25 States Have Supported 5G by Passing Small Cell Legislation to Promote Rapid Deployment of 5G


In May 2019, Nebraska passed its “Small Wireless Facilities Deployment Act” becoming the 25th State to pass legislation implementing the 5G and Small Cell deployment.   Thus, half of the Country now has state-wide legislation (versus just municipality or county specific legislation) to facilitate the deployment of 5G small cells.  While Maryland has introduced legislation the past two years on the topic, it has yet to pass a law.  Meanwhile, its neighboring States of Virginia, Delaware and West Virginia are among the 25 States.

These State laws take into consideration the unique circumstances of their State and local environment, but baseline principles can be established and are consistent with wireless industry standards, including:

  • Streamlined applications to access public rights of way

  • Caps on costs and fees

  • Streamlined timelines for the consideration and processing of cell siting applications

The Wireless Infrastructure Association (WIA and National Conference of State Legislatures) are tracking Mobile 5G and Small Cell 2019 Legislation. Click here to view the current legislation by State.

The telecommunications land use attorneys at Miller, Miller & Canby are experienced in Maryland, D.C. and Virginia and are closely monitoring the impacts of the FCC order and the efforts of State and local governments to craft small cell legislation in order to advise telecommunications and property owner clients.

Sean P. Hughes
is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic.  To learn more about the firm’s Land Use and Zoning practice, click here.

Cathy Borten
is an attorney in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, click here.





Promoting 5G: Two US Senators Re-Introduce Legislation to Streamline Rapid Deployment of Small Cells


On June 3, 2019, U.S. Senators John Thune (R-SD) and Brian Schatz (D-HI) re-introduced the Streamlining the Rapid Evolution and Modernization of Leading-edge Infrastructure Necessary to Enhance Small Cell Deployment Act, or STREAMLINE Small Cell Deployment Act.

The bipartisan legislation updates the Communications Act to better reflect developing technology and facilitate the rapid deployment of 5G networks. It also sets reasonable standards for local government review of infrastructure siting while recognizing the unique challenges for smaller municipalities.

Key Provisions of the STREAMLINE Small Cell Deployment Act:

  • Permits must be approved or denied on publicly available criteria that are reasonable, objective and non-discriminatory.

  • Small cell applications may be denied or regulated for objective and reasonable structural engineering standards, safety requirements or aesthetic or concealment requirements.

  • Applications must be acted on no later than 60 days for requests to co-locate equipment and 90 days for other requests.

  • Flexibility and additional time is allowed for small municipalities (fewer than 50,000 residents).

FCC Commissioner, Brendan Carr, released the following statement. “I commend Senator Thune and Senator Schatz for their leadership on smart infrastructure policies.  Their bill demonstrates bipartisan support for fee limits, timelines, and other reforms that are key to accelerating the buildout of 5G infrastructure in communities across the country.  If passed, their work to modernize our country’s approach to small cells would notch another solid win for the U.S. in the race to 5G.”

The telecommunications land use attorneys at Miller, Miller & Canby are experienced in Maryland, D.C. and Virginia and are closely monitoring the impacts of the FCC order and the efforts of State and local governments to craft small cell legislation in order to be able to advise telecommunications and landlord clients.

Sean P. Hughes
is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic.  To learn more about the firm’s Land Use and Zoning practice, click here.

Cathy Borten
is an attorney in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, click here.
 





Maryland Holds the Line on Property Tax Rate; But Buyers Should Consider Total Tax Burden


Recently, the Maryland Board of Public Works voted to keep the state property tax rate at its current level.  The Board is composed of the Governor, Comptroller and State Treasurer.  Governor Larry Hogan, a fiscal conservative, announced that holding the rate was part of his commitment to “prudent capital spending.”  As a result, the state tax rate will remain at 11.2 cents per $100 of assessed value, or 0.112% of total value.  That means a property assessed at $1,000,000 will incur a state tax of $1,120 annually.

