The Leasing Hotline

DAMAGES

After a default judgment award, a landlord is not entitled to penalties and interest where the landlord failed to show that it attempted to mitigate its damages and failed to show its calculation of the interest it claimed; an attorney is not entitled to fees at a requested hourly rate when that rate is too high compared with the rates charged by the rest of the community. Seaboard Stamford Investor Assoc. v. ThinkDirectMarketing, Civil No. 3:03cv1110 (PCD), U.S. District Court for the District of Connecticut, Dec. 24, 2003.

After various default proceedings, the landlord moved for a default judgment seeking damages and attorneys' fees against the tenant. The landlord sought a total of $355,427.95: $326,926.80 was claimed to be the tenant's arrears and 36 months of rent the lease permitted the landlord to seek in the event of breach; $4435 for attorneys' fees; $868.04 for costs and $23,198.11 for prejudgment interest. The tenant did not oppose the landlord's motion. The court found in favor of the landlord but adjusted the total damages.

With regard to attorneys' fees, the court did not find the 24.2 hours claimed to be unreasonable; however, it held that the rate charged by the associate attorney at either $195 or $175 per hour to be too high for the community and adjusted the rate downward to $150 per hour. It therefore awarded the landlord $3630 for attorneys' fees. With regard to damages for breach of contract, the court held that the tenant was only liable for its unpaid rent. It held that the landlord was responsible for mitigating its damages, which the landlord had failed to do. Because the landlord could not show that it attempted to mitigate its damages, it was not entitled to the 36 months of penalty rent. With regard to the prejudgment interest, the landlord failed to show its calculation of the interest. The court permitted the landlord to make a further motion to seek the interest, provided such motion would show the proper calculations. The court did not dispute the amount of costs in the sum of $868.04.

NOTICE OF DEFAULT

Where a lease is unambiguous, a notice of default cannot amend or alter the unambiguous lease provision; this is true even if the notice of default provides contrary terms to those of the lease agreement. Walters v. National Properties, LLC, Appeal No. 03-0862, Court of Appeals of Wisconsin, District Two, Jan. 21, 2004.

On Dec. 23, 1993, National Properties (NPL) leased commercial property from Horizon Properties (HPI) for a 10-year period. On Aug. 15, 1997, HPI assigned its interest in the property to RJW but continued to remain liable for all of its obligations under the lease. The lease required NPL to pay rent to RJW on the first day of each month. The lease further required NPL to provide RJW with annual and monthly sales information and to pay the real estate taxes. The lease also provided that “If LESSEE should default in the payment of any rental or monies due hereunder … after the LESSEE has been given notice by certified mail of such default, LESSEE has thirty (30) days after the date of such notice to correct such default or defaults.” Thereafter, on Sept. 1, 2002, NPL failed to pay its monthly rent. On Sept. 13, 2002, RJW sent a 30-day notice of default to NPL requiring it to pay, inter alia, the September 2002 rent. NPL received the notice on Sept. 16, 2002 and mailed the September 2002 payment on Oct. 15, 2002. RJW received the check on Oct. 17, 2002. Thereafter, RJW commenced eviction proceedings and a judgment of eviction was entered against NPL on March 14, 2003. NPL appealed, arguing that the notice of default provided that NPL had 30 days after service of the default notice to correct the default; it was therefore in compliance with the notice of default when it delivered the September 2002 payment on Oct. 15, 2002.

The appellate court affirmed the eviction. It held that a notice of default cannot amend or alter an unambiguous lease provision. Even though the notice of default did indicate that NPL had 30 days from the service of the notice to correct the default, the lease specifically and unambiguously provided that NPL had 30 days after the date of the notice ' rather than the service of the notice ' to correct the default.

ENVIRONMENTAL DAMAGE

A lessee was not responsible for environmental damage that did not occur during its use of the premises, and the parties that took assignment of the property after the occurrence of the damage could not be liable to indemnify the landlord of the property. State of New York v. Robin Operating Corporation, 93977, Supreme Court of New York, Appellate Division, Third Department, Jan. 22, 2004.

In February 1994, a petroleum discharge from a gas station cost the state $570,000 to repair and the state sued various parties, including Robin Operating Corporation (ROC). The state also sued Artco Properties, a lessee of the property, and RAD Leasing Corporation and Getty Petroleum Marketing as sublessees of the property. ROC moved for summary judgment and alleged entitlement to contractual indemnification from Artco, RAD and Getty based upon the lease between ROC and Artco and the subsequent assignment and guarantees. The trial court denied ROC's motion for summary judgment and further dismissed all claims against RAD and Getty because their assignments were taken after the 1994 discharge.

On appeal, ROC argued that Artco was responsible for environmental damages regardless of when the contamination occurred. The appellate court affirmed the trial court decision. It held that the lease unequivocally provided that Artco would only be responsible for environmental damages occurring during the time of Artco's use of the premises. Because issues of fact existed as to whether the petroleum discharge occurred after the commencement of the lease term, the trial court correctly denied summary judgment. With regard to the claims against RAD and Getty, because those parties did not assume any responsibilities with regard to the premises until 1995 and 1999 respectively, it was proper to find no liability against them.

