(a) A public entity shall offer a one-year leaseback agreement to the owner of a property to be acquired by any method set forth in subdivision (b) for that property owner's continued use of the property upon acquisition, subject to the property owner's payment of fair market rents and compliance with other conditions set forth in subdivision (c), unless the public entity states in writing that the development, redevelopment, or use of the property for its stated public use is scheduled to begin within two years of its acquisition. This section shall not apply if the public entity states in writing that a leaseback of the property would create or allow the continuation of a public nuisance to the surrounding community.
§ 1263.615.One-Year Leaseback Agreement Offered to Owner
Title 7. Eminent Domain Law · Chapter 9. Compensation · Article 7. Miscellaneous Provisions · Enacted 1650 · no amendments on record · Last verified July 29, 2026
In one sentenceSection 1263.615 requires a public entity acquiring property by eminent domain to offer the former owner a renewable one-year leaseback at fair market rent, with conditions covering liability, insurance, and unlawful detainer, unless development is imminent or the leaseback would perpetuate a nuisance.
Full Text of § 1263.615
(b) The following property acquisitions are subject to the requirements of this section:
(1) Any acquisition by a public entity pursuant to eminent domain.
(2) Any acquisition by a public entity following adoption of a resolution of necessity pursuant to Article 2 (commencing with Section 1245.210) of Chapter 4 for the property.
(3) Any acquisition by a public entity prior to the adoption of a resolution of necessity pursuant to Article 2 (commencing with Section 1245.210) of Chapter 4 for the property, but subsequent to a written notice that the public entity may take the property by eminent domain.
(c) The following conditions shall apply to any leaseback offered pursuant to this section:
(1) The lessee shall be responsible for any additional waste or nuisance on the property, and for any other liability arising from the continued use of the property.
(2) The lessor may demand a security deposit to cover any potential liability arising from the leaseback. The security deposit shall be reasonable in light of the use of the leased property.
(3) The lessor shall be indemnified from any legal liability and attorney's fees resulting from any lawsuit against the lessee or lessor, arising from the operation of the lessee's business or use of the property.
(4) The lessor shall require the lessee to carry adequate insurance to cover potential liabilities arising from the lease and use of the property, and shall require that insurance to name the lessor as an additional insured.
(5) Additional goodwill shall not accrue during any lease.
(6) The lessee shall be subject to unlawful detainer proceedings as provided by law.
(d) A public entity shall offer to renew a leaseback agreement for one-year terms, subject to any rent adjustment to reflect inflation and upon compliance with other conditions set forth in subdivision (c), unless the public entity states in writing that the development, redevelopment, or use of the property for its stated public use is scheduled to begin within two years of the termination date of the lease. At least 60 days prior to the lease termination date, the public entity lessor shall either offer a one-year renewal of the lease or send a statement declaring that the lease will not be renewed because the development, redevelopment, or use of the property is scheduled to begin within two years of the lease termination date. The lessee shall either accept or reject a lease renewal offer at least 30 days prior to the lease termination date. The lessee's failure to accept a renewal offer in a timely manner shall constitute a rejection of the renewal offer. A lessor's failure to offer a renewal or give the notice as required shall extend the lease term for 60- day increments until an offer or notice is made, and if a notice of termination is given after the lease termination date, the lessee shall have no less than 60 days to vacate the property. A lessee's failure to accept within 30 days a renewal offer made subsequent to the lease termination date shall constitute a rejection of the offer.
(e) A party who holds over after expiration of the lease shall be subject to unlawful detainer proceedings and shall also be subject to the lessor for holdover damages.
(f) A leaseback entered into pursuant to this section shall not affect the amount of compensation otherwise payable to the property owner for the property to be acquired.
Plain-English Summary
This section gives a condemned owner a chance to stay put, at least for a while. When a public entity acquires property by eminent domain -- whether through a completed taking, after a resolution of necessity, or even before one, once the entity has given written notice it may condemn -- it has to offer the owner a one-year leaseback for the owner's continued use of the property. The owner pays fair market rent and has to meet the conditions subdivision (c) sets out. The entity can skip the offer only by stating in writing that development, redevelopment, or the planned public use will begin within two years of acquisition, or that the leaseback would create or continue a public nuisance affecting the surrounding community.
The conditions protect the entity as landlord: the owner-turned-lessee answers for any added waste or nuisance and for liability arising from continued use, the entity can demand a reasonable security deposit, the entity is indemnified against lawsuits arising from the lessee's business or use of the property, and the entity can require the lessee to carry insurance naming it as an additional insured. No further goodwill accrues during the lease, and an owner who overstays is subject to unlawful detainer like any other tenant.
The leaseback is not a one-shot deal. The entity has to offer renewal in one-year increments, adjusted for inflation, unless it again states in writing that development is coming within two years of the lease's end. It has to give that renewal offer or termination notice at least 60 days before the lease ends; the lessee then has 30 days to accept or reject, and silence counts as rejection. If the entity misses its own deadline, the lease keeps extending in 60-day increments until the entity finally makes an offer or gives notice, and a late termination notice still gives the lessee at least 60 days to leave. A holdover tenant faces both unlawful detainer and holdover damages.
Subdivision (f) keeps the leaseback from becoming a bargaining chip in the compensation fight itself: entering into it does not change the amount of compensation owed for the property being acquired.
Frequently Asked Questions
Is a public entity always required to offer a leaseback after condemning property?
No -- the entity can skip the offer by stating in writing that development is scheduled within two years of acquisition, or that a leaseback would create or continue a public nuisance.
What rent does the owner pay under a leaseback?
Fair market rent, along with compliance with the conditions listed in subdivision (c).
What happens if the lessee overstays after the lease ends?
The lessee is subject to unlawful detainer proceedings and also liable to the lessor for holdover damages.
Does agreeing to a leaseback reduce the compensation owed for the property?
No, subdivision (f) says a leaseback under this section does not affect the amount of compensation otherwise payable for the property acquired.
Can additional goodwill build up while the owner leases back the property?
No, subdivision (c)(5) bars any additional goodwill from accruing during the lease.
Amendment History
Added by Stats 2006 ch 602 (SB 1650),s 3, eff. 1/1/2007.
Source & verification. Section text is reproduced verbatim from
the Deering's California Codes Annotated / vLex. Enacted by the California Legislature.
Last verified July 29, 2026.
· Official source
Also known as: leaseback agreement eminent domain californiaone year leaseback condemned property californiaunlawful detainer leaseback holdover eminent domain