While this might suggest good news for Maryland property owners, the state property tax is only a small portion of the overall tax burden on properties.  Each non-exempt property is also subject to county property taxes and, in some jurisdictions, municipal property taxes as well.  For instance, in Montgomery County, a D.C. suburb and the most populated county in the State, the current county tax rate is 0.9927%, which adds another $9,927 in taxes for a $1,000,000 assessment.  Further, a person owning property in Takoma Park, located inside Montgomery County and on the D.C. border, would pay an additional municipal tax of 0.5291.  Consequently, a non-exempt property assessed at $1,000,000 in Takoma Park is subject to a total property tax rate of 1.6338%, equaling $16,338 in annual property taxes.

Other Maryland municipalities that impose a third layer of property taxes include Frederick City (0.73%), Hyattsville (0.63%), and Annapolis (0.54%). When considering the location and timing of purchasing property in the Maryland, buyers should consider the total property taxes imposed annually.  Moreover, if the pre-purchase assessment is lower than the purchase price, the buyer can generally expect the assessment to increase up to the purchase price for the next triennial assessment cycle. The local assessment offices track sales of properties and will pick up the sale price when issuing new assessments.

Miller, Miller & Canby has been challenging the assessments of various types of properties in Maryland for more than 30 years and has obtained substantial reductions in real property assessments for our clients. We have successfully appealed the assessments on office buildings, retail stores, senior living centers, warehouses, industrial sites, casinos, apartment buildings, golf courses and cemeteries. 
Michael Campbell
 is a partner in the litigation group at Miller, Miller & Canby.  In addition to trial and appellate advocacy, his practice focuses on real estate litigation and property tax assessment appeals.  Please feel free to contact Mr. Campbell at 301.762.5212 or send him an email for property tax guidance or to help reduce your commercial Maryland property tax assessment.  For more information about the firm’s Maryland property tax appeals practice and representative cases, click here.





Should Maryland Commercial Property Owners Complete Tax Questionnaires?


Every year, the Maryland Department of Assessments and Taxation (SDAT) is tasked with reassessing one-third of all commercial properties in the state.  In the year prior to the reassessment, SDAT is required to obtain income and expense information from the property owner.  The information allows the assessor to determine the value of the property using an income approach.  This approach determines value by taking gross income (e.g., rent, CAM reimbursements and other income), applying a vacancy rate and deducting property-related expenses such as maintenance, repairs, utilities, insurance, professional fees (attorney or accountant) and management fees.  The resulting net operating income (NOI) is then divided by an appropriate capitalization rate to reach a final value.

Types of SDAT Property Questionnaires
There are several different types of questionnaires issued by SDAT, each tailored to the type of property being reassessed.  These include apartments, hotels, assisted living facilities, nursing homes, cemeteries, garages and parking lots, mobile home parks, marinas, golf courses and commercial/industrial properties.  The owner is asked to complete the questionnaire and return it to the local Assessment Office by May 15.  

Are Property Tax Questionnaire Submissions Mandatory?
Property owners often inquire whether the submission of the questionnaire is mandatory, and what happens if the questionnaire is not returned.  The answer depends upon the value of the property.  For income-producing property that has a value in excess of $5,000,000, as listed on the assessment roll, the owner is subject to a statutory penalty for failing to produce the information.  The penalty is $100 per day up to a maximum equal to 0.1% of the value of the property.  For instance, a property assessed at $6,000,000 would be subject to a penalty up to $6,000 for the failure to submit the competed questionnaire.

Despite the statutory mandate, there can be instances where the property owner would rather incur a penalty than submit income and expense information to SDAT.  A classic example is where the property is under-assessed by a large margin and submission of the income information would likely cause a significant increase in the assessment. Conversely, a property owner who is not required to submit a questionnaire might want to do so in certain situations. In this instance, the property may be over-assessed and the income and expense information will educate the assessor and likely lead to a reduction in the assessment.

What Should Owner-Occupied Properties Submit?
For properties that are owner-occupied, there is no stream of rental income to report to SDAT.  In this situation, the owner should return the questionnaire without inserting the income and expense data and simply note: “Owner-Occupied.”  The Assessment Office will then estimate market rent and expenses in order to conduct an income approach to value. Occasionally, an owner will have a “friendly lease” with itself or a closely related entity that holds title to the property.  Since this is not an arms-length lease, the rental income should not be reported on the questionnaire because it is unlikely to reflect fair market rent.

