Court Opinion

ID: 9796883
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:07:31.9338+00
Date Added: 2024-06-11T08:51:11.924178
License: Public Domain

*166MORENO, J., Concurring and Dissenting.
I agree with the result and most of the reasoning of the majority opinion. I write separately because I disagree with the majority’s conclusion that Tommy Hilfiger Retail, Inc. (Hilfiger) has only “a leasehold interest” in the building that it built at its own expense, operates, and owns under the terms of the lease. (Maj. opn., ante, at p. 162.) In my view, the trusts own the land, but under the terms of the lease, Hilfiger owns the building until the expiration of the lease, at which time ownership of the building transfers to the trusts.
The lease granted Hilfiger the right, which Hilfiger exercised, of constructing a new building, at Hilfiger’s expense, on the land owned by the trusts and leased by Hilfiger. The lease states: “During the term of this Lease, the Improvements shall be the property of and owned by Lessee but considered a part of the Premises.” The lease further provides that, when the lease terminated, ownership of the building would be transferred to the trusts. This type of arrangement is known as a ground lease. A ground lease “differs fimdamentally from the usual lease of space for an office or store in a number of respects, including the following, [f] First, the improvements on the land . . . generally are owned or become owned by the lessee. ... If the land is improved, the most common arrangements call for the lessee either to demolish the improvements and construct his own or to purchase the improvements as personal property severed from the land (though in all practical respects they are to be regarded as real property).” (Grenert, Ground Lease Practice (Cont.Ed.Bar 1971) § 1.1, p. 7.)
We addressed a related arrangement in Dean v. Kuchel (1950) 35 Cal.2d 444 [218 P.2d 521], in which “the state leased real property for a 35-year term to a private contractor, who agreed to construct an office building thereon and lease back the property and the building to the state for a 25-year term. If at the end of 25 years all covenants of the lease had been performed by the state, title to the property and building would vest in the state, and in any event full title would vest in the state at the end of 35 years. . . .” (Los Angeles County v. Nesvig (1965) 231 Cal.App.2d 603, 610 [41 Cal.Rptr. 918].) Even though title to the building would vest in the state at the end of the 35-year ground lease, we recognized that the contractor owned the building during the 25-year building lease, and would continue to own the building until the end of the ground lease if the state breached the terms of the building lease. (Kuchel, supra, at p. 448; see also Richards v. Pacific S.W. Discount Corp. (1941) 44 Cal.App.2d 551, 559 [112 P.2d 698] [“the ground lease specifically recites that the building and improvements situated upon the property remained personal property and were owned by the lessee and are not a part of the lessor’s estate”].)
*167In similar fashion, Hilfiger owns the building in the present case until the end of the ground lease. But, as noted above, the lease provides that the building is nevertheless considered a part of the premises. For purposes of property tax assessment under Revenue and Taxation Code section 60, therefore, the building is considered part of the property owned by the trusts. Accordingly, I agree with the result reached by the majority.