There was an interesting article in TheRealDeal — see here — about the New York town of Southhold’s efforts to use the power of eminent domain to seize property in the Town owned by Brinkmann Hardware. The site in question is about 1.75 acres along the main street in Southold. Brinkmann Hardware bought the property in 2016, intending to open one of its retail stores at the location. However, as noted, Southold has taken legal action to take the property under its power of eminent domain taking. As reported, the Town recently received a legal victory from a federal judge in Brooklyn who dismissed the lawsuit filed by Brinkmann to stop the eminent domain seizure.
In this article, the commercial lease and real estate attorneys at Wright Law Firm NYC offer a brief explanation of NY eminent domain law and typical eminent domain lease provisions.
In brief terms, eminent domain is the power of a government to take private property for public use or benefit as long as the governmental unit pays “just compensation” for the property taken. The federal and state governments possess the power of eminent domain as part of their sovereignty. The power can also be delegated to smaller governmental units. Under New York law, this is how a town like Southold can exercise the power of eminent domain. The power must be exercised in strict accordance with the governing statute. The legal proceedings to exercise the power of eminent domain are often called condemnation proceedings.
What is Eminent Domain?
In the Brinkmann case, Southold has exercised its power of eminent domain and is claiming that once seized; the Town will convert the property to a public park. On its face, the legal requirements for an eminent domain seizure are satisfied. First, a public park is clearly a “public use or benefit”. Second, Southold tendered the just compensation required under the law. The just compensation is generally the fair market value of the property.
Eminent Domain and Commercial Lease Provisions
It is difficult to defeat an NY eminent domain proceeding. It was not surprising that the federal judge dismissed Brinkmann’s case. See case opinion here. This is one reason most commercial leases contain complex provisions addressing what happens if the government seizes the property through eminent domain. Only the property’s owner is entitled to payment of just compensation by the government. Tenants usually do have the right to relocation assistance for such things as moving expenses.
One might seek to include the following eminent-domain-related clauses in commercial leases:
- Language precluding tenants from making any claims to part of the just compensation paid
- Waiver of tenant damage/default claims against the landlord in the event of eminent domain proceedings
- Authority of either party to terminate the lease because of eminent domain proceedings, including when, how, under what conditions (such as full condemnation).
- Exclusive remedy provisions stating that the tenant’s relocation assistance is the tenant’s exclusive remedy for damages flowing from an eminent domain proceeding.
- Provisions stating when a tenant’s rent-paying obligations terminate as the condemnation process can take several months
- Provisions concerning who pays for eminent domain litigation if the landlord chooses to fight
Contact the NYC Commercial Lease Negotiators at Wright Law Firm NYC Today
Call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC for more information. We provide top-tier commercial real estate legal services for the NYC business community. To schedule a consultation, contact our office by e-mail or call us at (212) 619-1500.