Miller, Miller & Canby has been challenging the assessments of various types of properties in Maryland for more than 30 years and has obtained substantial reductions in real property assessments for our clients. We have successfully appealed the assessments on office buildings, retail stores, senior living centers, warehouses, industrial sites, casinos, apartment buildings, golf courses and cemeteries.  

Michael Campbell
is a partner in the litigation group at Miller, Miller & Canby.  In addition to trial and appellate advocacy, his practice focuses on real estate litigation and property tax assessment appeals.  Please feel free to contact Mr. Campbell at 301.762.5212 or send him an email for property tax guidance or to help reduce your commercial Maryland property tax assessment.  For more information about the firm’s Maryland property tax appeals practice and representative cases, click here.





Democratic Congressional Leaders Accuse FCC of Collusion in Small Cell Ruling


In a letter to FCC Chairman Ajit Pai dated January 24, 2019, the heads of the House Energy and Commerce Committee and the Subcommittee on Communications and Technology accused the agency of colluding with telecom companies to win court approval for a ruling that limits fees and approval processes for small cell deployments. Click here to view the letter.

When the FCC approved the rule change in September 2018, it was positioned as a necessary step to meet the needs of 5G and speed up the deployment of small cells and other telecom equipment. Regulators limited the fees that cities and states can charge for small cell installations and set reduced timelines for the approval process.

Cities must now act on applications within 60-90 days and can only charge a $100 application fee and an annual $270 fee per small cell. The move drew criticism from local officials who believe the FCC overstepped its authority, and many continue to call for an appeal or outright reversal of the ruling.

As discussed in previous MM&C articles on this topic, many local governments have combined forces to appeal the FCC Order. The U.S. Court of Appeals for the 10th Circuit denied the cities’ request for a stay, the FCC’s Declaratory Ruling and Third Report and Order on small cell deployment went into effect on January 15, 2019. The cities’ appeal has moved to the 9th Circuit.

According to MM&C Telecommunications Attorney, Sean Hughes, “I suspect that this debate and accompanying legal and legislative maneuvering is going to continue. Between the Fed’s  actions to streamline 5G infrastructure development for the  consumer, which is nearly everyone (considering there are over 400 million wireless devices active in the United States), versus local government efforts to prevent or roll back Federal preemptions that are limiting local government review authority and citizen involvement over wireless development requests.“

The telecommunications land use attorneys at Miller, Miller & Canby are experienced in Maryland, D.C. and Virginia’s 5G Wireless and Small Cells Zoning. Our telecommunications, zoning attorneys and real estate attorneys are closely monitoring the impacts of the FCC order and the efforts of local legislatures to craft small cell legislation in order to be able to advise telecommunications carriers and potential landlords.

Sean P. Hughes
is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic.  To learn more about the firm’s Land Use and Zoning practice, click here.

Cathy Borten
is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, click here.
 





FCC Order on 5G and Small Cells Goes into Effect; Cities’ Appeal Goes to 9th Circuit Court


After the U.S. Court of Appeals for the 10th Circuit denied the cities’ request for a stay, the FCC’s Declaratory Ruling and Third Report and Order on small cell deployment went into effect on January 15, 2019.

Known as the September Small Cell Order, the item states that fees charged by a municipality for applications or rent must be limited to costs or they may be deemed as “effective prohibitions of service.” Aesthetic and undergrounding requirements may also be deemed to be a prohibition of service of small cell deployment. Additionally, it established new small cell shot clocks and codified previous ones, as well.
However, the courtroom drama is not over. In a second order, the 10th Circuit remanded the cities’ motion to review their petitions against the September Order back to the U.S. Court of Appeals for the 9th Circuit.

The 9th Circuit was already considering a lawsuit against the FCC’s Order banning municipal moratoria, which is basically part of the same rulemaking as the Small Cell Order. So with the transfer, both the moratoria and the Small Cell Order will be examined by the same court.
Which circuit rules on an appeal can have a big impact on the final outcome of the case. The 9th Circuit could turn out to be more supportive of the cities’ point of view as numerous 9th Circuits’ precedents were overruled by the FCC’s Small Cell Order.

Section 253 of the Telecommunications Act states that local regulations may not prohibit telecommunications services. The FCC Small Cell Order attempted to expand upon the definition of what would be deemed as a prohibition.

