Member Since: 6/15/07
The property is one entity and the business is another.
In 2004 the business signed a lease with the property owner for 20 years with a 10 year option. Compared to current market rates, the lease rent is substantially higher.
The business is a niche business, grandfathered in and having had no possibility of moving its location or transferring ownership over the last 32 years at this location; these factors as well as the last 9 years of lease fulfillment would give one reason to believe that the remainder of the lease would be fulfilled regardless of the local reduction in commercial rent.
From what i read the property owner is entitled to a leased fee value, which is the value of the right to receive contract rent for the term remaining on the lease. It is the capitalized value of the income stream over the life of the lease term remaining. And that the difference between this value of the lease and the current "fair rental value" should be awarded.
Anyone have any experience with these types of cases? Are the lease extensions normally added to the award? "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].)
Any questions or comments are appreciated.