South-Western Legal Studies in Business

Eminent Domain May Be Used to Take Leases for Benefit of Private Party
Description New York appeals court upheld the right of a city to use eminent domain to take lease interests in real estate for the benefit of a private company that wished to abrogate the leases in order to expand a shopping mall.
Topic Real and Personal Property
Key Words Eminent Domain; Condemnation; Private Interest
C A S E   S U M M A R Y
Facts In 1987 the Syracuse (NY) Industrial Development Agency (SIDA) used powers of eminent domain to acquire 800 acres for development of a shopping mall that was built by a private company, Pyramid. Mall tenants had long-term leases with Pyramid. Ten years later, Pyramid proposed to SIDA that it condemn more land for Pyramid, so that it could expand and redesign the mall. Tenants in the mall, including the anchor stores, objected, contending that the plans violated their leases with Pyramid regarding the structure of the mall. SIDA determined that it had the eminent domain authority to condemn the terms of leases as part of its authority to use its powers to expand the privately-owned mall. The tenants appealed the condemnation of their lease rights.

Affirmed. The SIDA followed proper procedure in its hearings on the matter, so there was no violation of due process. SIDA has the authority to use eminent domain to take the tenants' lease rights for the benefit of a private developer, Pyramid, because it is a part of its governmental purpose to further economic expansion. Eminent domain may be used to acquire real property as well as leasehold interests in real property so long as it is rationally related to a conceivable public purpose. The result is that Pyramid is relieved of being sued for breach of its leases with the mall tenants.

Citation Carousel, Inc. v. City of Syracuse Industrial Development Agency, 750 NYS2d 212 (Sup. Ct., App. Div., N.Y., 2002)

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