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No, this is not about the Korean
situation I was handling before, in which the Municipal Government of Seoul underpays
property owners in an out-of-control eminent domain system.
There are actually sovereign
nations within the United States of America, known as Indian Reservations.
By U.S. law, Indian Reservation
land cannot be sold to outsiders, so to have some type of real estate interest
on the reservation, the outside investor needs to lease the land, and the
ownership interest is called a “leasehold interest”. This is how one obtains a
valid real estate interest on an Indian reservation or elsewhere such as Hawaii
or the Zona Maritima in Costa Rica. This is often done on Indian reservations by
developers of gambling casinos, for instance.
In this particular case, a client
of mine wished to build an industrial park on an ideally located section of an
Indian Reservation, and then he divided the proposed park into pieces to lease
out to three willing outside tenants. What he possessed, as a leasehold
landlord, is commonly known as “sandwich leasehold interests”. He pays rent to
the Reservation, but in turn was already collecting rents from 2 of the 3
tenants who want to develop buildings on the property that he leases from the
Reservation. It was a very profitable arrangement.
The Reservation changed their
mind and broke their contract after my client had spent 5 years and over $2
million assembling this deal. Contract disputes with Indian reservations are
typically handled by Arbitration as typically established in contracts such as
these.
I was hired to estimate the value
of the leasehold interest as of the date of the breach of contract in August
2020. Tens of millions of dollars were already expected in rents. The irony of
this breach of contract is that my client agreed to divide profits with the reservation
at 50%. At present, no one is making any
money except lawyers and me.
My client has won the arbitration
but is now awaiting the computation of the award and damages.
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