Guidance

1. What constitutes a partial or total condemnation?

When describing a total condemnation, usually the entire property needs to be taken from the landlord by a governmental agency. However, if a small amount is not taken and the property is still rendered totally unusable, then it is still considered a total condemnation. A partial taking is defined as when part of the premises remains in the possession of the landlord and there is a possibility of honoring the lease.

2. Whether the lease agreement can be terminated?

In a total condemnation the lease is terminated as soon as the condemning party takes possession of the property. This occurs because there is no longer any property to lease. In a partial condemnation, typically both the landlord and the tenant have the option to terminate the lease, usually with 30 days notice. This allows both parties to look after their needs after a condemnation.

3. Which party has the right to terminate the lease?

As stated above, typically both the landlord and the tenant have the right to terminate the lease in a partial condemnation. Some leases limit the right to terminate to the landlord only. However, this might be unenforceable and could lead to litigation.

4. Who has a right to any damages or awards?

Another important part of this clause is the damages portion. Here, damages and awards are limited to only the owners of the property and not to the tenants. Doing this helps ensure that no questions of ownership of the property arise. Tenants though can claim damages for moving expenses, loss of business and damage to personal property.

5. Definitions

Condemnation: The process of taking private property, without the consent of the owner, by a governmental agency for public use through the power of eminent domain.

Eminent Domain: A power of the state, municipalities, and private persons or corporations authorized to exercise functions of public character to acquire private property for public use by condemnation, in return for just compensation.

Real Estate Terminology, LeasingProfessional.com.

"Landlords and tenants have separate and distinct interests in real property. In a condemnation action, however, the potential exists for the intermingling of these interests. Practitioners should draft lease condemnation clauses to ensure that the interests of landlords and tenants are separately compensable and that the condemnation award flows to the intended party or parties."

Condemnation Clauses in Real Estate Agreements, Glen T. Block & Robert T. Flick.

"If only part of the land condemned, the question of whether a lease ends is troublesome. Courts are generally split on how to handle leases as partial condemnations. In general, courts have generally indicated that if the condemnation affects the nature and character of the lease and substantially impair habitability of the premises then the lease should end."

Ken LaMance, Tenants Rights Upon Condemnation, LegalMatch.com (2011) (last visited Jan. 19, 2013).

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  • Updated: 09/21/2017
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Overview

A Condemnation clause in a lease determines what happens in the event that the leased premises are taken from the landlord by a governmental agency for public use, either by condemnation or eminent domain. The clause defines:

What constitutes a partial or total condemnation,

Whether the lease agreement can be terminated,

Which party has the right to terminate the lease, and 

Who has a right to any damages or awards.