City of Buffalo v. Michael, 16 N.Y.2d 96 (1965)

A tenant is entitled to compensation in condemnation proceedings for fixtures annexed to the real property, even if the lease grants the tenant the right to remove them upon termination, when the city’s taking of the property destroys the tenant’s leasehold interest.

Summary

In a condemnation proceeding, the City of Buffalo appropriated an apartment building owned by Michael, on which Whitmier & Ferris Co. (tenant) had a large advertising sign. The tenant’s lease for the roof space was not renewed because of the condemnation. The New York Court of Appeals held that the tenant was entitled to compensation for the sign as a fixture, despite the lease’s expiration shortly after the condemnation proceeding began. The court reasoned that the sign was permanently annexed to the building, its value was not included in the landlord’s compensation, and the condemnation effectively forced the premature removal of the sign, destroying its value.

Facts

The City of Buffalo initiated condemnation proceedings against Michael’s apartment building for a redevelopment project. Whitmier & Ferris Co. (tenant) had a large advertising sign permanently affixed to the building’s roof and walls, paying $250 annual rent under a year-to-year lease. The sign generated $4,800 annually for the tenant from its customers. The lease expired on April 1, 1960. Prior to the expiration and because of the city’s condemnation, the landlord notified the tenant that the lease would not be renewed and requested removal of the sign.

Procedural History

The Supreme Court awarded the landlord $47,250 for the land and building but denied compensation to the tenant for the sign, deeming it personal property. The Appellate Division reversed, holding that the tenant was entitled to compensation and ordered a new trial to determine damages. On retrial, the Supreme Court awarded the tenant $4,926 for the sign’s value. The city appealed to the Court of Appeals.

Issue(s)

Whether a tenant is entitled to compensation in a condemnation proceeding for an advertising sign permanently affixed to a building, when the lease for the roof space was not renewed due to the condemnation, and the lease granted the tenant the right to remove the sign at the end of the lease term?

Holding

Yes, because the sign was a fixture, the condemnation proceeding forced its premature removal and destroyed its value, and the tenant was not compensated for the sign in the award to the landlord.

Court’s Reasoning

The court held that the advertising sign was a compensable fixture because it was permanently annexed to the building. The court relied on the principle that a tenant is entitled to compensation for fixtures when the condemnation destroys the leasehold interest, even if the tenant has the right to remove them upon lease termination. The court noted the sign “was not personalty which a public body might except from its appropriation” and “had not lost its identity by becoming a structural part of a building”. The court distinguished the situation from personal property that could be removed without damage. The court emphasized that the city’s condemnation action directly caused the non-renewal of the lease and the premature removal of the sign, thus destroying its value to the tenant. The court cited Matter of City of New York [Allen St.], 256 N.Y. 236 (1931) and Marraro v. State of New York, 12 N.Y.2d 285 (1963), reinforcing the principle that a tenant does not lose the right to be paid for removable fixtures when the leasehold is terminated by condemnation. The Court stated, “although the tenant * * * loses his right to compensation for his leasehold, he does not lose the right to be paid for his removable fixtures”. The fact that the landlord received compensation based on the rental value of the roof for sign-bearing purposes did not negate the tenant’s right to compensation for the sign itself.