The Law

So Business Environment Changed? by Ron Davis A California shopping center tenant has failed in his attempt to avoid paying back-rent totaling nearly a quarter of a million dollars that he apparently owed. The shopping center, located in Orange County, is owned by the principals of Cypress Center Holding LLC, and the tenant leased space at the center for a number of years to operate a retail store. Apparently during his lease term, however, he failed to pay rent when owed. Moreover, he eventually abandoned his leased properly in hopes of avoiding the consequences of his omission. The center owners sued to collect $225,000, plus interest, attorney fees, and “costs.” In response, the tenant did not dispute the legitimacy of the request, but claimed that the center’s owners did not have sufficient grounds to justify legal action against him. Additionally, the tenant argued, the attorney for the shopping center did not have a sufficient agency relationship with the shopping center owners to file a complaint. At the trial to settle the dispute, the center owners noted that the firm that managed the shopping center authenticated the terms of the lease. In particular, the lease seemed to prove that the tenant did in fact owe $222,212.32 for rent. That included “future losses” of $71,615.79 and $150,596.53 for “past losses.” Also, a leasing agent testified as to the center’s efforts to minimize damages by leasing the abandoned premises of the tenant to some other business or retailer. Those efforts, said the leasing agent, were not successful. The tenant testified during the trial and explained that the business environment changed during his tenancy, so that “making a profit became economically impossible.” Such an environment, he added, should excuse nonpayment of rent. Furthermore, he argued, the leasing agent who claimed that the center made efforts to minimize damages could not show documentation to verify that opinion. The court, however, ruled in favor of the center’s owners and agreed that the tenant must pay the $222,212.32 that the center’s owners sought. The tenant appealed that ruling. A California appellate court affirmed that decision by the lower court, explaining, “The tenant’s argument demonstrates his fundamental lack of understanding of Californian procedure.” Finally, added that court, “The amount of damages awarded was supported by substantial evidence. Both the lease and [the legal code] authorized the damages awarded by the court. The tenant makes no effort to show otherwise, instead generally referencing the perceived injustice of the award in a half-page section of his brief. We sympathize with [the tenant’s] business misfortunes, but affirm the judgment.” (Cypress Center Holding LLC v. Polny) Decision: December 2014 Published: January 2015