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Tenants Rights & Eminent Domain

Posted on October 5 2014 by Gabriela Ocampo

When the government takes one’s land through eminent domain, the law entitles that property owner to certain benefits. Commercial tenants, business owners and private home owners may have the right to significant compensation through the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. This compensation is owed in order to cover the tenant’s relocation expenses.

Aside from the financial compensation mentioned above, sometimes services are also owed to parties who’ve been forced to vacate their property as a result of the exercise of local, state or federal eminent domain powers. These services and relocation payments are provided in addition to the “just compensation” that a property owner is paid for the value of the land that the government seizes when exercising its eminent domain powers.

In addition to the the rights outlined above, tenants also have the right to prepare, present, submit and negotiate a benefits claim in order to protect their interests. Sometimes litigation is required in order to receive fair compensation and services in return for one’s land. There’s a wide range of re-establishment expenses that are incurred when eminent domain powers are exercised. The Uniform Relocation Assistance Act was enacted as a result of government findings that businesses displaced during eminent domain typically closed and suffered significant economic and social well-being hardships.

The act requires that tenants be provided with assistance including reimbursement for storage costs, moving costs, re-installation costs, recording fees, closing costs, equipment reassembly costs, utility hookup charges, transfer taxes on the replacement property purchase and even business and/or liquor license fees. Although few know it, the law states that tenants are to be reimbursed for all of these expenses when the government exercises its eminent domain powers.

The Act even states that commercial tenants may be eligible for a fixed payment in place of reimbursement for these expenses. It states that the payment should be equal to the business’s average net earnings across the last two taxable years and fall in the range of $1,000 to $20,000.

As a result, when the government exercises its eminent domain powers, tenants often find themselves in position for a significant reward. The magnitude of the award typically depends on the terms of the lease agreement. Some leases have provisions that limit the recovery of compensation in eminent domain situations. Tenants might not have extensive rights as a result of apportionment of compensation provisions that require compensation to be shared between the leaseholder and fee-owner or another party.

Or, “consequential damages” may occur when the government impairs the use of private property while executing eminent domain powers. Nearby construction can significantly diminish physical access to a tenant’s property which constitutes a “taking”. When damages result from the inconvenience of construction, compensation is not awarded. Sometimes, governmental entities are required to compensate tenants for the loss of intangible business damages like damaged goodwill and lost profits but only under specific circumstances.

Eminent domain is a complicated process that most tenants struggle to fully comprehend. During these situations, tenants typically require the assistance of an experience attorney. An attorney with extensive knowledge, experience and research capabilities will understand exactly how much compensation a property owner is owed and the government’s specific statutory obligations under the Uniform Relocation Act. He’ll fight to ensure that fair compensation and services are provided in a timely manner.