Rothman Gordon: Increased Protection for Small Business Property Owners

Rothman Gordon Corporate News Alert

Increased Protection for Small Business Property Owners

On May 4, 2006, Governor Rendell signed SB 881 and its companion HB 2054, also known as the Property Rights Protection Act. The new law is a good first step for protecting small business owners and homeowners from overzealous local governments seeking to exercise their rights of eminent domain.

Under the U.S. Constitution, eminent domain is restricted to public uses, such as highways, parks, or public buildings. But the courts have steadily expanded the definition of eminent domain to include economic redevelopment projects, even private ones. In June 2005 the U.S. Supreme Court ruled in Kelo v. City of New London that economic development is a "public purpose" and therefore, all levels of government can condemn properties for this "public purpose", even if the economic development is by private interests, without violating the Constitution. On a more local level, here in Pittsburgh in 1999, a number of small business owners were threatened with losing their property under Mayor Murphy's plan to develop the Fifth & Forbes corridor. Even though the plans ultimately fell through, they sparked a lot of controversy.

The new law prohibits the use of eminent domain to benefit private businesses, even if a case can be made for increased economic development. In addition, it tightens the definition of "blight," updates the procedures used to condemn property, and re-determines the compensation formula for those property owners who are displaced by eminent domain.