1. Christopher M. Clough Barron & Adler, LLP clough@barronadler.com

2.  1. Set what happens – lease continues? Rent?  2. Determine who gets what.  3. Provide certainty.  4. Save costs including litigation costs.

3.  The Undivided Fee Rule. ◦ An award to one party reduces the award to the other.  Leasehold Advantage aka Bonus Value. ◦ Tenant’s additional cost in finding substitute leasehold in the market. ◦ Extended over life of lease including options.

4.  1. Automatic. ◦ If lease terminates, Tenant gets nothing. ◦ Be clear, because law favors Tenant.  2. Optional. ◦ Details – who, why, how much, when. ◦ Avoid subjective terms.  3. Mixed. ◦ Good way to handle total vs. partial takings.  Role of the Use Clause.  Use care in drafting – Texaco v. Crown Plaza.

5.  All compensation to one party. ◦ Use assignment language.  Without reference to leasehold value (lump). ◦ Problem of divergent interests.  Specific aspects of the real estate to each party. ◦ Problem of lump sum award.  How are litigation costs paid. ◦ Working together always best!  Relocation benefits. ◦ Exist for any tenant as of date of taking.

6.  Partial taking does not terminate rent obligation.  Proportional Reduction. ◦ But not always a proportional impact. ◦ Trade reduction for condemnation case?  Fixed Reduction. ◦ Problem of planning.  Equitable Reduction. ◦ May be the best option, but costly.  Abatement allows for automatic “termination” by lease without Tenant losing right to share in award.

7.  If silent, goes by leasehold advantage.  Otherwise, depends on who owns/can remove upon lease termination, not who built or installed.  Termination by lease does not extinguish Tenant’s right to be paid for improvements.  Provide for payment for improvements. ◦ But beware shortcomings of litigation.  Fixtures vs. Personal Property. ◦ Check local law; typically lease classification is not determinative. ◦ Role of relocation.

8.  Assign rights to compensation.  Right to compensation survives termination.  Provide for who pays costs and team up.  Provide for practicalities, including those related to Eminent Domain case.  Lenders: be sure to protect yourself whether lending to landlord or to tenant.  Draft for a specific condemnation but remember to account for all others.

10. Christopher M. Clough Barron & Adler, LLP clough@barronadler.com