Irv-Ceil Realty Corp. v. State
| Decision Date | 27 December 1973 |
| Docket Number | No. 49205,IRV-CEIL,49205 |
| Citation | 43 A.D.2d 775,350 N.Y.S.2d 784 |
| Parties | REALTY CORP., Appellant, v. STATE of New York, Respondent. Claim |
| Court | New York Supreme Court — Appellate Division |
Koeppel, Sommer, Lesnick & Martone, Mineola (William D. Siegel, Mineola, of counsel), for appellant.
Louis J. Lefkowitz, Atty. Gen. (Richard Dorsey, Albany, of counsel), for respondent.
Before HERLIHY, P.J., and COOKE, SWEENEY, KANE and MAIN, JJ.
Appeal from a judgment, entered June 28, 1972, upon a decision of the Court of Claims which awarded claimant $231,022, plus interest, for the appropriation of its land for highway purposes.
Claimant owned a 1.626-acre parcel of land situated on the northerly side of the Jericho Turnpike in the Town of Huntington, Suffolk County. The property was developed in three sections: a restasurant and parking lot; a children's amusement park; and a miniature golf course. It was located in a general business zone and its highest and best use before the appropriation was for highway commercial use consonant with the existing zoning. The court found that only the restaurant area was within the highest and best use. At trial, the parties stipulated to a value of $58,400 for the restaurant and that portion of the award is not before us; nor is the restaurant fixture value of $12,872. What is involved is the court's method of evaluation of the amusement park area, and the adequacy of its award for the golf course area due to its failure to make any award for the fixtures on the miniature golf course.
The amusement park area, consisting of 23,653 square feet, was leased to Playland at Huntington, Inc. for a 25-year term which had over 19 years left to run at the time of appropriation. Pursuant to the lease, which restricted the use of the premises 'as a place of amusement', the tenant was obligated to pay a rental of 10% Of its annual gross income up to $50,000 and 15% Of such income in excess thereof, with a minimum annual rental of $2,000. The rental payments actually made by the tenant in the four years immediately preceding the appropriation were at or near the minimum rental. Apparently, business was adversely affected by a ferris wheel accident which resulted in the death of a child in 1963.
Based upon the market data method of valuation, the court arrived at a $2.50 per square foot value for the unencumbered fee, for a total land value of $177,000 which is not challenged. However, the court carved out of this value.$17,250 representing the value of the lease. Because of the amusement park restriction in the lease which impaired its economic advantage to the tenant, as reflected by the past performance of the operation, the court found no competent support, under the contract rent-economic rent advantage appraisal procedure, for the $33,000 leasehold valuation proposed by Playland. At the same time, the court noted that the existence of a long term, low-yield lease was an encumbrance on the fee, which would have to be removed in order to develop the property for its highest and best use. Using what it denominated as the 'legal holdup' theory of valuation, the court attempted to determine the value of the leasehold as the amount which lessor would be willing to pay and which lessee would be willing to accept to cancel the lease. The court thus arrived at a $1.75 per square foot for the property encumbered by the lease or a.$17,250 value for the lease.
The rule for evaluation of leasehold interests were stated by the Court of Appeals as follows:
Generally speaking, where there are two or more interests or estates in a condemned parcel, the proper mode of assessing damages is to ascertain first the damage to the fee as if it were unencumbered, and then to apportion that amount among all of the estates and interest which are held in the property * * * the damages to which a lessee is entitled are generally the value of the leasehold (Matter of City of New York (Delancey St.), 120 App.Div. 700, 708, 105 N.Y.S. 779, 784). In computing the value of the leasehold, the court must first ascertain the fair...
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