REALWorld Law

Commercial leases

Termination by a third party

Can a lease be terminated by any third party, eg the government or a municipal authority? If so, how long does this process take? Is compensation payable and, if so, who pays it?

United States

United States

The federal and state governments’ inherent power to take land for public purposes so long as compensation is paid to the land owner is commonly known as the power of ‘eminent domain’ or ‘condemnation’ in the United States. Upon complete condemnation, any leases affecting the land will automatically terminate and, subject to the provisions of the lease, the affected tenant may have a claim for a portion of the compensation award to cover the value of the unexpired lease, the tenant’s fixtures and relocation expenses. Whether a condemnation of only part of the land will result in terminating a lease will depend upon the materiality of the land taken and the provisions of the lease governing this circumstance.