CACI No. 3508. Bonus Value of Leasehold Interest

Judicial Council of California Civil Jury Instructions (2023 edition)

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3508.Bonus Value of Leasehold Interest
[Some/All] of the property taken was leased to [name of lessee]. You must
determine the amount of compensation that [name of lessee] can recover.
To do this, you must determine the difference between:
1. The present value of the total rent that [name of lessee] agreed to
pay during the time remaining on the lease after [insert date of
possession when lessee no longer occupied the premises]; and
2. The present value of the total fair market rent for the leased
property from [date of valuation] for the time remaining on the
lease.
If the present value of the total agreed rent is less than the present value
of the total fair market rent, then [name of lessee] is entitled to the
difference.
New September 2003
Directions for Use
Do not give this instruction if bonus value is allocated under the lease to the owner.
This instruction may not be appropriate in every case involving a lessee.
This instruction would be applicable to the apportionment phase of the case under
Code of Civil Procedure section 1260.220(b).
Sources and Authority
• Lessee’s Right to Compensation. Code of Civil Procedure section 1265.150.
• Terms of Lease Define Rights of Parties. Code of Civil Procedure section
1265.160.
• “Under the Eminent Domain Law, a provision of a lease that declares that the
lease terminates if all the property subject thereto is acquired for public use does
not deprive the lessee of any right he may have to compensation for the taking
of his leasehold or other property. The Eminent Domain Law itself declares the
generally applicable rules that the lease terminates if all the property subject
thereto is acquired for public use, and that such termination does not affect any
right of the lessee to compensation related thereto.” (City of Vista v. W.O. Fielder
(1996) 13 Cal.4th 612, 618 [54 Cal.Rptr.2d 861, 919 P.2d 151], original italics.)
• “Usually the rental value of the property is measured in terms of existing
tenancies. Tenants, like owners in fee, are also entitled to compensation in
condemnation.” (People ex rel. Dept. of Water Resources v. Andresen (1987) 193
Cal.App.3d 1144, 1163 [238 Cal.Rptr. 826].)
• “The bonus value can be more precisely defined as the present value of the
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difference between economic rent, i.e., the value of market rental, and the
contract rent through the remaining lease term. The bonus value usually assumes
importance only in long-term commercial leases.” (New Haven Unified School
Dist. v. Taco Bell Corp. (1994) 24 Cal.App.4th 1473, 1478-1479 [30 Cal.Rptr.2d
469], internal citations omitted.)
• “Whether or not the lessor and lessee are joined in a single proceeding, these
rules will ordinarily result in an aggregate award to both lessor and lessee equal
to market value of the property. Where the lease rental falls below market value,
the lessor will have a claim to less than the full market value of the property,
since he is restricted to the present value of actual contract rental; but the lessee
will have a right to recover the balance of the market value, above that
recovered by the lessor, as lease bonus value.” (New Haven, supra, 24
Cal.App.4th at p. 1479, internal citation omitted.)
• “Although generally a tenant is entitled to all compensation attributable to the
tenant’s interest in a lease, it is well recognized that the parties to a lease may
contractually agree to allocate a condemnation award to the landlord rather than
the tenant.” (City of South San Francisco v. Mayer (1998) 67 Cal.App.4th 1350,
1354 [79 Cal.Rptr.2d 704], internal citations omitted.)
• “A lessee’s option to renew a lease should be considered to the extent that the
option enhances the value of the leasehold.” (San Francisco Bay Area Rapid
Transit Dist. v. McKeegan (1968) 265 Cal.App.2d 263, 272 [71 Cal.Rptr. 204].)
Secondary Sources
8 Witkin, Summary of California Law (11th ed. 2017) Constitutional Law, § 1389
1 Condemnation Practice in California (Cont.Ed.Bar 3d ed.) §§ 4.57-4.63
4 Nichols on Eminent Domain, Ch. 12D, Valuation of Interests Other Than Fee
Interests, § 12D.01[3] (Matthew Bender)
20 California Forms of Pleading and Practice, Ch. 247, Eminent Domain and
Inverse Condemnation, § 247.136 (Matthew Bender)
CACI No. 3508 EMINENT DOMAIN
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