Private property sign.

When the government seizes a piece of property in an eminent domain1 action, even a lay person may be able to conclude that the property owner is entitled to just compensation for that acquisition.

However, what happens to the tenant who leases or rents an apartment, home, or office that has been condemned? In such a situation, the lessee may lose their home or place of business and it may have a significantly adverse effect on their life. 

The following is some information regarding a tenant’s rights in the condemnation of property and some general advice to navigate this challenging situation.

Definition of Condemnation

Condemnation occurs when the government, or other so-authorized entity, utilizes its eminent domain power to acquire private property for a public purpose or use–such as a road or airport.

A property can be partially or totally condemned, depending on how much land is needed for the project.

What Happens to Tenants When a Property Is Acquired via Eminent Domain?

When a property is condemned, not only does the landowner obviously sustain a loss, but often the tenant(s) on that property are impacted as well. If the acquisition includes the improvement housing the commercial or residential tenant, the tenant will have to be relocated. 

Understanding what happens to tenants when a property is acquired via eminent domain is vital to ensuring they can navigate the process effectively.

If the Entire Property Is Condemned and/or the Improvement is Acquired

  • Tenants will be required to vacate the property by the date specified in the relocation notice issued by the condemnor
  • Generally, residential tenants are entitled to relocation assistance from the condemnor to cover moving costs and the fair market value benefit of the remaining lease term if it is a sub-market lease. 
  • Generally, commercial tenants are entitled to moving expenses, reestablishment costs, fixture value, and reimbursement of certain expenses incurred in finding a new location.
  • In certain states, if the commercial enterprise cannot be relocated, the tenant may be entitled to the value of the business.

If Only Part of the Property Is Condemned

  • The tenant may have to petition the condemnor, through negotiation, administrative procedure, or condemnation, for relocation assistance if the partial acquisition results in the tenant having to relocate (but doesn’t specifically take the improvement) and the condemnor refuses to initially offer relocation assistance.
  • The tenant may be entitled to a reduction in rent proportionate to the reduction in the size of the property depending on the wording of the lease, and in some instances, may be able to terminate the lease and vacate the property.

Lease Agreements May Remain Enforceable

  • Condemnation does not automatically terminate leases. Tenants may still be obligated to pay rent unless the lease allows for such termination (or rent reduction).

For tenants, knowing what happens to tenants when a property is condemned can help them prepare for relocation, negotiate compensation, and protect their legal rights.

Condemned Property Tenant Rights

When a property is condemned, tenants have several rights designed to protect their interests and ensure they are treated fairly.

Notice Requirements

Assuming the improvement is being acquired, tenants are entitled to receive proper notice before condemnation proceedings begin. This notice should clearly explain the reason for condemnation, the timeline for vacating, and any relevant legal processes. If the improvement is not being acquired, depending on the jurisdiction, the condemnor may not notify the tenant and may rely on the landlord to notify the tenant. A tenant will have to be vigilant in this instance to ensure that their rights are protected.

Relocation Assistance

In certain state condemnations, and in all condemnations for road projects involving federal funds, tenants may qualify for relocation assistance. This can include financial support for moving expenses or help finding alternative housing or business locations, depending on the jurisdiction.

Compensation for Leasehold Interests

Tenants may be eligible for compensation for their leasehold interests, which include  improvements made to the property, or the value of the remaining lease term. Eligibility for compensation depends on lease terms and local laws.

Right to Safe and Habitable Housing

In residential relocations, tenants have the right to live in a safe and habitable replacement property. A condemnor is generally prohibited from utilizing replacement properties that are not safe and habitable for purposes of identifying potential relocation housing and/or the relocation assistance available to the tenant.

Are You Entitled to Compensation?

Understanding condemned property tenant rights is essential when a property is acquired by eminent domain. A tenant is entitled to relocation assistance if relocated and may be entitled to the fair market value for the unexpired portion of the lease (if sub-market).

Further, some landlords include “condemnation clauses” in their lease agreements that specifically set forth a tenant’s rights to the compensation award in a condemnation proceeding–and in some instances fully disclaims such interest.

However, many leases do not have this clause, and if this is the case, the compensation is apportioned between the parties depending on the laws of the jurisdiction in which the property is located. 

As an example, the tenant is generally entitled to the value of its unexpired lease term, if it has a value, and/or any business losses it may sustain if the jurisdiction permits such recovery.

What if I have a condemnation clause in my lease?

One of the complexities of condemned property tenant rights is how existing lease obligations are treated during condemnation actions.

In most, but not all, commercial leases there is a condemnation clause that specifies the rights of the parties in the event of both partial and total condemnation acquisitions. The tenant should first examine its lease for this clause upon learning of a condemnation of the premises. Generally, residential leases do not have condemnation clauses.

If you do not have a condemnation clause in your lease, your right to compensation will be determined by applicable laws in the jurisdiction where the property is located.

Practical Advice for Tenants Facing Condemnation

Facing a property condemnation can be overwhelming, but tenants can take steps to protect themselves and prepare for potential disputes:

Understand Lease Terms

  • Review your lease agreement for any clauses that address condemnation or termination.
  • Identify any provisions that outline tenant compensation or relocation obligations.
  • Clarify whether your lease includes a “condemnation clause,” which may limit your right to compensation.

Perform Your Due Diligence

  • Reach out to an eminent domain attorney to learn your rights.
  • If being relocated, start the process of finding an adequate space to relocate (if possible).
  • Keep track of the time and money spent on finding a new location.
  • Collect estimates on relocating personal property, inventory, and fixtures, if possible.

Taking these steps can empower tenants to navigate condemnation proceedings with confidence and ensure their rights are protected.

Discuss Your Rights with a Skilled Condemnation Attorney Today

Whether you are a landowner, business owner, or a tenant, your life and finances can be seriously impacted by an eminent domain action. 

It is important to fully understand your rights and have representation from a highly experienced eminent domain lawyer who knows how to protect your rights. 

The team at Sever Walker Padgitt, LLP stands up for client interests against the government in many states, including Georgia, Illinois, Indiana, Missouri, North Carolina, Ohio, and Texas. If you need assistance, please contact us online or at 888-318-3761 today.