Daily Development for Thursday, November 4, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu

EMINENT DOMAIN; POWER TO CONDEMN; SCOPE; LEASEHOLDS: County does not have power to condemn a leasehold interest in property under statute that authorizes only the condemnation of a fee interest, easement, profit or water right.

Orsett/Columbia Limited Partnership v. Maricopa County, 83 P.3d 608 (Ariz. App. 2004)

A Justice of the Peace office occupied space under a lease that was extended until January of 2003), with the final extension providing that the County "shall have no further right or option to extend the Lease."

The parties failed to negotiate a new lease and, when the County remained in possession after January 31, 2003, Landlord instituted a forcible entry and detainer action. The superior court granted the County's motion to dismiss ruling that the County could remain in possession as a holdover tenant until July 31, 2003 pursuant to an express holdover provision in the lease agreement.

In June, 2003 the County filed a complaint in eminent domain seeking to condemn a twenty-three month leasehold interest in the Property on the same terms, except for rent, as set forth in the lease agreement. The County also applied for an order granting it immediate possession of the premises. The superior court entered an order permitting the County to remain in possession of the Property and granting it a leasehold interest by condemnation from August 1, 2003 through June 30, 2005. The trial court reasoned:
“[The County] does not seek to 'extend' its lease but rather to acquire by condemnation a leasehold interest in the property for the continued operation of the Peoria Justice of the Peace Court. No extension is sought but rather a taking of a leasehold interest upon the identical terms which previously existed between [the County and Landlord], with the exception of the rent to be paid.”

On appeal: Held: Reversed.

The court of appeals began by noting that the county had only the power to condemn delegated to it as a political subdivision of the state. Arizona has been conservative in reviewing this delegation. For instance, a prior case had held that the delegate power to acquire property for “buildings and grounds” did not allow a city to condemn private property for parking areas to be used in conjunction with city buildings. The court agreed that the state legislature could have authorized the county to take only a leasehold interest, but concluded that the legislature had not done so.

The statute indicated that the county had the power to condemn (in truncated summary): (1) a fee simple; (2) an easement; (3) a profit a prendre; (4) a water use right.

The County asserted, and the trial court agreed, that the right to condemn a fee simple necessarily comprehended the right to acquire a leasehold interest in property that could have been acquired in fee. It cited to a case in which the Arizona Supreme Court held that a city could condemn away appurtenant interests belonging to properties neighboring the servient property that the City was acquiring in fee for a road. Obviously, this case did permit the city to acquire less than a fee interest in these appurtenant parcels, but the court here distinguished the earlier case by noting that the right of way for the road was in fact being acquired in fee, and the condemnation of the appurtenant easement rights were only part of that process. In any event, the court noted, the statute specifically permits acquisition of an easement, but says nothing about a leasehold estate.

The court distinguished other Arizona decisions on similar reasoning also considered authority from other jurisdictions, finding that no on point case presented to it authorized the condemnation of a leasehold interest pursuant to a statutory authorization to acquire a fee.

Comment 1: Compare Kaufmann's Carousel v. City of Syracuse, 750 N.Y.S.2d 212 (A.D. 4 Dept. 2002) (Rights pursuant to a shopping center lease, including control over the naming of the center, are not solely contract rights but are real property interests subject to the power of eminent domain and such rights may be condemned without the concurrent condemnation of the underlying real property or even of the leases as a whole.) The Kauffman’s case involved interpretation of a statute granting authority to acquire “real property interests” without further differentiation. The Arizona court might have less difficulty with upholding the County’s actions here under such a statute.

Comment 2: It is quite possible that, in a given state, a charter city or county, which has broader inherent powers, might be viewed as having greater flexibility in this area as well. Note that commonly courts recognize that there can be a “temporary taking” remedy in an inverse condemnation action.

Comment 3: In short, the problem seems to be entirely one of statutory limitations, and not Constitutional ones. But other states may contain the same difficulties in their statutes, and this may provide a useful defense for landlords faced with public tenants who just don’t see why the landlord should view itself as the owner of his property.

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