Case of Struggling Mall May Test Power of Eminent Domain

A dispute over the designation of a struggling Colorado mall as “blighted” might serve as testing ground for how much recourse commercial property owners have against the power of eminent domain.

The City of Westminster, Colo., is attempting to seize the land belonging to the owners of Westminster Mall in order to make way for a transit-oriented mixed-use project. And legal experts say that the case illustrates how cities may attempt to evade laws put in place in recent years to prevent the use of eminent domain for the purpose of economic development.

Typically, eminent domain has been used to seize property in order to make way for government or other public use. Less frequently, municipalities have tried to use the power for economic development. That is precisely what occurred in New London, Conn., where the city, following a controversial Supreme Court ruling, used the power of eminent domain to seize private residences to make way for a commercial redevelopment.

Many saw that decision as an erosion of property rights. And property owners voiced concerns that other cities might try to seize homes or small commercial properties—even healthy ones—to make way for larger commercial projects that could deliver higher tax revenues. In the wake of Kelo, many states, including Colorado, put in laws banning the use of eminent domain for the purpose of economic development.

But blight has always been an exception. That designation gives cities more power to seize private property. In the case of the Westminster Mall, if the Jefferson County District Court agrees with the city’s take it would give Westminster the power to take control of the property and move ahead with its redevelopment plans without the current owner’s consent.

So the question at play in Westminster is whether the mall, which is unquestionably struggling, is truly blighted or whether the city is pushing the boundaries of the definition in order to seize a property that it otherwise would be unable to take.

The mall owner, Westminster Mall Co., thinks the blight designation stems from the fact that the municipality is dissatisfied with the decline in tax revenue generated by the mall. The owner has filed a lawsuit to stop the process. The court’s decision in the case might help determine just how flexible cities’ eminent domain rights are.

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