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Little Caesar Came, Saw, Conquered Increase
by Ron Davis
The sizable increase in rent that the owners of a Utah shopping center hoped to collect from one their tenants will apparently not be forthcoming.
The shopping center, located in Salt Lake City, is owned by the principals of Bell Canyon Shopping Center, L.C., and the tenant--Little Caesar Enterprises, Inc.--has battled to prevent the increase for nearly three years.
The dispute over the rental amount arose when Little Caesar, which operates a pizza restaurant at the shopping center, began negotiations to extend its lease after the initial five-year term ended in 1998. The original 1993 lease contained an option clause that allows an extension--and at similar rental rates--"until the end of the 1993 lease."
The 1993 lease also did not require Little Caesar to pay any additional rent based on a percentage of sales proceeds. Thus, the total rent that Little Caesar paid to the shopping center each month was $11 per square foot, or $1,190 total.
But during negotiations on a lease extension, the shopping center's owners demanded an increase to $19 per square foot. They stated that they had the right to increase the rental rate because the terms of the 1993 lease were indefinite and unrealistic in light of current conditions.
Little Caesar responded by simply pointing out that, despite current conditions, the 1993 lease extension agreement stated that the maximum monthly rent cannot be greater than $11 per square foot.
A Utah appellate court, in ruling in favor of the tenant, explained, "When a bargained-for term of a renewal provision sets a range within which negotiations for a rental rate must take place, the lessor may not render the renewal provision unenforceable.... Here, Little Caesar agreed to pay the maximum rent allowed by the renewal provision. There is nothing uncertain or indefinite in that offer, nor is there any doubt of its compliance with the terms of the renewal provision.... The renewal provision was enforceable because Little Caesar offered to pay the maximum rent payable under the provision and the lessor Bell Canyon could not lawfully refuse to accept that offer." (Little Caesar v. Bell Canyon Shopping Ctr., 13 P.3d 600 [Utah App. 2000])
Decision: November 2000
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