The Law

I Can’t Believe This Went to Court by Ron Davis The controversial share of property taxes that an Indiana shopping center tenant annually pays has dramatically dropped. Moreover, the tenant is due a reimbursement for overpaying past-year taxes. But all that has not occurred without a struggle. It has taken a lengthy legal contest pitting the tenant against the property’s lessor, Weida Levee, LLC, to resolve the matter. The shopping center, located in West Lafayette, is Levee Plaza. And the tenant has sublet a structure there known as “the Laundry Building” from Weida Levee since 2001. That building is part of a 1.5-acre portion of Levee Plaza that the shopping center’s owner transferred to Weida Levee in 2000. The tenant, after subletting the Laundry Building, dutifully began paying the property taxes on the leased facilities as Weida Levee required. That’s because of an agreement in the lease document that states, “Lessee shall reimburse Lessor the amount of real estate taxes and assessments paid on the demised premises.” In 2006, the tenant realized that Weida Levee had requested property taxes for the entire property since the inception of the sublease. So the tenant appealed, arguing that the tax liability should be for only a bit more than 6 percent of the entire amount of property taxes for Levee Plaza. The demand for reimbursement resulted in a dispute that ended up in the Indiana courts. The tenant argued that responsibility for taxes required that it pay only a proportionate share. Weida Levee countered that the terms of the lease with the tenant required reimbursement of the full amount of real estate taxes and assessments paid on the leased premises. And for the next three years, Weida Levee continued to submit to the tenant a request for reimbursement of the taxes due. In response, the tenant recalculated the taxes and reimbursed Weida Levee for only its calculated share of taxes owed. An Indiana court rejected Weida Levee’s argument, ordering it to pay the tenant damages totaling $64,939.46 in “overpaid taxes,” plus $32,075.85 in interest. The judge explained that Weida Levee provided no evidence that the tenant knew of the discrepancy in the tax amount (though noting that “the tenant should have known”) Weida Levee appealed that ruling. The Court of Appeals of Indiana agreed with the lower court, noting, “The lease between the two parties provides that the tenant is required to pay only the taxes on the ‘demised premises’ and that the tenant’s proportionate share of real estate taxes is to be calculated on a ratio…. Under the plain meaning of the lease agreement, the tenant is not liable for the taxes on the entire property.” (Weida Levee, LLC v. Brooks, 2011 WL 5136106 [Ind.App.]) Decision: November 2011 Published: November 2011