Eminent Domain Report

When a public agency acquires property for a public project, property owners have a constitutional right to receive just compensation. But what about the businesses that operate on the property – are they entitled to anything? 

The rights of business owners vary from state to state, as there is not a constitutional right to compensation for business losses. In California, business owners may be entitled to compensation for several items. These include:

• Loss of Business Goodwill: A business may accrue “goodwill” because of its location, reputation and ability to attract and keep customers. Compensation for business goodwill may be awarded if a business loses these benefits because of the taking, assuming the business undertakes reasonable efforts to mitigate its losses.
• Fixtures and Equipment: A business may be entitled to compensation for the value of immovable fixtures and equipment. This can include things like signage, security cameras, building canopies, electrical upgrades and certain appliances. 
• Relocation Benefits: A business may be entitled to recover some of the costs of moving the business and reestablishing it at a new location. These costs can include transportation of personal property, packing and unpacking personal property, dismantling, re-assembling and re-installing machinery and equipment, modifications to a relocation site, storage costs, permit or license fees, signs and stationary and certain professional services. 
• Leasehold Bonus Value: A business that has a lease at below-market rent may be entitled to the difference between contract rent and market rent for the remainder of the lease term, known as “leasehold bonus value”. 

If you’re interested in learning more about the rights of business owners impacted by the acquisition of property for a public project – via eminent domain or under threat of eminent domain, please reach out or consult our California Business Owners Survival Guide.