Articles Posted in commercial lease

A recent California decision miraculously vacated an arbitration award in a commercial lease dispute. The Columbus Club Inc. owned a banquet room, and leased to a commercial caterer, who did over $300,000 in tenant improvements. The Lessee intended to hold weddings at the location. At their first event, the police showed up and told the Tenant the could not hold functions beyond 12:30 at night due a local ordinance. The tenant also learned that they could not use the Landlord’s liquor license. Apparently they did not consult with an experienced real estate and leasing attorney in negotiating this lease.

The Lessee claimed that, during the negotiations, the Lessor knew about the restrictive laws but did not disclose them, and in fact made contrary representations about the operating hours. They sued the Club, and the individual (Rodela) who signed the lease on behalf of the club. After a trial date had been set they agreed to submit the case to binding arbitration.

The arbitrator, retired judge Hubbell, refused to allow the Club to select who would represent the corporation, allowing only Rodela to do so. The arbitrator also allowed the Lessee to present an expert who submitted a report that the Lessee’s lost profits were over $1 million, though the Lessee failed to provide that report o the Club as part of the pre-arbitration exhibit exchange. I guess the fact that the Club was surprised by this million dollar claim, and without disclosure was unprepared to counter it, did not bother this arbitrator. He ruled for the Lessee, with a total of $1.2 million in damages. The Court of Appeals vacated the decision, on the grounds that the arbitrator exceeded his powers, in Hoso Foods, Inc. V. Columbus Club, Inc.

A California commercial lease had an early termination provision. One requirement to exercise was to pay $136,000 on the date of termination. The tenant terminated, and made this payment partly by check, and applied the security deposit for the balance. The landlord kept the check, but claimed the lease was not properly terminated, and filed suit. The trial judge concluded that the landlord, in keeping the partial payment, waived the requirement, and ruled for the tenant.

On the appeal of Gould v. Corinthian Colleges, Inc., the landlord claimed the lease had an anti-waiver clause, stating “acceptance of a payment which is less then the amount due shall not be a waiver of lessor’s rights to the balance of such rent”; and all monetary obligations “are rent”

The appellate court found that the termination payment was not an obligation under the lease, but was payment for exercise of a right or privilege. If they had made no such payment, they would not be in breach of the lease. Besides, there is no prohibition from a lessor waiving an anti-waiver provision, which is what happened here.