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Condemnation On Token Payment
by Ron Davis
Only a token payment will go to a retail tenant at a St. Paul, MN, area shopping complex that local government authorities have condemned and confiscated.
The tenant, who operated a tire store there, leased the space that is part of Apache Plaza. That shopping complex is now owned, through condemnation, by the local redevelopment authority.
Prior to the takeover, the tenant leased from the company that for many years owned the complex. That company actually offered to sell the tire store to the tenant several years ago, but the tenant rejected the offer. Apparently, the tenant believed that his lease protected him in case of condemnation.
One provision of the lease stated, for example, that so long as the tenant observes the lease provisions, “tenant shall have peaceful and quiet use and possession of the premises without hindrance by the landlord, and landlord shall warrant and defend tenant in such peaceful and quiet use and possession.”
So when condemnation of the property seemed imminent, the tenant apparently felt safe. He also apparently believed that if worse came to worse, he would be justly compensated.
When condemnation later occurred, however, redevelopment authorities refused to compensate the tenant. They pointed out that his lease anticipated condemnation of the property by stating, “The award for any taking shall be the sole property of the landlord.” The lease further defined “award” as “all compensation, sums, or anything of value awarded, paid, or received on a total or partial condemnation.”
The tenant eventually sued the property owner and the redevelopment authority for breach of contract. Specifically, he claimed he was denied the stated right to the peaceful and quiet enjoyment provision of the lease.
A Minnesota appellate court, in ruling in favor of the redevelopment authority, explained, “The lease prohibits the tenant from recovering a takings award following a condemnation...and there is no evidence that the redevelopment authority orchestrated its purchase and condemnation so as to disadvantage the tenant....The quiet enjoyment provision of the lease does not preclude the authority from acquiring the tenant’s interest by condemnation.”
The court did order that the tenant receive payment for moving expenses as well as for loss of any merchandise, personal property and unamortized costs of improvements that the tenant paid. (Rasmussen v. Housing and Redevelopment Authority, 2006 WL 1148112 [Minn,App,])
Decision: May 2006
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