Blog 6 Can FSTC take a lessee's land?

Yes.  FSTC has the right of Eminent Domain.  If you are a lessee, FSTC can take your land for a public purpose.  I thought just governments could do that.

Once, when I objected to FSTC taking back public park land and then leasing it to individuals, an officer told me, "You know, that corner you live on would make a nice park.  FSTC has the right to take it for a public purpose."   I didn't like the "bullying" suggestion that I'd better be quiet or they would take my land.  I was even more upset to think that FSTC could possibly have the right of Eminent Domain. So, I went home and read my lease.

It says:  "(9) The Fairhope Single Tax Corporation reserves the right to resume possession of all or any portion of the land herein described, for public purposes only, on payment of the appraised value of the improvements thereon. The terms of this paragraph do not apply during the time a mortgage exists on the leasehold interest and the improvements thereon."

Have they ever done that to anyone?   I don’t know.  

I do know that Council members who govern this large land leasing company, do not get any official training in the law of leases, leasehold value, or the rights of lessees.  The fact that they get no official training and have this huge power is frightening to me. 

Right now the State of a Alabama is condemning land to widen Highway 181.  Many leaseholders are losing a good bit of the property they have the right to use and enjoy for 99 years.  So who gets the money the State pays for this land?

The FSTC Council says "we own the land. We should get all the money"

Sounds logical in a way. I do pay a rent bill every year.  But, I paid the market value for the exclusive right to use and enjoy this land for 99 years.  Seems like the State would be taking quite a bit of my land value in this too.

The 5th Amendment of the Constitution says "...nor shall private property be taken for public use, without just compensation."  Is my leasehold interest 'property' that must be compensated for in Condemnation cases ?

The U S Supreme Court says it is. I have an absolute right to compensation in condemnation because it considers leasehold value 'property ownership.'

FSTC, apparently not knowing about leasehold value being considered "property" has taken the position that FSTC ‘owns the land’ and should therefore get all the money in condemnation, but is willing to give some money to the lessee—30%.  

The FSTC had their attorney draw up a document for lessees on Highway 181 to sign, giving FSTC 70% and the lessee 30%.

Director McCawley said he wanted to make it clear that this is not a settlement or offer, but rather that FSTC is willing to share in the proceeds of the forced sale of its asset—the land.  

What about the forced sale oif the lessee's asset--the right to use and enjoy the land exclusively for 99 years?

That is also 'property ownership.'

The FSTC also seems to have forgotten that the Alabama Supreme Court in Rezner ruled that improvements to the land are owned by the lessee.  Those improvements include every blade of grass, every shade tree, every flower, every fruit tree, the time and energy used in nurturing the land, the lessee's good taste in planning, etc.  Appraisers generally give a value for the building and a value for the land.  The value of all the trees and grass and flowers are not included by appraisers generally as "improvements."  Those improvements must be appraised and then subtracted from the land value.  Once land value is determined after subtracting all those improvements of trees and flowers and care, etc, then leasehold value of that land can be determined. 

Suppose you paid $100,000.00 last year for a piece of property.  The lessee selling the property got to keep the entire $100,000.00. FSTC had no claim to it. This year the State decides it needs the entire lot and appraised it for $100,000.00. FSTC comes to you and says "FSTC owns the land and should get that entire $100,000.00, not you.  But we'll share the proceeds from our loss and give you $30,000.00."  Sound fair?

Well, since the US Supreme Court determined that leasehold value is "property" how should a fair split between FSTC and the lessee be decided?  

That's been decided too. The Alabama Supreme Court determined the procedure that must be used in determining a fair split. FSTC learned this in a previous condemnation lawsuit back when Greeno Road was being widened. In that lawsuit, SouthTrust Bank vs FSTC, the Court of Appeals said that the Alabama Supreme Court, in a case known as Drummond Coal, determined the method the courts must use in determining a fair split, and sent the case back to the trial court so the trial court would apply that procedure.  The case was settled out of court and the settlement sealed.  But it is obvious when reading the case at the Court of Appeals level, that FSTC would have gotten nothing.  FSTC subsequently  paid for two legal opinions on what value FSTC could expect in condemnation cases.  Opinions: zero most likely, but never more than 10%.  

This information was paid for with rents from the lessees, but the lessees were not given this information which is crucial to their bargaining position.  

Are the Council’s actions putting the  Corporation  at risk of being sued?   The Council seems realize that they are because the March 2013 minutes say, “It was suggested to get Wilkins, Bankester, Biles and Wynne on board in case litigation is required.”     

Questions from members as to the Council's basis for determining the 30/70 split were never answered.  

Some officers are quick to point out that legal costs can be expensive.  

 FSTC has very deep pockets.  Lessees know that.  Is FSTC  Council using this power of deep pockets to encourage lessees to settle for much less than the courts would probably give them?  I certainly  hope not.  That would be opposite any Georgist philosophy. 

Was that how Henry George intended the 'single tax' to be used?  Is this how the FSTC was intended to treat the citizens of its ‘model community.’   Is this the way to demonstrate how a ‘model community’ should work? 

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