CACI 3508 Bonus Value of Leasehold Interest

California Civil Jury Instructions CACI

3508 Bonus Value of Leasehold Interest

[Some/All] of the property taken was leased to [name of lessee]. You must determine the amount of compensation that [name of lessee] can recover.

To do this, you must determine the difference between:

1.The present value of the total rent that [name of lessee] agreed to pay during the time remaining on the lease after [insert date of possession when lessee no longer occupied the premises]; and

2.The present value of the total fair market rent for the leased property from [date of valuation] for the time remaining on the lease.

If the present value of the total agreed rent is less than the present value of the total fair market rent, then [name of lessee] is entitled to the difference.

Directions for Use

Do not give this instruction if bonus value is allocated under the lease to the owner.

This instruction may not be appropriate in every case involving a lessee.

This instruction would be applicable to the apportionment phase of the case under Code of Civil Procedure section 1260.220(b).

Sources and Authority

Lessee’s Right to Compensation. Code of Civil Procedure section 1265.150.

Terms of Lease Define Rights of Parties. Code of Civil Procedure section 1265.160.

“Under the Eminent Domain Law, a provision of a lease that declares that the lease terminates if all the property subject thereto is acquired for public use does not deprive the lessee of any right he may have to compensation for the taking of his leasehold or other property. The Eminent Domain Law itself declares the generally applicable rules that the lease terminates if all the property subject thereto is acquired for public use, and that such termination does not affect any right of the lessee to compensation related thereto.” (City of Vista v. W.O. Fielder (1996) 13 Cal.4th 612, 618 [54 Cal.Rptr.2d 861, 919 P.2d 151], original italics.)

“Usually the rental value of the property is measured in terms of existing tenancies. Tenants, like owners in fee, are also entitled to compensation in condemnation.” (People ex rel. Dept. of Water Resources v. Andresen (1987) 193 Cal.App.3d 1144, 1163 [238 Cal.Rptr. 826].)

“The bonus value can be more precisely defined as the present value of the difference between economic rent, i.e., the value of market rental, and the contract rent through the remaining lease term. The bonus value usually assumes importance only in long-term commercial leases.” (New Haven Unified School Dist. v. Taco Bell Corp. (1994) 24 Cal.App.4th 1473, 1478–1479 [30 Cal.Rptr.2d 469], internal citations omitted.)

“Whether or not the lessor and lessee are joined in a single proceeding, these rules will ordinarily result in an aggregate award to both lessor and lessee equal to market value of the property. Where the lease rental falls below market value, the lessor will have a claim to less than the full market value of the property, since he is restricted to the present value of actual contract rental; but the lessee will have a right to recover the balance of the market value, above that recovered by the lessor, as lease bonus value.” (New Haven, supra, 24 Cal.App.4th at p. 1479, internal citation omitted.)

“Although generally a tenant is entitled to all compensation attributable to the tenant’s interest in a lease, it is well recognized that the parties to a lease may contractually agree to allocate a condemnation award to the landlord rather than the tenant.” (City of South San Francisco v. Mayer (1998) 67 Cal.App.4th 1350, 1354 [79 Cal.Rptr.2d 704], internal citations omitted.)

“A lessee’s option to renew a lease should be considered to the extent that the option enhances the value of the leasehold.” (San Francisco Bay Area Rapid Transit Dist. v. McKeegan (1968) 265 Cal.App.2d 263, 272 [71 Cal.Rptr. 204].)

Secondary Sources

8 Witkin, Summary of California Law (11th ed. 2017) Constitutional Law, § 1389
1 Condemnation Practice in California (Cont.Ed.Bar 3d ed.) §§ 4.57–4.63
4 Nichols on Eminent Domain, Ch. 12D, Valuation of Interests Other Than Fee Interests, § 12D.01[3] (Matthew Bender)
20 California Forms of Pleading and Practice, Ch. 247, Eminent Domain and Inverse Condemnation, § 247.136 (Matthew Bender)