I’m not going to lie, business has been tough, but we’ve managed to stay slightly above breaking even for the past year. Now, I’ve received notice from the building owners that the city is using eminent domain to take over our complex and neighboring ones to build a large public transport hub.
The city is offering up to $40k to help tenants relocate, but that amount doesn’t even come close to covering the cost of building out a new space to meet our needs. We run a light manufacturing business, so we require additional air conditioning to handle the heat from the machines, extra plumbing, and exhaust systems. Our current location is 4,800 square feet, and we’re paying $9/sqft + N, which is well below the market rate since we’ve been here for a decade. Finding a new space will cost at least $20/sqft + N if not $30.
As a tenant, what are my options? Is it even possible to fight the city for a larger relocation reimbursement?
As a commercial real estate appraiser, my area of expertise is litigation-related appraisals. I’ve previously handled a lot of eminent domain matters. You should probably turn down the city’s offer and hire a competent ED attorney. I would also talk to the other renters. The stronger your stance, the more people who decline the offer.
Property owners frequently act in this manner. According to my observations, the eventual deal is better the longer they hold out.
Refer to above. served as a juror in a civil case involving a business relocation brought on by an impending domain. The portion of the case I was involved in, specifically the business relocation, settled at a price that was about fair market for the property. The city paid out a lot and did not have a good jury selection process.
My grandfather used his business in this way. was the final occupant of a large low-rise shopping center that the city intended to renovate or rezone.
He didn’t get anything in the end; the city harassed him with construction and health inspectors, shutting him down repeatedly until he was forced to close permanently.
Towns may be cruel places.
This occurred in the 1980s; one could probably not get away with it now.
I’m not sure where you’re located, but where I live in the greater Seattle area, WA when the local transportation agency acquires property through eminent domain, they are required to (1) provide suitable replacement accommodations, and (2) fully cover relocation costs, including any tenant improvements needed to make the new property work. I know someone who worked as a right-of-way agent for the local transportation agency during a light rail project, and they had plenty of stories about how expensive it was to relocate residential, commercial, and industrial properties.
You should avoid relying on your landlord and go directly to the City. The landlord might be misleading you by only mentioning $40k when you could be entitled to more. Until you speak with the City, take anything the landlord says with caution.
If you’re in a lease, your rights are limited to the lease’s duration since you don’t own the land. If the cost to buy out your lease is less than the expense of a build-out, the landlord can simply pay you off and provide a small sum to help with the transition. This is more of a tenant/landlord issue than an eminent domain fight. In private equity, it’s common for landowners to sell property and terminate leases by paying the penalties outlined in the contract. Tenants often overlook this possibility, focusing only on fulfilling their lease obligations.