POSSESSION

Under state law, a tenant in possession of the leased premises may retain possession of the premises by paying all arrearages to the landlord, regardless of the terms of the lease. Willow Point Partners, LLC v. Willows on the Water, LLC, A03-223, Court of Appeals of Minnesota, Dec. 23, 2003.

The landlord, Miller, entered into a lease agreement with the tenant, Tachney, to lease property. The base rent was $10,000 per month plus “additional rent,” including Tachney's share of the real estate taxes, special assessments and operating expenses. The lease required the rent to be paid on or before the first day of each month and further provided that Tachney would be in default if he failed to make payment of any amount due for a period of 4 months past the actual due date. Subsequently, Miller initiated an eviction action against Tachney for failure to pay rent for more than 3 months. The parties settled that dispute; Tachney was required to make two payments to Miller on or before a certain date. When Miller attempted to deposit Tachney's second check, the bank teller informed him that the account from which the check would be drawn held insufficient funds to cover the check. However, the evidence established that the teller would have advised Tachney of the potential default of the check and that the bank would have provided Tachney with a chance to place sufficient funds in the account to cover the check. Nevertheless, Miller initiated another eviction proceeding. Meanwhile, Tachney deposited the amount of the second check with the Washington County Court Administrator.

The district court entered judgment in favor of Miller for the amount owed. However, the district court also held that the second eviction proceeding was ineffective because it was issued prior to any default by Tachney. The court reasoned that Tachney had met his obligations under the settlement agreement because his check would have been honored in the normal course of the bank's business procedure. The court further held that Miller acted in bad faith by commencing the second eviction proceeding.

Miller appealed, and the appellate court reversed in part and affirmed in part. It held that Tachney did not fulfill his obligations under the settlement agreement because the funds were not available on the date Miller presented the check for payment. It was not relevant that Tachney may have had an opportunity to cure; the funds should have been available to Miller on the day he presented the check for payment absent any other circumstances. However, the appellate court affirmed that Tachney was not subject to eviction. It considered that the lease provided that Tachney was entitled to a continuous 4-month delay of the rent payments. Even though Tachney was 5 months behind at one point, Minnesota law provided that a tenant still in possession of the property may retain possession by paying all arrearages to the landlord. Finally the appellate court reversed the finding of bad faith against Miller because nothing in the record indicated that Miller acted in bad faith; furthermore, the district court did not follow the statutory requirements to make a finding of bad faith.

DAMAGES

After a default judgment award, a landlord is not entitled to penalties and interest where the landlord failed to show that it attempted to mitigate its damages and failed to show its calculation of the interest it claimed; an attorney is not entitled to fees at a requested hourly rate when that rate is too high compared with the rates charged by the rest of the community. Seaboard Stamford Investor Assoc. v. ThinkDirectMarketing, Civil No. 3:03cv1110 (PCD), U.S. District Court for the District of Connecticut, Dec. 24, 2003.

After various default proceedings, the landlord moved for a default judgment seeking damages and attorneys' fees against the tenant. The landlord sought a total of $355,427.95: $326,926.80 was claimed to be the tenant's arrears and 36 months of rent the lease permitted the landlord to seek in the event of breach; $4435 for attorneys' fees; $868.04 for costs and $23,198.11 for prejudgment interest. The tenant did not oppose the landlord's motion. The court found in favor of the landlord but adjusted the total damages.

With regard to attorneys' fees, the court did not find the 24.2 hours claimed to be unreasonable; however, it held that the rate charged by the associate attorney at either $195 or $175 per hour to be too high for the community and adjusted the rate downward to $150 per hour. It therefore awarded the landlord $3630 for attorneys' fees. With regard to damages for breach of contract, the court held that the tenant was only liable for its unpaid rent. It held that the landlord was responsible for mitigating its damages, which the landlord had failed to do. Because the landlord could not show that it attempted to mitigate its damages, it was not entitled to the 36 months of penalty rent. With regard to the prejudgment interest, the landlord failed to show its calculation of the interest. The court permitted the landlord to make a further motion to seek the interest, provided such motion would show the proper calculations. The court did not dispute the amount of costs in the sum of $868.04.

NOTICE OF DEFAULT

Where a lease is unambiguous, a notice of default cannot amend or alter the unambiguous lease provision; this is true even if the notice of default provides contrary terms to those of the lease agreement. Walters v. National Properties, LLC, Appeal No. 03-0862, Court of Appeals of Wisconsin, District Two, Jan. 21, 2004.

