California Eminent Domain Report

With plans to demolish the old Carriage Square shopping center and rebuild it with a Lowe's, the City of Oxnard was on the verge of passing a resolution of necessity to acquire by eminent domain the leasehold interests of one of the few remaining tenants of the center.  However, according to an article by Scott Hadly, "Oxnard, credit union likely to avoid eminent domain clash," the City's threat of eminent domain appears to have resulted in a deal with that tenant, Pacific Oaks Credit Union.

In order to force the tenant to relocate and give up its rights under its lease, the City would normally be required to institute eminent domain proceedings and thereafter compensate the tenant for relocation expenses, lost business goodwill, and other forms of damages, such as leasehold "bonus value" (the difference between the tenant's contract rent and the market rent the tenant would be required to pay at the new location).  Here, for example, the tenant believed there would be a $500,000 difference between its rent under its lease and current market rents.

The shopping center property is owned by a private developer, and the City is therefore seeking to acquire the leasehold interests of the tenant on behalf of the developer in order to prompt the property's redevelopment.  The developer would typically be on the hook for any expenses the City incurs through the eminent domain process.  However, in order to avoid such expenses, it appears the developer of the new shopping center and the tenant are putting the finishing touches on a new lease agreement that will relocate the tenant at a reasonable rental rate at a satisfactory location.