If you rent or lease a building being taken by eminent domain, you may be entitled to compensation.
If your lease contains an enforceable condemnation clause, you may not be entitled to compensation. In the absence of a condemnation clause, the property will be valued, and then the value is divided up among the owner and tenants.
How much you receive as a tenant depends on your interest in the property. Interests include leases, easements, and liens. If the compensation is valued more or less than the value of the property, the compensation is divided proportionally. It is possible for you to walk away from a condemnation with a profit or loss. Even if you draft the lease and fail to put in a condemnation clause, you still have an interest in the compensation.
When the compensation award is being devised, tenants who made improvements or additions to the property are entitled to the amount of the improvements. However, if the lease contains a provision that says the landlord owns any improvements or additions, then the tenant may not recover.
Generally, your obligation to pay rent continues if the property is taken by eminent domain. Some statutes release a tenant¿s obligation. If you still have an obligation, you may use your compensation award to pay the remainder of your lease. If you are in a long term lease, the court may tailor the award more in the owner’s favor and eliminate your obligation to pay rent.
Eminent domain laws can be confusing and complex. An experienced real estate attorney can explain the compensation laws in your region. If you are a tenant or an owner, a real property lawyer can help you resolve lease obligations and ensure you receive the compensation you are entitled to.