On Dec. 23, 1993, National Properties (NPL) leased commercial property from Horizon Properties (HPI) for a 10-year period. On Aug. 15, 1997, HPI assigned its interest in the property to RJW but continued to remain liable for all of its obligations under the lease. The lease required NPL to pay rent to RJW on the first day of each month. The lease further required NPL to provide RJW with annual and monthly sales information and to pay the real estate taxes. The lease also provided that “If LESSEE should default in the payment of any rental or monies due hereunder … after the LESSEE has been given notice by certified mail of such default, LESSEE has thirty (30) days after the date of such notice to correct such default or defaults.” Thereafter, on Sept. 1, 2002, NPL failed to pay its monthly rent. On Sept. 13, 2002, RJW sent a 30-day notice of default to NPL requiring it to pay, inter alia, the September 2002 rent. NPL received the notice on Sept. 16, 2002 and mailed the September 2002 payment on Oct. 15, 2002. RJW received the check on Oct. 17, 2002. Thereafter, RJW commenced eviction proceedings and a judgment of eviction was entered against NPL on March 14, 2003. NPL appealed, arguing that the notice of default provided that NPL had 30 days after service of the default notice to correct the default; it was therefore in compliance with the notice of default when it delivered the September 2002 payment on Oct. 15, 2002.

The appellate court affirmed the eviction. It held that a notice of default cannot amend or alter an unambiguous lease provision. Even though the notice of default did indicate that NPL had 30 days from the service of the notice to correct the default, the lease specifically and unambiguously provided that NPL had 30 days after the date of the notice ' rather than the service of the notice ' to correct the default.

ENVIRONMENTAL DAMAGE

A lessee was not responsible for environmental damage that did not occur during its use of the premises, and the parties that took assignment of the property after the occurrence of the damage could not be liable to indemnify the landlord of the property. State of New York v. Robin Operating Corporation, 93977, Supreme Court of New York, Appellate Division, Third Department, Jan. 22, 2004.

In February 1994, a petroleum discharge from a gas station cost the state $570,000 to repair and the state sued various parties, including Robin Operating Corporation (ROC). The state also sued Artco Properties, a lessee of the property, and RAD Leasing Corporation and Getty Petroleum Marketing as sublessees of the property. ROC moved for summary judgment and alleged entitlement to contractual indemnification from Artco, RAD and Getty based upon the lease between ROC and Artco and the subsequent assignment and guarantees. The trial court denied ROC's motion for summary judgment and further dismissed all claims against RAD and Getty because their assignments were taken after the 1994 discharge.

On appeal, ROC argued that Artco was responsible for environmental damages regardless of when the contamination occurred. The appellate court affirmed the trial court decision. It held that the lease unequivocally provided that Artco would only be responsible for environmental damages occurring during the time of Artco's use of the premises. Because issues of fact existed as to whether the petroleum discharge occurred after the commencement of the lease term, the trial court correctly denied summary judgment. With regard to the claims against RAD and Getty, because those parties did not assume any responsibilities with regard to the premises until 1995 and 1999 respectively, it was proper to find no liability against them.

POSSESSION

Under state law, a tenant in possession of the leased premises may retain possession of the premises by paying all arrearages to the landlord, regardless of the terms of the lease. Willow Point Partners, LLC v. Willows on the Water, LLC, A03-223, Court of Appeals of Minnesota, Dec. 23, 2003.

The landlord, Miller, entered into a lease agreement with the tenant, Tachney, to lease property. The base rent was $10,000 per month plus “additional rent,” including Tachney's share of the real estate taxes, special assessments and operating expenses. The lease required the rent to be paid on or before the first day of each month and further provided that Tachney would be in default if he failed to make payment of any amount due for a period of 4 months past the actual due date. Subsequently, Miller initiated an eviction action against Tachney for failure to pay rent for more than 3 months. The parties settled that dispute; Tachney was required to make two payments to Miller on or before a certain date. When Miller attempted to deposit Tachney's second check, the bank teller informed him that the account from which the check would be drawn held insufficient funds to cover the check. However, the evidence established that the teller would have advised Tachney of the potential default of the check and that the bank would have provided Tachney with a chance to place sufficient funds in the account to cover the check. Nevertheless, Miller initiated another eviction proceeding. Meanwhile, Tachney deposited the amount of the second check with the Washington County Court Administrator.

The district court entered judgment in favor of Miller for the amount owed. However, the district court also held that the second eviction proceeding was ineffective because it was issued prior to any default by Tachney. The court reasoned that Tachney had met his obligations under the settlement agreement because his check would have been honored in the normal course of the bank's business procedure. The court further held that Miller acted in bad faith by commencing the second eviction proceeding.

Miller appealed, and the appellate court reversed in part and affirmed in part. It held that Tachney did not fulfill his obligations under the settlement agreement because the funds were not available on the date Miller presented the check for payment. It was not relevant that Tachney may have had an opportunity to cure; the funds should have been available to Miller on the day he presented the check for payment absent any other circumstances. However, the appellate court affirmed that Tachney was not subject to eviction. It considered that the lease provided that Tachney was entitled to a continuous 4-month delay of the rent payments. Even though Tachney was 5 months behind at one point, Minnesota law provided that a tenant still in possession of the property may retain possession by paying all arrearages to the landlord. Finally the appellate court reversed the finding of bad faith against Miller because nothing in the record indicated that Miller acted in bad faith; furthermore, the district court did not follow the statutory requirements to make a finding of bad faith.