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Chapter 10Commercial LeasesProvisions in a Commercial LeaseExample Actual Lease from Property I OwnDefine premisesSet term/terminationRentCAMSinking FundCPI AdjustmentPermitted UseAssignments/SubleasingMaintenanceAlterationsRight of Entry UtilitiesWaiver/Indemnify (injury on premises)


InsuranceDefaultQuiet EnjoymentImprovementsNoncompete Lack of Statutory Protections for Commercial LesseesA model law exists but no states have fully enacted it.Most commercial lease law is common law interpreting leases.3End-of-Chapter Q 5: Oral Statements v. Written Contract. A mall landlord said that Dos Coyotes, Starbucks and Baskin-Robbins would rent in the mall by the end of 1998. Tenant leased land based on these assurances. Dos Coyotes, Starbucks and Baskin-Robbins never leased space but another ice cream store and coffee shop did.Tenant wants out based on fraud.Lease said: Lessee does not rely on the fact nor does Lessor represent that nay specific lessee oftype or number of Lessees shall during the term of this Lease occupy any space in the Shopping Center.

Ethical Issue: Overstating Selling Points.This is an ideal location that really brings in the pedestrian traffic. The previous tenant did so well on her grosses here.4Consider 10.1 Oral Statement of Exclusive Use of a Parking LotCheung-Loon owns a bar called Primos Bar and Grille and he leased a parking lot for his patrons. The landlord said he would have exclusive use. Later, the landlord leased access to another business causing a lack of parking space.Issue: Is the oral statement enough?Pruo v. Neil Enterprises (#5)987 A2d 935 (Vt 2009)Exculpatory Clauses Lease of Booths in Antique Mall. Puro (coin sales) and Yoken (jewlerey) leased space from Neil Enterprises in an antique mall with 400 booths.Stolen Merchandise. Thieves broke in an stole merchandise from Puro and Yoken. Puro lost $25,293 and Yoken lost $31,698.Alarm Sounded. The alarm sounded and police were notified, but by the time they arrived the thieves had fled. Exculpatory Clause. shall not be held liable from any cause, whatsoever, including but not limited to fire or theft, it being understood that that the extend desired and at [the dealers] option, that his property shall be insured by the undersigned dealer/licensee.General Manager Assurances. The general manager said that the mall had video cameras everywhere and that he lived with minutes of the mall. A handbook also included extensive security measures, but also the disclaimer. Issue: Is the exculpatory clause valid?5

Richard Barton Enterprises, Inc. v. Tsern (#6)928 P2d 368 (Utah 1996), P. 216Right to Offset Rent in Commercial Lease Constructive Eviction? Freight Elevator Broken. Barton rented two-story building for use as an antiques dealership. Large antiques cannot be stored on the first floor so need the freight elevator. The elevator did not work and Barton repeatedly told Tsern that is a condition to the rental.Lease Term. Lease said the freight elevator must be in good working order.Facts of Elevator. Barton took possession Dec 1 but elevator did not work. On Jan 9, the elevator was repaired but only worked until Jan 24. The city then shut it down for violations.Barton suggested a rent abatement for lack of use of the elevator. Tsern refused and a lawsuit resulted.Offset Rent? Do residential rules such as warranty of habitability apply to commercial leases? Or, the ability to offset rent against another lease violation? Should they?


7Consider 10.2 Warranty of Habitability in Commercial Lease? Medical Space Lease. Problems. The air conditioning did not work and the roof leaked. This resulted in stained tiles and rotting, mildewed carpet. Pets and rodents invested the office. Tenant Moved Out. Issue: Can the tenant stop paying rent? Start here Thursday this slide is a bit of reviewBijan Designer for Men v. St Regis Sheraton Corporation (#X)536 NYS2d 951 (1989), p. 219Constructive Eviction Bijan Rents from Regis. Bijan rents space from St. Regis with doors on street, main floor lobby and second floor mezzanine. Bijan said it would put the rent into an escrow.St. Regis closed hotel and lobby for 14-18 months for renovations to meet the Landmarks Preservations Committee requirement to be designated as a New York landmark.Eviction? Lease Language: For Defendant: The lease permits the hotel to make such decorations, repairs, alterations, improvements or additions as lessor may deem necessary or desirable either to the Hotel or the demised premises the rent shall in way abate while [these changes] occur.For Plaintiff. The first floor of the premises shall have access to the Hotels main lobby and the second floor shall have access to the Hotels mezzanine.8

Lease Terms (cont)Fixtures and alterationsOperations: Hours and HolidaysCommon area expenses and managementFree speech issues and demonstrationsMall of America Case where Mall kicked out animal rights protestors four people stood in mall and carrying signs and distributing leaflets directed against fur sales.The Mall is Akin to a town square especially because the taxpayers put in $186 million for the mall. Lower court ruled it must be open to protestors

Consider 10.6, p. 230. Mall Rats. How to handle teen agers in malls.

