The problem of the State is the assumption of sovereignty. Initially this was purely theocratic - the divine right of Kings was the driver for Louis XIV, who created the first modern territorial bureaucratic state - which was the model presented at the Peace of Westphalia. During the enlightenment - Descartes and all that - the idea of divine right of Kings was recast as the divine right of the people - interpreted as representative democracy or communism by different groups. However the basic theocratic idea of the state being a repository for all sovereignty (or having a 'divine right') was not really challenged, and this is why modern democracy is so different from the classical interpretation, or indeed pre-Westphalian European models of property (which was exclusively held by individuals, not states). You are right to point out the paradox of states being able to define the exception to the law - the contingent nature of land rights is only one expression of this - the state can overrule the law anytime it likes and take anything you have, including your life. The real question is do we really need to have a form of authority which assumes divinity above us, even if it tells us that it derives its divine authority from 'the people', from ourselves? Or, especially now in our radically interconnected world, can we get along without this ancient territorial intermediary between ourselves and our own Gods?
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