Leasehold Compensation If Billboards Cannot Be Relocated
Three recognized valuation methods in condemnation cases exist. These are the income capitalization approach, the market approach and the cost approach.
Jurisdictions are divided as to which method appropriately values a billboard leasehold interest.
Some courts focus on whether a billboard is characterized as personalty or realty, as does Nevada Department of Transportation, in determining whether advertising income should be considered in assessing the value of leasehold interests, or in determining whether a billboard owner is entitled to compensation at all.
Those courts conclude that if a billboard is characterized as a trade fixture or personalty, then either it is improper to consider the advertising income it generates, or the owner is not entitled to compensation at all.
Other courts conclude that the characterization of a billboard as either realty or personalty is an arbitrary distinction, and that advertising income generated from billboards that cannot be relocated should be considered in valuing leasehold interests so that owners will be justly compensated.
We conclude that this latter approach is the better means of awarding just compensation for condemned leasehold interests when billboards cannot be relocated to comparable, income-generating sites.
This approach is espoused in 8A Nichols on Eminent Domain 23.03 (5)(a), at 37-42 (3d ed. 1997, 1998), which recognizes the importance of location in the ability of a billboard to generate advertising income and the difficulty in relocating billboards under restrictive regulations.
Under the circumstances of this case, we believe that either the comparable sales method or the income capitalization method would be a better means than the bonus value method of appraising the market value of the Advertising Companies' lost interest. See City of Scottsdale v. Eller Outdoor Advertising, 119 Ariz. 86, 579 P.2d 590 at 598 (1978).