Another wrinkle in this case, the FCC currently does not have a lawyer working on this with the partial government shutdown. If it is not reopened in time, the Dept. of Justice will argue the case.

Congressional Involvement
The cities have also taken their fight against the FCC to Capitol Hill. Congresswoman Ana Eshoo introduced the “Accelerating Broadband Development by Empowering Local Communities Act of 2019,’’ on Jan. 14th to preserve the rights of state and local governments, essentially nullifying the September small cell order by the FCC: ‘‘Accelerating Wireless and Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment.

Sean Hughes of Miller, Miller & Canby weighed in, “All interested parties are anxiously watching the Courts and legislative actions that will steer 5G infrastructure development.  Nearly all agree that the 5G state of the art technology is desired, the debate really exists about where the 5G equipment can be located, what it can look like and what local governments can charge as the related fees.”  

The telecommunications land use attorneys at Miller, Miller & Canby are experienced and entrenched in Maryland, D.C. and Virginia’s 5G Wireless and Small Cells Zoning. Our telecommunications, zoning attorneys and real estate attorneys are closely monitoring the impacts of the FCC order and the efforts of local legislatures to craft small cell legislation in order to be able to advise telecommunications carriers and potential landlords.

Sean P. Hughes
is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic.  To learn more about the firm’s Land Use and Zoning practice, click here.

Cathy Borten
is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, click here.
 





City of Gaithersburg Considers Changes to Small Cell Regulations


While some communities are re-inventing themselves as smart cities, many other small towns are busy deciphering what 5G means to them. Bringing 5G capabilities to an area means either new telecommunications towers or small cell deployment and all the financial implications of each.

The September FCC 5G and Small Cell Order is trying to help wireless companies speed deployment of 5G capabilities. The order states that local government cannot prohibit wireless telecommunication services. Local governments are trying to ensure their regulations do not run afoul of the FCC requirements and their regulations do not have the effect of prohibiting wireless telecommunication services to their residents.

Gaithersburg, Maryland City Council members discussed potential changes to small cell tower ordinances for local right-of-ways at a public hearing on January 7, 2019. New changes in FCC regulations and the telecommunications industry spurred on the proposed revisions that would allow developers to increase the size of cell tower equipment housing. Crown Castle and AT&T have been in communication with local government to discuss the possible changes. According to Deputy City Manager Dennis Enslinger, the current size regulation for cell tower equipment is 2.8 cubic feet, and with the changes it would increase to 12 cubic feet.

Council Member Ryan Spiegel will soon become president of the Maryland Municipal League and the City of Gaithersburg Council, where he has expressed the importance of this issue, and continuing to regulate small cell installation.

The public record on the potential ordinance changes will be open until January 31, and the Council will re-address the issue in mid-February.

The telecommunications land use attorneys at Miller, Miller & Canby are experienced and entrenched in Maryland, D.C. and Virginia’s 5G Wireless and Small Cells Zoning. Our telecommunications, zoning attorneys and real estate attorneys are closely monitoring the impacts of the FCC order and the efforts of local legislatures to craft small cell legislation in order to be able to advise telecommunications carriers and potential landlords. Click here to view all MM&C articles related to this topic.

Sean P. Hughes
is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic.  To learn more about the firm’s Land Use and Zoning practice, click here.

Cathy Borten
is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, click here.

 





Property Owners Have Until Early February to Appeal New Maryland Property Tax Assessments


At the end of December, the Maryland Department of Assessments and Taxation (SDAT) issued new Assessment Notices to owners of one-third of all commercial and residential properties in Maryland.  For instance, in Montgomery County, commercial properties in Silver Spring and Wheaton were reassessed.  In Frederick County, commercial properties in Urbana and parts of Ijamsville and Frederick were reassessed.  In Prince George’s County, commercial properties in Greenbelt, College Park, Hyattsville, Oxon Hill, Temple Hills and Riverdale were reassessed.

