The Law

Lease Not Abandoned by Ron Davis Persistence has paid off for a California shopping center owner in his efforts to collect rent due from a tenant who abandoned the leased premises without notice. The shopping center is located in Los Angeles, and the tenant had leased space there since 2003 to operate a restaurant. The lease agreement required the tenant to pay rent until that contract expiration in 2025. But in 2009, the tenant stopped paying rent and moved from the premises. Meanwhile, the center’s owner had transferred the property and all associated leases to a so-called “single-asset entity” formed by the center’s owner. And that business now holds title to the center property—and is charged with collecting past-due rent from the former tenant. That change in ownership, however, gave the tenant a chance to challenge efforts of the center’s owner to collect past-due rent and other related expenses. Rent alone amounted to $11,686.50 a month. And that didn’t include the tenant’s proportionate share of common-area maintenance costs, real property taxes, and insurance. But the center’s owner was eventually successful in re-leasing the tenant’s property, though for only $8,500 a month. Then the owner sold the shopping center to an unrelated buyer, while still demanding that the previous tenant honor the lease arrangement regarding rent. The former tenant, upon learning that the center’s owner had transferred the property and all associated leases, rejected any award of unpaid rent. But a California court required the former tenant’s company and the tenant personally to pay the center owner $930,370 plus interest. The former tenant challenged that award. But local regulations are specific in such matters. A landlord may indeed recover losses from a tenant who breaches a lease and abandons the leased property. In such cases, the lease terminates and the landlord is due “the worth at the time of award of the unpaid rent which had been earned at the time of termination.” And that’s not all. The tenant in such circumstances could pay additional amounts, plus for “all the detriment proximately caused by the lessee’s failure to perform his obligations under the lease….” The tenant also bears the burden of proving that the landlord’s rental losses from a breach of lease “were or could have been avoided.” Yet, an expert witness for the former tenant presented calculations showing that the center property was worth $181,800 more with the replacement tenant leasing the restaurant. But calculations presented by the previous owner of the center showed that the property could have been sold for $601,000 more had the former tenant not abandoned the leased space. A California appellate court ruled in favor of the center’s owner, succinctly stating, “The evidence…did not compel a finding in the tenant’s favor. (Merona Enterprises, Inc. v. Adir Restaurants Corp., 2012 WL 3756969 [Cal.App. 2 Dist.]) Decision: September 2012 Published: September 2012