Termination for Eminent Domain Applies to Building, Not Parking Spaces

Facts: Under the right of eminent domain, a city took over a portion of a tenant's leased space. The portion, which the city planned to use in order to complete a road project, amounted to five out of 107 parking spaces that were part of the leased space. The space also included a building and outdoor area.

Based on the lost parking spaces, the tenant sued the owner in order to terminate its lease. The court ruled against the tenant, finding that the language in the lease—specifically “premises”—did not give the tenant the right to terminate it under these circumstances—that is, losing merely parking spaces. While the lease provisions stated that it could be terminated if the “premises” were taken by eminent domain, the term premises was not all-inclusive: It covered only certain parts of the leased space. The parking spaces were not protected. The tenant appealed.

Decision: The appeals court upheld the trial court's ruling in favor of the owner.

Reasoning: The appeals court agreed that, according to the lease terms, the tenant could terminate it upon a taking by eminent domain of the premises. It also agreed that the term premises included the building, but not the property upon which it was located, including the parking lot. Because the parking spaces were subject to eminent domain under the lease, it could not be terminated simply because they alone were being taken over by the city. The tenant could terminate the lease due to eminent domain only if the building itself were being taken.

• Rite Aid of Ohio, Inc. v. Monroe/Laskey Limited Partnership, February 2009

Expert Commentary: Avoid Imprecise or Multiple Definitions

The trial court and appeals court in this case seemed to base their decision upon the strict definition of the terms “premises” and “property” contained in the lease, notes New York real estate attorney Craig Ingber. It appears that the definition of the property—which included the building, but not the adjacent or related facilities such as parking—permitted the tenant to terminate its lease if the building was subjected to a “taking” under Ohio's eminent domain laws, he also points out. “As a result of these definitions—and probably because of the way in which the lease defined different portions of the space leased by the tenant—the trial and appeals courts ruled correctly in rejecting the tenant's attempt to terminate its lease, because only its parking spaces were affected by the eminent domain action,” Ingber says.

“This case and the court's ruling illustrate how imprecise definitions—or perhaps too many definitions within a lease—can result in unintended consequences,” Ingber concludes. He advises: If availability of parking was a crucial element of the tenant's lease and its ability to continue its operation from and within its space after an eminent domain action, then the lease should have specified that the loss of a set number of parking spaces, or perhaps a percentage of existing parking spaces, could also trigger the tenant's ability to terminate its lease in the event of an eminent domain action. Absent such specific language most courts would probably reach the same determination as the Ohio courts did in this instance.

Expert Commentator

Craig Ingber, Esq.: Partner, Belkin Burden Wenig & Goldman, LLP, 270 Madison Ave., New York, NY 10016; (212) 867-4466, Ext. 318; cingber@bbwg.com.