Common Area Maintenance FormulaXTotal costsAmount tenant pays in CAMSquare feet tenant rentsTotal square footage maintenance=Types of Rent ClausesGross rent ($16 square foot for 4,500 square foot building versus $6,000/month)Triple net rent (taxes, insurance, maintenance)Flat rent or fixed rentPercentage rentCombinations of aboveCPI adjustment clausesCAM (Common Area Maintenance costs)Circle K Corporation v. Collins (#7)98 F3d 484 (9th Cir 1996) affd 127 F3d 904, cert. denied 522 US 1148 (1998), p. 223Lottery tickets as gross sales Percentage Rent. Lease language: Lessee shall pay annually as hereinafter provided as additional rent, the amount, if any, by which two percent (2%) of Lessees gross sales (as hereinafter defined) exceeds the guaranteed minimal annual rent plus the sum of the real estate taxes and insurance premiums on the leased premises for such year. Such rent is hereinafter referred to as percentage rent.Gross Receipts. Gross receipts of every kind and nature originating from sales and services on the demised premises, whether on credit or for cash, in every department operating on the leased premises, whether operated by Lessee, or by a Sub lessee, or concessionaire excepting therefrom any rebates and/or refunds to customers.Attempted Lease Modification. Lessor do hereby accept and agree to allow participation in the Arizona Lotteryagree to exempt and exclude any commissions and computation of sales from percentage rents.Issue: 2% of Gross Receipts or Profits from Lottery Ticket Sales?Money Orders. This was the closest comparison in the lease and it was excluded from gross sales. 12

Another Percentage Rent Example13Consider 10.3, p. 224. Sears leased space from Honey Creek Square, Inc. The lease provided for only a percentage based rent with no minimum.3% of Sales. Not to exceed;$8 million over three year. Net Sales Defined. Sales on the premises except:Sales for divisions not located on the premisesThe amount of taxes collected/paid (sales tax and otherwise)Returns and allowancesDelivery, rental, service and installation chargesAmounts in excess of sales price for charges (interest) on credit cards or credit purchasesSales through its cataloguePolicies of insurance sold on premises (Dean Witter)Sales made through its commercial or Industrial Sales teamsShould The Below Be Included? Sears did not include the following in determining the rent:Alteration salesGift wrappingBike set-upAuto laborService contracts Service sale centers.

Yet Another Percentage Rent Example14End-of-Chapter Q 4, p. 24020 Year Lease with Percentage Rent. In 1975, A&P rented space in a 20 year lease that provided for a fixed rent plus an additional 1% of sales in excess of $10,356,000.Percentage Rent Starts in 1979. A&P did not have sufficient sales to have to pay the 1% until 1979.In 1980 A&P Ceases Operations and Subleases. In 1980 A&P ceased operations and subleased the building to Dunhams. Dunhams lease provided for a percentage of 2% after sales exceeded $3,000,000, which it never has.A&P Pays Base Rent No Percentage Rent. A&P continued to pay the base monthly rent to the landlord.Lawsuit for Percentage Rent. The landlord sued for the additional percentage rent.Whats the result?

Sublease to

Safety and LiabilityNotice of criminal activityForeseeable actionsSecurityLighting

Pichardo v. Big Diamond, Inc. (#X)215 SW3d 479 (Tex App 2007), p. 228Car speeds away from gas station without paying for gas, ran a red light and seriously injured an innocent party.Is the gas station liable? Is the landlord, Diamond, liable? Plaintiffs argue that the gas station should have required pre-payment for gas.Does the fact that a criminal activity was involved impact the decision? Foreseeability? 16

Considre 10.5 Parking Lot RapeWomen raped in parking lot when she parked in her assigned spot for her job at her job.Parking lot had deteriorated with cots for homeless people in the ramp and lights were out in some spots including where she was raped. Is the landlord liable? ADANeed for public accommodationAllocation of responsibility and costs between landlord and tenant on ADA complianceSecurityLightingConsider 10.7, p. 231. 7-Eleven Access. Customer sued he lived 550 miles from the 7-Eleven but used it periodically.No van-accessible parkingThe striping outl9ining the disabled parking space was fadedNo sign designating the location of the wheelchair rampThe wheelchair ramp was too steepThe store aisles were too narrowThe entry mat obstructed entry to the storeDisabled patron were denie


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