The Law

Sold Business, Not Lease by Ron Davis The struggles never seem to end for a Georgia shopping center tenant trying to comply with the terms of a lease. The tenant had operated a sports bar and restaurant at the Atlanta-area shopping center until the economy soured in 2008. As a result of the downturn, the tenant experienced a decline in customer patronage to the point that payment of the full amount of rent owed became impossible. The tenant subsequently informed the center’s owners of that plight, seeking “some relief on the rent.” They in turn accepted a monthly rental amount less than that agreed to in the lease. And in some months, the tenant paid no rent. That arrangement continued for nearly a year. Then, in October 2009, the tenant sold the sports bar and restaurant. The center’s owners never agreed, however, to a lease with the new owner of that establishment. Instead, they simply accepted rental payments from him each month. But the new owner of the sports bar/restaurant soon suffered the same fate as his predecessor. That led to the center’s owners ousting him from the premises and seeking payment for rent owed. Then, failing to obtain the rent from him, the center’s owners turned to the original owner of the sports bar/restaurant, demanding rent payments from November 2009 onward. And when they were unable to collect the amount owed, they sued. A Georgia court sided with the center’s owners, ordering the original owner of the sports bar/restaurant to pay $91,405.84 for unpaid rent, interest, attorney fees, and court expenses. The tenant appealed, arguing that the two parties had agreed to a “mutual departure from the strict terms of the lease regarding the monthly amount of rent owed.” Specifically, added the tenant, the “uncontroverted evidence” shows that such rent was never required and that the center’s owners “orally agreed” to modify the lease to reduce the amount of monthly rent owed until the economy improved. A Georgia appellate court ruled in favor of the center’s owners, explaining, “The lease provided that among other remedies, the landlord had the option, upon the tenant’s default, either to terminate the lease and sue for damages, or to reenter the premises and rent to another party, with the defaulting tenant being liable for any deficiency between the rent owed under the lease and the rent obtained on re-letting…. Because the lease provided the option of reentering the premises and renting it to another party without releasing the tenant from liability for any deficiency in rent, there was nothing inconsistent in renting the premises to another party, pursuing legal action for unpaid rent, and then pursuing for the deficiency between the rent owed under the lease and whatever amount was ultimately obtained from the new tenant.” (Westmoreland v. JW, LLC, 2012 WL 34256 [Ga.App. 12 FCDR 135) Decision: February 2012 Published: February 2012