The Leasing Hotline

Each party moved for summary judgment, and the trial court granted Foster's motion. The appellate court affirmed. It held that no lease existed between the parties, and that Mariner became a tenant at will once the lease expired. It further held that although the rent portion of the lease might have continued, the balance of the terms of the lease ended once the lease expired and was not renewed, including the term for the right of first refusal.

Lease Precludes Additional Payment of Taxes By Tenant

A landlord that received a reduction in the assessed value of its property was not entitled to additional taxes from a tenant, where the lease clearly provided that the tenant would not pay any increased taxes that resulted from a modification of the Base Assessed Value of the leased premises. Fair Oak, LLC. v. Greenpoint Financial Corp., 2004-08867, Index No. 187/03, Supreme Court of New York, Appellate Division, Second Department, Feb. 28, 2006.

In 1995, the landlord's predecessor in interest and the tenant entered into a commercial lease. The lease provided that the tenant would pay as additional rent a portion of any increase in the amount of real estate taxes for a tax year resulting, inter alia, from an increase in the assessed valuation for that tax year over the Base Assessed Valuation (defined as the valuation determined by the assessor, without giving effect to any reduction to the Real Property during the Base Tax Year). In 1996, the landlord's predecessor applied for a tax reduction of the Base Assessed Valuation, and in 1999 the tax court reduced the Base Assessed Valuation of the subject property. Nevertheless, although the Base Assessed Valuation was reduced, the newly assessed valuations increased from year to year (as compared with the former valuations, which remained constant). Thereafter, the landlord increased the tenant's rent and, when the tenant refused to pay the increase, the landlord commenced an action to recover damages for breach of the lease.

The trial court held that the newly assessed valuation did not apply to the calculation of taxes owed by the tenant. The appellate court affirmed. It held that the terms of the lease were clear and unambiguous; the reduction to the assessed valuation of the property for the Base Tax Year resulting from the tax certiorari proceeding should not be applied in computing the Base Assessed Valuation. Although the parties were aware of the impending tax certiorari proceeding, the Base Assessed Valuation was defined in terms that did not allow for any future modification.

Right of First Refusal

No right of first refusal exists where a lease expires and the tenant continues occupancy as a tenant at will. Mariner Health Care, Inc., et al. v. Foster et al., Court of Appeals of Georgia, Fourth Division, July 11, 2006.

Mariner leased five nursing homes from Foster. After the written leases had expired, Mariner remained in possession of the properties and continued to pay rent on a month-to-month basis. Mariner and Foster attempted to negotiate a new lease, but no new lease was agreed upon. Thereafter, Foster leased the nursing homes to another company, but Mariner did not vacate the premises. Foster filed a declaratory judgment action seeking to determine the rights of the parties. Mariner counterclaimed, arguing it had a right of first refusal to re-lease the premises.

Each party moved for summary judgment, and the trial court granted Foster's motion. The appellate court affirmed. It held that no lease existed between the parties, and that Mariner became a tenant at will once the lease expired. It further held that although the rent portion of the lease might have continued, the balance of the terms of the lease ended once the lease expired and was not renewed, including the term for the right of first refusal.

Lease Precludes Additional Payment of Taxes By Tenant

A landlord that received a reduction in the assessed value of its property was not entitled to additional taxes from a tenant, where the lease clearly provided that the tenant would not pay any increased taxes that resulted from a modification of the Base Assessed Value of the leased premises. Fair Oak, LLC. v. Greenpoint Financial Corp., 2004-08867, Index No. 187/03, Supreme Court of New York, Appellate Division, Second Department, Feb. 28, 2006.

In 1995, the landlord's predecessor in interest and the tenant entered into a commercial lease. The lease provided that the tenant would pay as additional rent a portion of any increase in the amount of real estate taxes for a tax year resulting, inter alia, from an increase in the assessed valuation for that tax year over the Base Assessed Valuation (defined as the valuation determined by the assessor, without giving effect to any reduction to the Real Property during the Base Tax Year). In 1996, the landlord's predecessor applied for a tax reduction of the Base Assessed Valuation, and in 1999 the tax court reduced the Base Assessed Valuation of the subject property. Nevertheless, although the Base Assessed Valuation was reduced, the newly assessed valuations increased from year to year (as compared with the former valuations, which remained constant). Thereafter, the landlord increased the tenant's rent and, when the tenant refused to pay the increase, the landlord commenced an action to recover damages for breach of the lease.

The trial court held that the newly assessed valuation did not apply to the calculation of taxes owed by the tenant. The appellate court affirmed. It held that the terms of the lease were clear and unambiguous; the reduction to the assessed valuation of the property for the Base Tax Year resulting from the tax certiorari proceeding should not be applied in computing the Base Assessed Valuation. Although the parties were aware of the impending tax certiorari proceeding, the Base Assessed Valuation was defined in terms that did not allow for any future modification.