The 2021 Infrastructure Investment and Jobs Act put $1.2 trillion behind public works, and eminent domain filings picked up in its wake almost immediately.[1] What’s changed since is the target. The 2005 fight over Kelo was about redevelopment agencies and blighted lots. The 2026 fight is about transmission corridors: a 107-mile line across four states to feed Virginia data centers, carbon dioxide pipelines cutting through the Corn Belt, the physical footprint of the AI buildout landing on land somebody else owns.[2] A lot of that land has a commercial tenant on it, and a lot of those leases have a condemnation clause nobody has read closely since the day they signed it.
A lease clause assigning “all awards” from a taking to the landlord reaches the value of the real estate. It does not reach the value of the business the tenant built on top of it, because California law treats goodwill as a separate thing to compensate, and a landlord who wants a piece of it has to say so in the lease.
A restaurant lease had a standard-form condemnation clause, and then the school district showed up. Edgar Fragoso and his mother, Eva Meneses, signed a 15-year lease in February 2008 for a building at 2800 Firestone Boulevard in South Gate, California, to run El Parral Restaurant. Section 13 of the lease read: “All awards for the taking of any part of the Premises or any payment made under the threat of the exercise of the power of eminent domain shall be the property of the Landlord… provided, however, that Tenant shall be entitled to any award for loss or damage to Tenant’s trade fixtures and removable personal property.” In 2009 the Los Angeles Unified School District filed to condemn the property for a new school, and got a prejudgment possession order that November.[3]
The landlord told the district it wasn’t going after the tenant’s goodwill claim, then sued for it five years later. In the eminent domain case itself, the landlord, Thee Aguila, Inc., answered that it claimed “by assignment, each and every award herein for the taking, including [El Parral’s] loss of good will, but not including its[] trade fixtures.” But at deposition, when LAUSD’s attorney asked whether Thee Aguila had resolved its goodwill claim against El Parral, Thee Aguila’s own attorney said: “We are not seeking to apportion any portion of the business operator’s goodwill claim, if any.” The March 2011 judgment split the award: $6,198,100 to Thee Aguila for its property interest, $6.1 million to Meneses, Fragoso, and El Parral for leasehold value, goodwill, fixtures, relocation, and costs. Thee Aguila let that stand. Then, in January 2014, it sued Meneses and Fragoso, arguing the lease’s condemnation clause (or, failing that, an alleged oral side deal, or a theory that a prior operator had secretly kept the right to the goodwill and assigned it back to the landlord) entitled it to the tenant’s $6.1 million.[3]
The Court of Appeal held goodwill isn’t the landlord’s to assign, because it isn’t the landlord’s in the first place. Under Code of Civil Procedure section 1263.510(a), a business owner on condemned property is compensated for lost goodwill as its own statutory category, separate from whatever the leasehold itself is worth. The California Supreme Court had already drawn that line in City of Vista v. Fielder: “goodwill can exist apart from a leasehold, and a leasehold can exist apart from goodwill."[4] The condemnation clause here assigned awards “for the diminution of the value of the leasehold,” “for the taking of the fee,” and “as severance damages” — three categories that don’t include the value of the business Fragoso and Meneses built inside the space. A clause that wants to reach a tenant’s goodwill has to name it. This one didn’t, so the trial court and the Court of Appeal both read it as written, not as Thee Aguila wished it had been written.[3]
The apportionment fight had to happen inside the condemnation case, and it already had. Code of Civil Procedure section 1260.220 requires that where there are “divided interests in property,” the court apportion the award among the parties “in the same proceeding” as the taking, not in a lawsuit filed years afterward. Thee Aguila argued it and the tenants had been codefendants, not adversaries, in the LAUSD action, so nothing there should bind it now. The Court of Appeal disagreed: the eminent domain judgment had already decided who got what, complete with Thee Aguila’s own lawyer disclaiming any goodwill claim on the record, and collateral estoppel closed the door on relitigating it. The same timing problem sank Thee Aguila’s separate claim for two months of back rent — once LAUSD’s possession order took effect in November 2009, the lease terminated by operation of law under sections 1265.110 and 1265.140, months before the rent Thee Aguila was still trying to collect.[3]
The next version of this dispute is already underway, just with different infrastructure. El Parral was a school taking, the kind of eminent domain everyone expects. The projects driving condemnation filings now are transmission lines and pipeline easements serving private energy and data infrastructure, which means landlords and tenants who never expected to be a defendant in an eminent domain case are going to find themselves apportioning an award for the first time, often with a lot more than $6.1 million on the table.[2]
A condemnation clause sits in the same category as a letter of credit clause governing bankruptcy proceeds: both assign money after an event neither party chose, and both get tested by rules outside the lease that don’t bend to reach what the drafter meant to say.
Reading the assignment language against what it actually reaches#
Acrebase’s clause extraction flags condemnation provisions that assign “all awards” without naming goodwill, business value, or relocation benefits specifically, so a landlord’s counsel can see the gap before a taking happens rather than after a tenant has already banked the check. Its clause library lets a firm standardize the language that actually reaches goodwill, where that’s the negotiated deal, instead of relying on form language that a court will read narrowly by default.
If you are a landlord, a general “all awards belong to Landlord” clause won’t capture a tenant’s goodwill; if that’s the deal you want, the clause has to name goodwill and business value as separately assigned. If you are a tenant, don’t concede your goodwill claim’s status during the condemnation proceeding itself, however informally, because a landlord who wants it back later may not get a second bite once that case is final.
Footnotes
[1] Ballard Spahr, “Bipartisan Infrastructure Law Spurs Increased Use of Eminent Domain” — the Infrastructure Investment and Jobs Act authorizes $1.2 trillion in public works spending; “we already have seen a significant increase in condemnations in the wake of the IIJA.” https://www.ballardspahr.com/insights/alerts-and-articles/2023/05/bipartisan-infrastructure-law-spurs-increased-use-of-eminent-domain
[2] Jimerson Birr, “Eminent Domain for Private Infrastructure: A Florida Guide” (Apr. 2026) — describes a 107-mile, four-state transmission project seeking condemnation authority to serve Virginia data centers, carbon dioxide pipeline disputes across the Midwest, and argues “the 2026 fight is about the physical infrastructure of the energy transition, the computing buildout, and the interstate movement of goods.” https://www.jimersonfirm.com/blog/2026/04/the-renewed-debate-over-eminent-domain-for-private-infrastructure-projects-why-it-matters-now/
[3] Thee Aguila, Inc. v. Century Law Group, LLP (Cal. Ct. App., 2nd Dist., Div. 1, filed July 2, 2019, certified for publication), No. B289452, L.A. Super. Ct. No. BC532354 — lease terms, condemnation clause text, the 2011 eminent domain judgment and award split, Thee Aguila’s 2014 complaint and theories, and the disposition affirming judgment for the tenants and Century Law Group. https://www.courts.ca.gov/opinions/archive/B289452.PDF
[4] City of Vista v. Fielder, 13 Cal.4th 612, 617 fn. 1, 620 fn. 6 (1996) — distinguishing a tenant’s leasehold interest from its goodwill “as owner of a business,” and holding the two do not stand or fall together; Cal. Code Civ. Proc. §§ 1263.510(a), 1260.220, 1265.110, 1265.140 — goodwill compensation as a separate statutory category, apportionment of divided interests “in the same proceeding,” and lease termination upon a possession order. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CCP§ionNum=1263.510
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