to property even average people have rights.

The 2004 Michigan decision was a return to basic principles, a reversal of an earlier case and a balancing of interests that one day will again be adopted by the Supreme Court.

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Published originally by Realty Times on July 5, 2005 and posted with permission.

Will Government Grab Your Home? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Amendment, Fifth, Kelo, Michigan, New London, Poletown, taking