When a property is leased or rented, both the owner and tenant may be entitled to compensation, depending on whether the lease contains an enforceable condemnation clause. If there is no condemnation clause, the property is generally valued as a whole and that value is then divided among the owner and the tenants according to their respective interests in the property. What many property owners do not realize is that if their property is leased at below market rents, and their lease does not contain a condemnation clause, the tenant may be entitled to receive a sizeable portion of any compensation paid for the real estate.
It should be noted that the government can alternatively require that each party’s interest be separately valued, rather than valuing the property as a whole and then dividing the whole. This is, however, rare.