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Just compensation refers to the monetary payments that the United States government must make to individuals if the government takes or seizes their property. It is mandated by the Fifth Amendment to the Constitution of the United States. The rules regarding just compensation are designed to ensure that no individual is unfairly deprived of his property without being paid a fair price for it.
The Fifth Amendment, among other things, states that "nor shall private property be taken for public use, without just compensation." Therefore, this is an inalienable right in the United States and in every situation wherein the government seizes property for public use, compensation must be paid. This rule does not apply if a government seizes property for tax evasion, property paid for with money from illegal criminal activity, or property used in the commission of a crime.
Instead, it applies only if the government takes the property to use it for the public good. The government has the right to take property for such purposes under the doctrine of eminent domain. For example, if the US government needs to build a highway and needs to take someone's land to do so, the government has the legal right to take that land for the good of the public as a whole. This doctrine of eminent domain is necessary and important because sometimes it is in everyone's best interest if the government is able to carry out its work by taking a given piece of land, even without the owner's permission.
When the government does take land, however, it would be grossly unfair if the person was not compensated. This Fifth Amendment protection ensures that will never happen. Generally, courts have interpreted "fair price" to mean the fair market value of the given piece of property. This is determined on a case-by-case basis in light of the price that a reasonable buyer would pay to purchase the property on the open market. An independent appraiser is generally used to determine fair market price.
In certain rare cases, another measure other than the actual property value is used to determine just compensation. For example, if the government seizes land that a business is on, the government may pay for the loss of income as a result of the seizure until the company is able to find a new piece of land on which to operate. The reason this alternate measure of just compensation may be used is because the courts recognize that sometimes there is additional value to ownership of a piece of property than simply the value of the land and property.
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