The lessee is entitled to any excess in value of his or her unexpired leasehold over and above the rentals that would be due for the unexpired term. ^[5] In other words, he or she is entitled to recover the fair market value of his or her leasehold interest less the rents he or she must pay to the landlord. ^[6] While evidence of a property owner’s business profit normally is not allowed in condemnation cases, it may be admissible under the peculiar facts of a case to show the fair market value of the lessee’s interest. ^[7] In the event of a partial taking of the leasehold, the lessee is entitled to recover the difference in value of the lease before the taking and the value of the lease after the taking. ^[8]

Procedurally, where a partial taking of property subject to a leasehold occurs, the jury must first determine the total amount of just compensation for the taking, including the fair, reasonable cash market value of the property taken on the date of the taking, and incidental damages, if any, to that portion of the property remaining. ^[9] In determining the total fair market value of the fee, the jury should consider the leasehold as one element of the total fair market value of the property, as the leasehold indicates one available use of the property. ^[10] The total compensation is to include all losses suffered by all parties having an interest in the property affected and cannot exceed the value of the fee, unencumbered by the lease on the date of taking. ^[11] The jury then apportions the total compensation between the landlord and tenant. ^[12]

And while this is the recognized rule--that total compensation for a tract of land cannot exceed the unencumbered fee and must be apportioned between the reversioner and the lessee according to their respective interests--this does not mean that the amount of incidental damages to owner and lessee is restricted to the market value of the land taken where only part of the land is condemned.^[13]

And by statute, incidental damages to the leasehold are provided, see T.C.A. § 29-16-203, including the lessee’s moving expenses.^[14]

Notes:
^[5] Shelby Cnty. v. Barden, supra; Mason v. City of Nashville, supra; City of Johnson City v. Outdoor West, Inc., supra; State ex rel. Comm'r, Dep't of Transp. v. Teasley, 913 S.W.2d 175 (Tenn. Ct. App. 1995); State v. Texaco, Inc., 49 Tenn. App. 278, 354 S.W.2d 792 (1961).

^[6] State ex rel. Dep't of Transp. v. Gee, 565 S.W.2d 498 (Tenn. Ct. App. 1977); Gallatin Hous. Auth. v. Chambers, supra; City of Nashville v. Mason, supra.

^[7] Shelby Cnty. v. Barden, supra; Lebanon & Nashville Turnpike Co. v. Creveling, 159 Tenn. 147, 17 S.W.2d 22 (1929); State v. Texaco, Inc..

^[8] State ex rel Smith v. Hoganson, 588 S.W.2d 863 (Tenn. 1979).

^[9] State ex rel. Smith v. Hoganson, supra; Moulton v. George, 208 Tenn. 586, 348 S.W.2d 129 (1961).

^[10] State v. Texaco, Inc., supra.

^[11] State ex rel. Smith v. Hoganson, supra; Moulton v. George, supra.

^[12] State ex rel. Smith v. Hoganson, supra; Shelby Cnty. v. Barden, supra; Moulton v. George, supra.

^[13] Gallatin Hous. Auth. v. Chambers, supra.

^[14] Nashville Hous. Auth. v. Hill, 497 S.W.2d 917 (Tenn. Ct. App. 1972).