People
The owner is not the only party with a claim
A lease is an interest in property. Tenants and businesses have rights in a condemnation and they are regularly overlooked, sometimes by the agency and sometimes by the tenants themselves.
Leasehold value
When a lease is worth money
A leasehold has value where the rent payable is below what the premises would command in the market and the lease has time left to run. That difference, capitalised over the remaining term, is the bonus value, and it belongs to the tenant rather than the landlord.
Where the rent is at or above market there is usually no bonus value, and the tenant\u2019s claim rests on fixtures, improvements and relocation instead.
Read the condemnation clause in the lease first. Many leases contain one, and some of them assign the entire award to the landlord or terminate the lease automatically on a taking. Where such a clause exists it may extinguish the tenant\u2019s claim before it starts.
Division
Who gets what
| Item | Usually belongs to |
|---|---|
| Land and building | The landlord |
| Bonus value of the lease | The tenant |
| Tenant installed trade fixtures | The tenant |
| Landlord installed fixtures | The landlord |
| Relocation benefits | Whoever is displaced, owner or tenant |
| Business goodwill, where compensable | The business operator |
| Improvements paid for by the tenant | Depends on the lease and on whether they are fixtures |
Specific to business
What businesses should document early
Fixtures and equipment
What is attached, what was installed by whom and what cannot be moved without damage.
Access and parking
How customers and deliveries reach the premises, with photographs and vehicle movements.
Trading records
Needed for any business damages claim, and for relocation reestablishment expenses.
Lease and amendments
Including the condemnation clause and any renewal options.
Licences and permits
Those tied to the site, which may not transfer to new premises.
Relocation options
Evidence of what comparable premises cost, which supports relocation claims.
Questions from tenants and businesses
My landlord says the award is theirs
That depends on the lease and on state law. A condemnation clause may say so. Absent one, a tenant with bonus value or fixtures has a claim of their own and should assert it.
Can I claim for lost business
In most states business goodwill and lost profits are not compensable as part of the valuation. A small number of states, Florida among them, compensate business damages by statute. The relocation programme separately covers certain reestablishment expenses.
My lease ends next year anyway
Then the bonus value is small, because there is little term left. Fixtures, moving costs and reestablishment expenses may still be substantial.
Does the agency have to deal with me directly
It should identify and serve all interest holders. In practice tenants are sometimes missed, and a tenant who waits to be contacted can find the matter settled without them.
Not sure what to do next
Most owners are reacting to a document they did not expect. Working through it in order is easier than it looks.