Property owners have 45 days from the date of the Assessment Notice to challenge these new assessments.  Based on the notices we have seen this cycle, the appeal deadline is February 11, 2019, although this could vary depending upon the notice date.  The “first-level” appeal takes place at the local Assessment Office.  If the assessor refuses to reduce the assessment, the owner may file a further appeal to the county’s Property Tax Assessment Appeals Board (PTAAB).   This Board will consider the evidence and issue a written decision, usually within two weeks.  If the property owner is still dissatisfied, another appeal may be filed to the Maryland Tax Court.

Miller, Miller & Canby has been challenging the assessments of various types of properties in Maryland for more than 30 years and has obtained substantial reductions in real property assessments for our clients.  Our litigation attorneys regularly represent clients before the local Assessment Office, PTAAB and the Maryland Tax Court.  We have successfully appealed the assessments on office buildings, retail stores, senior living centers, warehouses, industrial sites, casinos, apartment buildings and cemeteries.  Let us help you reduce your Maryland property assessments in 2019.

Michael Campbel
l is a partner in the litigation group at Miller, Miller & Canby.  In addition to trial and appellate advocacy, his practice focuses on real estate litigation and property tax assessment appeals.  Please feel free to contact Mr. Campbell at 301.762.5212 or send him an email for property tax guidance or to help reduce your commercial Maryland property tax assessment.  For more information about the firm’s Maryland property tax appeals practice and representative cases, click here.
 





Court Denies Stay Action on FCC Order to Speed Deployment of 5G and Small Cells


Many local governments were caught off guard by the September FCC Order to ease siting of small cells. The National League of Cities (NLC) and a group of local governments and associations brought their case to court and requested a stay for the looming January 14, 2019 implementation date.

Several localities sought judicial review of the order. A judicial panel consolidated the petitions and assigned them to the U.S. Court of Appeals for the Tenth Circuit. In addition to NLC, other parties joining the stay request were: the U.S. Conference of Mayors, National Association of Counties, National Association of Regional Councils, National Association of Towns and Townships and the National Association of Telecommunications Officers & Advisors.

NLC claims the FCC overreached when it voted to impose shot clocks for siting applications and cap application fees for municipalities and other localities concerning wireless infrastructure siting in public rights-of-way.

When evaluating a stay request, the Tenth Circuit Court considers whether the applicant’s arguments are likely to succeed, whether the party would be “irreparably injured” without a stay, and where the public interest lies.

The Tenth Circuit Court concluded the motion failed to satisfy these factors. As for the parties’ arguments that easing small siting rules would hurt property values and create traffic hazards, the court said even the NLC conceded the order, “does not compel any locality to authorize any particular facility,” states the decision signed by Donald Stockdale, Chief of the Wireless Telecommunications Bureau.
The FCC said it followed Congress’ lead by articulating, “specific standards for resolving concrete disputes over whether states’ or localities’ fees” are consistent with its rules. Most of the order is slated to become effective January 14, 2019. The order acknowledged that “some localities will require some time to establish and publish aesthetics standards,” and therefore the aesthetics standards will not take effect until 180 days after Federal Register publication.

According to the FCC Order, for localities that choose to impose aesthetic standards on small cell deployment, they must be:

  1. Reasonable;
  2. no more burdensome than those applied to other types of infrastructure deployments;
  3. objective; and
  4. published in advance.

The telecommunications land use attorneys at Miller, Miller & Canby are experienced and entrenched in Maryland, D.C. and Virginia’s 5G Wireless and Small Cells Zoning. Our telecommunications, zoning attorneys and real estate attorneys are closely monitoring the impacts of the FCC order and the efforts of local legislatures to craft small cell legislation in order to be able to advise telecommunications carriers and potential landlords.

Sean P. Hughes
is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic.  To learn more about the firm’s Land Use and Zoning practice, click here.

Cathy Borten
is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, click here.
 





Is Your Commercial Lease Boat Ready for a Condemnation Storm?


Think of your commercial property lease as a boat for a moment, and condemnation by the government as a storm – is your lease ready for a condemnation storm?  The most basic level of preparedness, the equivalent of having the right number of reliably functional life jackets, is to have an effective Condemnation Clause in your lease.  Just as many boat owners and passengers do not give their life jackets a second thought in advance of a voyage, the same is true of Condemnation Clauses.  Then when a condemnation storm unexpectedly hits the property, landlords and tenants reach for the lease only to find they are not adequately covered by the Condemnation Clause, or worse, there is no Condemnation Clause.

