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South Florida Commercial Tenant Escapes $2M in Damages Because Lease Did Not Require it to Remove Subtenant

A Palm Beach County tenant successfully appealed a decision that would have forced it to pay $2 million to its commercial landlord for failing to remove one of the subtenants on the property. The 4th District Court of Appeal concluded that the tenant had no legal obligation, since its lease with the landlord did not make any mention of removing that subtenant.

The dispute centered around a Palm Beach County parcel of land that Michael Anthony Company owned. A flea market, parking lot, and billboard were situated on the 14.6-acre parcel. The billboard was leased to a tenant named AK Media Group, Inc.

In 2005, Anthony reached a purchase and sale agreement with Coscan Palm Springs, LLC that called for Anthony to sell the property to Palm Springs and for the buyer, in turn, to complete a commercial lease agreement renting the property to the seller. The parties executed both agreements. While the lease document contained several paragraphs relating to the occupants of the flea market, it made no mention of the billboard.

Early in 2007, Anthony went to court to evict the billboard tenant, alleging that the tenant had not paid its rent. A few months later, the term of lease between Anthony and Palm Springs expired. The occupants of the flea market left the property on a timely basis, but the billboard remained. Palm Springs sought holdover rent from Anthony because of the billboard, but Anthony refused to pay.

A Palm Beach County trial court sided with Palm Springs, awarding it $2 million in liquidated damages. The court determined that the buyer completed the purchase of the property under the belief that Anthony would be in breach of the agreement if it did not “timely surrender exclusive possession of the property,” including the billboard subtenant, when the lease term between Palm Springs and Anthony ended.

On appeal, however, the seller emerged successful. The appeals court found that the trial court should have read and construed the lease agreement and the purchase and sale agreement together. Interpreting both agreements together, the appeals court concluded that Palm Springs could not possibly have had any expectations regarding the billboard subtenant based upon the purchase and sale agreement and the original lease agreement, since neither mentioned any obligation by Anthony to remove the billboard subtenant. That obligation did not emerge until the two sides executed the first amendment to the purchase and sale agreement.

Even if Palm Spring had been correct that the terms of the lease agreement alone governed the outcome of this dispute, Palm Springs was still not entitled to damages. The lease’s terms addressed how Anthony was to deal with the flea market subtenants, but nothing in that document’s language demonstrated that it governed Anthony’s relationship with the billboard subtenant. Without proof in the agreement documents indicating an obligation on Anthony’s part regarding the removal of the billboard, Palm Springs could not establish an entitlement to damages.

Commercial leases often involve multiple players, including landlords, tenants, and multiple subtenants. With a larger number of business relationships in play, the chances for a dispute also rise. If you’re involved in a dispute regarding your commercial lease, talk to the Florida real estate attorneys at Stok Kon + Braverman. Our attorneys have years of experience helping clients like yours defend your business interests.

Contact us online or by calling (954) 237-1777 to schedule your consultation.

More blog posts:

Types of Recovery Available to a Florida Commercial Tenant When the Landlord Breaches the Lease, Florida Business Lawyers Blog, June 26, 2015

Florida Court Blocks Subtenant’s Request for Information About Tenant’s Commercial Lease Terms With Landlord, Florida Business Lawyers Blog, April 7, 2015

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