The Leasing Hotline

The appellate court held that the 1996 modification was invalid because the landlord did not execute it; therefore, the parties were required to calculate unpaid rent based upon the 1995 modification. It further held that the landlord did not unreasonably withhold its consent to the assignment because the proposed use by a fast food restaurant was materially different from the use specified in the lease with the tenant.

CONDEMNATION

A tenant cannot seek compensation in an eminent domain matter where the tenant contractually waives its right to share in any condemnation award in its lease with the landlord. West Valley City v. Martin dba Fantastic Sam's, Case No. 20030299-CA, Court of Appeals of Utah, Sept. 23, 2004.

In 1996, the tenant leased a portion of the first floor of a commercial building owned by the landlord. The tenant and landlord renewed the lease in 1998 for a 10-year term. The condemnation clause provided that the lease would terminate upon a condemning authority's taking possession of the premises. The tenant waived its right to share in any condemnation award, and the lease specifically provided that any condemnation award would go directly to the landlord. In 2001, the city negotiated a purchase of the subject building, and the landlord and the city entered into an agreement wherein the landlord would be responsible for causing all first floor tenants of the building to vacate no later than March 1, 2002. On Nov. 12, 2001, the landlord and the city amended the purchase agreement to release the landlord from its obligation to cause the tenant to vacate the premises in exchange for payment of $60,000 to the city. On Nov. 27, 2001, the city provided the tenant with written notice to vacate the premises no later than March 1, 2002. The tenant responded that it would not vacate, and in January 2002 the city filed an unlawful detainer and eminent domain action against the tenant. The tenant counterclaimed, seeking, inter alia, compensation for the taking of its leasehold interest. The city moved for an immediate occupancy order and pursuant to that order, the city deposited $30,100 (the appraised value of the leasehold) with the court. The tenant withdrew the funds and vacated the premises. Thereafter, each party moved for summary judgment.

The court granted summary judgment to the city on the tenant's contract and abuse of process claims, holding that the lease terminated when the city took possession of the premises in 2002 and that the city retained condemnation authority over the tenant's leasehold despite its purchase of the property. The court also granted summary judgment to the tenant on the city's unlawful detainer claim. The court did not grant summary judgment to the city on its eminent domain claim or to the tenant on its just compensation claim. It held that a factual question existed regarding the value of the tenant's leasehold. The appellate court disagreed and held that summary judgment should have been granted to the city on the tenant's just compensation claim because the tenant contractually waived that right in its original lease with the landlord. It further held that the city had expressly retained its right to use the eminent domain power to take the premises and terminate the tenant's lease if it still occupied the premises on March 1, 2002.

CONSENT TO ASSIGNMENT OF LEASE

A landlord did not unreasonably withhold consent to an assignment where the tenant failed to pay rent and related charges under the lease and where the use of the assignment sought by the tenant materially differed from the use specified in the lease. Sayed v. Rapp, Index No. 21020/98, 2003-02845, Supreme Court of New York, Appellate Division, Second Department, Sept. 27, 2004.

The landlord and tenant entered into a lease for commercial property. The lease prohibited any assignment or sublease without the express written consent of the landlord. The lease further provided that the landlord could not unreasonably withhold or delay its consent to a sublease. Thereafter, the tenant, as individual, assigned the lease to the realty corporation in which the tenant was the sole shareholder. At this time, the lease was also modified by reducing the tenant's rent in exchange for the tenant's surrender of a portion of the leased premises (the “1995 modification”). Subsequently, the tenant alleged that another modification occurred that further reduced the rent (the “1996 modification”). In 1998, the tenant sought to assign the lease to Digital City. The landlord withheld its consent, stating that the tenant had failed to pay real estate taxes, water and sewer charges and back rent. The landlord also commenced an action against the tenant for nonpayment. The parties settled, and judgment was entered in favor of the landlord. The tenant then sought to assign the lease to a fast food restaurant, and the landlord denied its consent. The tenant commenced an action against the landlord, alleging that the landlord unreasonably withheld its consent to assign the lease to the fast food restaurant. The landlord counterclaimed for unpaid rent, as well as unpaid real estate taxes and water and sewer charges. After a trial, the court held that the landlord did not unreasonably withhold its consent to assign the lease to the fast food restaurant and fixed unpaid rent based upon the 1996 modification. Each party appealed.

The appellate court held that the 1996 modification was invalid because the landlord did not execute it; therefore, the parties were required to calculate unpaid rent based upon the 1995 modification. It further held that the landlord did not unreasonably withhold its consent to the assignment because the proposed use by a fast food restaurant was materially different from the use specified in the lease with the tenant.

CONDEMNATION

A tenant cannot seek compensation in an eminent domain matter where the tenant contractually waives its right to share in any condemnation award in its lease with the landlord. West Valley City v. Martin dba Fantastic Sam's, Case No. 20030299-CA, Court of Appeals of Utah, Sept. 23, 2004.

In 1996, the tenant leased a portion of the first floor of a commercial building owned by the landlord. The tenant and landlord renewed the lease in 1998 for a 10-year term. The condemnation clause provided that the lease would terminate upon a condemning authority's taking possession of the premises. The tenant waived its right to share in any condemnation award, and the lease specifically provided that any condemnation award would go directly to the landlord. In 2001, the city negotiated a purchase of the subject building, and the landlord and the city entered into an agreement wherein the landlord would be responsible for causing all first floor tenants of the building to vacate no later than March 1, 2002. On Nov. 12, 2001, the landlord and the city amended the purchase agreement to release the landlord from its obligation to cause the tenant to vacate the premises in exchange for payment of $60,000 to the city. On Nov. 27, 2001, the city provided the tenant with written notice to vacate the premises no later than March 1, 2002. The tenant responded that it would not vacate, and in January 2002 the city filed an unlawful detainer and eminent domain action against the tenant. The tenant counterclaimed, seeking, inter alia, compensation for the taking of its leasehold interest. The city moved for an immediate occupancy order and pursuant to that order, the city deposited $30,100 (the appraised value of the leasehold) with the court. The tenant withdrew the funds and vacated the premises. Thereafter, each party moved for summary judgment.

The court granted summary judgment to the city on the tenant's contract and abuse of process claims, holding that the lease terminated when the city took possession of the premises in 2002 and that the city retained condemnation authority over the tenant's leasehold despite its purchase of the property. The court also granted summary judgment to the tenant on the city's unlawful detainer claim. The court did not grant summary judgment to the city on its eminent domain claim or to the tenant on its just compensation claim. It held that a factual question existed regarding the value of the tenant's leasehold. The appellate court disagreed and held that summary judgment should have been granted to the city on the tenant's just compensation claim because the tenant contractually waived that right in its original lease with the landlord. It further held that the city had expressly retained its right to use the eminent domain power to take the premises and terminate the tenant's lease if it still occupied the premises on March 1, 2002.