I have been presented with the opportunity to purchase a business which is located within a portion of my county that a revitilization project will soon (in the next 10 years) be taking place. The land is owned by one individual, the business by another. If I buy this business, and the landowner willingly sells his property to the county or is forced to as a result of eminent domain, as a tenant am I forced out of the property? Am I entitled to the relocation assistance offered?

I know this is a question probably best asked to a retained lawyer, but if someone can advise me here and keep me from even placing a contract on this place, I'd appreciate it.

Thanks.

Yes you are forced out, no normally you will not get any assistance unless who ever is taking the land is offering any to make taking the property easier.

Eniment Domain basically voids any lease you would have.

You could ask for the lease to include a clause that if he sells it, you would get...

But as you said, this is best left to the lawyers.

Quote:

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Originally Posted by jillianleab

as a tenant am I forced out of the property? Am I entitled to the relocation assistance offered?

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Hello jillian:

Well, of course you’d be forced off the property too. The city, county, state (I dunno), wants the property for other purposes. That IS the whole reason they're doing this after all.

What makes you think there WILL be relocation assistance? IF there is relocation assistance paid, I'll bet it'll be paid to your landlord - NOT you - unless of course, you put THAT in your lease.

Now, I'm going to take off my lawyer hat and put on my businessman hat. Location, location, location. IF the business, due to the impending procedure, is priced very, very, very cheap, then I might consider it. Certainly IF you're successful in that location, moving could be catastrophic to YOU, so you might have to earn your retirement BEFORE the impending crisis occurs. You can't do that if you paid retail for the business and you're paying retail rent.

excon

Thanks for your responses. The logical side of me said that yes, I'll be forced out of the property and the lease would be voided, I just wanted conformation of that. The reason I ask about relocation assistance is because I have read a max of $20,000 can be paid to destroyed businesses as a result of eminent domain. However, I read that on Wiki, so it must be taken with a grain of salt! You are, of course, right, there should be a clause in the lease specifically stating such things if we decided to go ahead with this deal.

The business is highly profitable (a junkyard), and the purchase price is very low, so it would act like a cash cow for the period we own it. However, there is no chance (in my opinion) a revitilization project will want a junkyard to stick around when they are building $800,000 homes three blocks away. Also, it would be a very difficult business to pick up and move to another location (zoning, cost, etc). I'm not the only investor involved with this deal, but I think given the situation I will probably sit this one out and encourage the others to hire a lawyer if they proceed...

Thanks again for your responses!

I will note on a junk yard, you want to be careful on a few issues, If and when they get ready to force you out, I saw this done in a Major GA city a few years ago. The zoning people, and the government agency that wants the property will start finding code and other violations. I saw a major college basically close down a car wash to put them out of business so they could get that land real cheap.

And a local salvage recycle yard ( junk yard) ended up going bankrupt 4 times over 5 years from fines and penalties the city put on them trying to force them out so they could build apartments and condo on that property.

** and there are condos and apartments there now, so I guess the city won.

Just be careful your cash cow does not bite you and that there are no possible areas of violations of code or government rules.

I wondered about violations and the fees from the county to force the business out, or to pick the place up cheaper. Thank you for your example.

I have another brief question; I am hesitant to proceed with this deal, but the other investors seem gung-ho. I don't think they fully understand the concept of eminent domain. When I brought this up to them, they insisted that "grandfather clauses" will allow the business to stay. I don't see how that's possible. Please tell me I'm right! Also, is there a location on the internet which is a good source for eminent domain information? The most comprehensive thing I found in a brief search was the Wikipedia article. If you know of a place (please don't search on my account!) I'd appreciate a link.

Thanks!

Hello again, jillian:

The concept of "eminent domain", since a recent Supreme Court ruling, has been BIG news in the real estate world. Personally, I cannot imagine any investor with enough cash and savvy, who would not know about it, and who would dive in with BLINDERS on. Yet, that's what their doing.

Unless one of these guys is a relative, you're not going to convince him that an elephant is a deer; if he's convinced it's a deer.

excon

PS> I didn't Google it, but I'll bet if you did, you'd come up with thousands of pages about it.

Hi excon:

The investment situation is a little strange; the other people we are involved with are Korean, and thus far have dealt with Korean business owners where "your word" means more than anything else. This is the first deal we have been involved in. My husband and I are trying to urge them toward an everything-in-writing and solid contracts form of investing. Most of the people involved are also relativley new to investing and are concentrating heavily on the financial aspect of things. In other words, is the business turning a profit and can we buy it an continue to turn a profit? That's the lure of the junkyard; it's about 80% profit! They seem a bit narrowminded about other aspects and almost unconcerned with things like EPA regulations, OSHA requirements, etc, thinking this will be easy and fall into place. I've worked in the automotive industry and for a manufactuing company so I know OSHA and EPA can be a bear... My husband and I are trying to point out a junkyard is a different sort of business than say, a restaurant and with the revitalization project taking place sometime in the future that needs to be a major deciding factor. I don't know if we can convince them or not, but my husband and I always have the option of not proceeding with the deal. I might be young and have enough time to recover financially if I blow things right now, but I really don't want to! :)