Ambiguous Condemnation Clause – A Faulty Life Jacket
Ideally, the Condemnation Clause in a commercial lease will provide clear guidance for the landlord and tenant in the event the property faces eminent domain before the lease expires.  What is the difference between condemnation and eminent domain you may ask?  While “eminent domain” is the constitutional power of the government to take all or a portion of a privately owned property for public use in exchange for just compensation, “condemnation” is the term used for the act of exercising that power, the process of the taking itself.  Unfortunately, not all Condemnation Clauses are clearly drafted, leaving landlords and their tenants to litigate over the ambiguities, where they could otherwise be working together to weather the storm.  Taking an adversarial position to resolve ambiguities is costly, time-consuming and can take a toll on valued long-standing business relationships.  Better to have condemnation contingencies clearly framed at the outset of the lease.

Condemnation Triggers Lease Termination – Don the Life Jacket
The primary guidance the Condemnation Clause provides landlords and tenants is to affirm the circumstances under which condemnation triggers the lease’s termination; whether the lease will terminate only by a complete taking or also by a partial taking of the property. The Condemnation Clause should also define the apportionment of the just compensation proceeds, if any, between the landlord and tenant.  Regardless of whether the tenant is entitled to a share of any proceeds under the lease, the government will still pay the tenant’s relocation expenses, including a portion of the tenant’s resulting increased rent at a comparable new location.  The tenant may also be compensated for certain improvements (fixtures) to the property the tenant installed, but cannot relocate to a new space.

Complete or Partial Takings – The Type of Storm Matters
The complete taking of a property through eminent domain will terminate a tenant’s leasehold interest in the property, just as it will terminate the landlord’s ownership interest.  A Condemnation Clause will provide how the compensation paid by the government will be allocated between the landlord and tenant.

If only a portion of a property is taken, a good Condemnation Clause will state whether either the tenant or landlord may terminate the lease and under what circumstances.  The partial taking may only impact property value, or it could render the property unable to function as currently used, thus triggering lease termination.  A partial taking scenario raises many challenging questions that a thoughtfully-drafted Condemnation Clause should address, including:  Will the lease continue if there is a partial taking, or will even a partial taking trigger automatic lease termination, making it indistinguishable from a complete taking?  Will the lease continue at the landlord’s option, or will the tenant get to decide whether to continue based upon its own assessment of whether its use of the property is significantly impaired?  Will there be a pre-agreed rent abatement as incentive for the tenant to remain, or perhaps a pre-agreed apportionment of the just compensation proceeds between the landlord and tenant?

No Condemnation Clause – No Life Jacket
Where there is no Condemnation Clause, the lease is still terminated by operation of law if there is a complete taking of the property, and no further rent is owed by the tenant.  However, the question of whether the tenant shares in the condemnation award is left open, which leaves the landlord and tenant to litigate the apportionment of the condemnation proceeds.  In a partial taking, the absence of a Condemnation Clause leaves many other unanswered questions, the foremost being whether the lease is terminated or if it may be terminated by either party.  There is no reason to allow this degree of unpreparedness, which can be easily avoided with a Condemnation Clause.

Prepare For the Storm Before It Comes
Hopefully the message is clear – if a condemnation storm hits your property, a Condemnation Clause is as imperative to a lease as life jackets are to a boat.  However, having one in your lease is not enough; you must also ensure that it is unambiguous and that it adequately addresses the challenging questions raised in the event of a taking.

Because of the competing interests between a landlord and tenant, the terms and conditions of Condemnation Clauses vary widely.  What is important is that the impact of a future condemnation be considered when the lease is negotiated.

James (Jamie) Roth
is an associate in Miller, Miller & Canby’s Litigation Practice Group where he concentrates his practice on real estate litigation with a focus in eminent domain, as well as business and commercial litigation.

Whether you are a landlord or a tenant, contact Jamie Roth at 301-762-5212 to discuss your Condemnation Clause, or if you have learned that the government may be taking all or a portion of your property. For more information on Miller, Miller & Canby’s Eminent Domain and Condemnation Law Practice and representative cases, click here.
 





More Entries