An Eminent Domain Lease Provision Controls Issue of Apportionment of Just Compensation Award Between A Landlord and Tenant

By Lauren Ryan on May 9, 2019

Eminent Domain Case: Department of Transportation v. 600 West Dundee, LLC

A new Illinois appellate decision was issued from the Fist District on May 7, 2019, captioned Department of Transportation v. 600 West Dundee, LLC, 2019 Il App (1st) 181699, that involves apportionment of a just compensation award between a landlord and tenant in an eminent domain case.  In this case, the Illinois Department of Transportation (“IDOT”) planned to improve and widen a state route adjacent to 600 West Dundee, LLC’s property that was improved with a restaurant and leased to Market Square Restaurant.  As part of the project, IDOT acquired fee simple title to part of the property and a temporary easement.

The condemnation clause in the lease provided that in the event of a partial taking, the tenant was entitled to a rent adjustment and was silent as to any apportionment of the just compensation award.  Specifically, eminent domain clause in section 26 of the lease provided:

(b) Effect of Partial Condemnation. *** In the event of partial taking and Lessee does not terminate this lease, then this lease shall continue in full force and effect as to the part not taken, and the rental to be paid by Lessee shall be subject to adjustment based upon provisions set forth hereinafter.

Eminent Domain Clause in Lease Controls the Rights Between a Landlord and Tenant

The tenant argued that it was entitled to a rent adjustment and part of the just compensation award.  The landlord argued that the eminent domain clause in the lease provided the tenant with only one remedy in this instance – a rent adjustment.  The trial court agreed and denied the tenant’s claim for part of the just compensation award. In affirming the trial court, the Appellate Court began with the well-settled principle of Illinois eminent domain law that parties to a lease are free to include a provision governing their rights in the event of a condemnation proceeding.  The Appellate Court found that there was nothing in the lease that allowed the tenant to share in the just compensation award. The Appellate Court further explained that the landlord and tenant agreed in the lease that the tenant was only entitled to a rent adjustment if part of the property was condemned and the lease did not terminate.  Since the tenant was only entitled to a rent adjustment, the tenant was not entitled to any portion of the just compensation award.

 

*The original court opinion can be viewed here.

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