When leased property is taken, both landlord and tenant have interests, and the lease usually allocates them.
Total taking. The lease terminates and the award is apportioned. The landlord recovers the value of the fee subject to the lease; the tenant may recover the bonus value of a below-market lease, the value of its improvements, and in some states relocation costs and business damages.
Partial taking. The lease continues with rent abated proportionately, or the tenant has a termination right where the remaining premises are unsuitable.
Lease provisions. Many leases assign the entire award to the landlord, subject to the tenant’s right to pursue a separate claim against the condemnor for its trade fixtures, moving expenses and business damages where state law permits a separate award.
Temporary takings are treated differently, with rent generally continuing and the award going to the tenant.
Notice and participation. The tenant should have notice of proceedings and a right to participate, since a landlord settling globally can extinguish the tenant’s claim.
Relocation benefits under statutes are independent of the lease and cannot be waived in some jurisdictions.
Practical guidance for tenants. Read the condemnation article before signing; it is one of the least negotiated and most consequential provisions in a long lease.