When is a lease that everyone agrees is worth more than a million dollars totally worthless? When it's an eminent domain case and the court applies the "undivided fee" rule, that's when.
Most eminent domain attorneys know about the infamous undivided fee rule (aka as the "unit rule" in some jurisdictions), a legal fiction which requires a trial court to calculate valuation of property as if a single owner possessed everything, even when it is held by more than one interest. Under the rule, the condemnor is not required to compensate each separate interest in the property, but treats the property as if it had one owner.
For example, if a condemned building is being leased to tenants, compensation is measured by the value of the undivided fee simple absolute value of the building, not the aggregate value of the building and the leases. The building owner and the tenants must divide up the condemnation award by contract. In many if not most cases, the rule is uncontroversial. But in a few cases its rigid application works very unusual and unfair results.
This amici brief urges the U.S. Supreme Court to review a 2009 decision by the Wisconsin Supreme Court that concluded a very valuable long term lease possessed by the VFW was worthless under the undivided fee rule. The brief argues that under the Just Compensation Clause of the Fifth Amendment, each interest in property must be compensated at its true market value, and not by a legal fiction such as the undivided fee rule.
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