## Facts

- Dr. Henrik A. Knudsen and Rogene F. Knudsen owned commercial property in Independence, Missouri, used as a dental office.
- The building included areas used in common by occupants and patients, including a shared reception area and a shared parking lot.
- In November 1996, the Knudsens entered a written agreement with Dr. Joan R. Walker for Walker to occupy office space in the building that had previously been used by another dentist.
- The document was titled “Professional Office Lease Agreement,” identified the Knudsens as “Landlords” and Walker as “Tenant,” stated that a landlord-tenant relationship was created, and provided Walker exclusive control over the leased space.
- The agreement set a five-year term, required monthly rent of $775, and granted Walker an option to renew for an additional five-year term upon timely notice.
- In December 2000, Walker gave timely notice exercising the renewal option.
- In August 2001, Santa Fe Trail Neighborhood Redevelopment Corp. filed a condemnation petition seeking to take the property as blighted, and the trial court ordered condemnation and required Santa Fe to pay $275,000 into the court registry as damages for the taking.
- In the apportionment/distribution proceeding over the condemnation award, the trial court awarded Walker $47,000 for the taking of her interest.
- The Knudsens appealed, arguing Walker had only a license revocable at will and therefore had no compensable interest entitling her to any portion of the condemnation proceeds.

## Issues

1. Whether Walker’s “Professional Office Lease Agreement” created a compensable leasehold estate or merely a revocable license.
2. Whether, given the nature of Walker’s interest, she was entitled to receive a portion of the condemnation award.

## Decision

- The Missouri Court of Appeals held that Walker’s occupancy agreement created a leasehold estate rather than a revocable license.
- Because a leasehold is a compensable property interest in condemnation, Walker was entitled to share in the condemnation proceeds.
- The appellate court rejected the Knudsens’ argument that shared use of common areas or the parties’ relationship converted Walker’s interest into a noncompensable license.

## Legal Principles

- In condemnation, compensation paid for the property taken is apportioned among all parties who hold compensable interests in the property at the time of the taking.
- A lease transfers the right of exclusive possession of identified premises for a definite term in exchange for rent; a license is permission to use property that does not transfer an interest in land and is typically revocable.
- Courts determine lease versus license from the rights granted by the instrument and the parties’ arrangement, not solely from how the parties later describe the relationship.
- The existence of shared common areas (such as reception space or parking) is consistent with a multi-tenant lease and does not, by itself, defeat a finding of exclusive possession over the leased premises.
- A tenant holding a valid leasehold interest is entitled to just compensation for the taking of that leasehold when the leased property is condemned.

## Conclusion

Santa Fe Trail’s condemnation required distribution of the $275,000 award among holders of compensable interests, and the court held that Walker’s “Professional Office Lease Agreement” granted her a true leasehold—exclusive possession for a set term at a set rent with a renewal option she timely exercised—so she was entitled to a share of the condemnation proceeds rather than being treated as a mere licensee.


Santa Fe Trail Neighborhood Redevelopment Corp. v. W. F. Coen & Co., 154 S.W.3d 432 (2005)