Eminent Domain Law

Supreme Ct., N.Y. Cty.

(Shulman, J.)

In an eminent domain proceeding, tenants sought compensation for trade fixtures in a condemned building. The court held that tenants were entitled to compensation, even though the realty itself had been valued for compensation purposes as if the buildings were torn down to permit assemblage of a larger parcel.

Three separate restaurant tenants lease space in the subject building, which the MTA has condemned to build the Fulton Street Transit Center. The building itself is owned by DLR Properties, whose sole principal is Dennis Riese. He or his family also own all of the shares in a corporation that, in turn, owns all three tenant restaurants. When the city sought to condemn the property, Riese contended that the highest and best use of the property was for land assemblage purposes, and persuaded the Appellate Division to value the property for assemblage purposes, rather than valuing the property separately from other properties, as urged by the MTA. After the Appellate Division decision, the Riese tenants sought, in this proceeding, compensation for fixtures.

The MTA objected, contending that once the property is valued as if it would be torn down, tenants should not be entitled to fixtures which would have to be sacrificed to realize the value associated with tearing down the building for assemblage purposes.

The court rejected the MTA's argument, conceding that if the fixtures were all owned by the fee owner, the fee owner would not be entitled both to the assemblage value and the value of the fixtures. But because the tenants were separate legal entities (even if held under largely common ownership), the court would not “pierce the corporate veil” to treat the tenants and the fee owner as a single entity. As a result, the court held that tenants were entitled to compensation for the fixtures, despite the valuation of the parcel as a whole for assemblage purposes.

Tenant Entitled to Compensation for Fixtures Even Though Parcel's Highest Value Would Require Tearing Down Building

Application of Metropolitan Transportation Authority

NYLJ 2/8/12, p. 21, col. 3

Supreme Ct., N.Y. Cty.

(Shulman, J.)

In an eminent domain proceeding, tenants sought compensation for trade fixtures in a condemned building. The court held that tenants were entitled to compensation, even though the realty itself had been valued for compensation purposes as if the buildings were torn down to permit assemblage of a larger parcel.

Three separate restaurant tenants lease space in the subject building, which the MTA has condemned to build the Fulton Street Transit Center. The building itself is owned by DLR Properties, whose sole principal is Dennis Riese. He or his family also own all of the shares in a corporation that, in turn, owns all three tenant restaurants. When the city sought to condemn the property, Riese contended that the highest and best use of the property was for land assemblage purposes, and persuaded the Appellate Division to value the property for assemblage purposes, rather than valuing the property separately from other properties, as urged by the MTA. After the Appellate Division decision, the Riese tenants sought, in this proceeding, compensation for fixtures.

The MTA objected, contending that once the property is valued as if it would be torn down, tenants should not be entitled to fixtures which would have to be sacrificed to realize the value associated with tearing down the building for assemblage purposes.

The court rejected the MTA's argument, conceding that if the fixtures were all owned by the fee owner, the fee owner would not be entitled both to the assemblage value and the value of the fixtures. But because the tenants were separate legal entities (even if held under largely common ownership), the court would not “pierce the corporate veil” to treat the tenants and the fee owner as a single entity. As a result, the court held that tenants were entitled to compensation for the fixtures, despite the valuation of the parcel as a whole for assemblage purposes.