Court of Appeals reverses lower courts,finds that items may qualify as compensable trade fixtures when functional utility is reduced. After the City acquired title to Kaiser Woodcraft’s property through eminent domain, Kaiser’s appraiser valued compensable trade fixtures at about $577,000. The appraisal included several industrial woodworking tools, including a large table saw and several heavy duty hand tools. The City’s appraiser valued the compensable trade fixtures at $128,936, excluding many items on Kaiser’s list, noting that many were of standard design and could function with the same utility if relocated or used by another business. The trial court and First Department agreed with Kaiser, with the appellate panel finding, in part, that most items were compensable trade fixtures because they would depreciate substantially if removed from the premises or sold on a secondhand market.

The Court of Appeals rejected the lower courts’ rulings, finding that compensability requires a loss in functional value, not merely an economic loss. The Court pointed out that the items in question were all standard woodshop equipment with no unique design or special relationship to one another, and would not lose functional value if removed from the property or sold secondhand.

Kaiser Woodcraft Corp. v. New York City, 2008 N.Y. Slip Op. 08157 (N.Y. Oct. 28, 2008) (Attorneys: Michael Rikon, for Kaiser; Michael A. Cardozo, Paul T. Rephen, Rochelle Cohen, Fred Kolikoff, for NYC.)