When Buying a Commercial Property Subject to an Existing Lease Agreement Goes Wrong

A Client Case Story

As a landlord attorney, I’ve handled my share of lease enforcement and eviction matters for commercial and residential landlords, (along with lease drafting, negotiation and reviews), but few cases illustrate the importance of precise legal strategy than my representation of a shopping center owner in a Florida appellate court case named Hallandale Plaza, LLC v. New Tropical Car Wash, LLC, 335 So. 3d 712 (Fla. 4th DCA 2022). This dispute arose from my client’s purchase of the Hallandale Plaza shopping center in Broward County, Florida, that was subject to a poorly drafted triple net lease agreement with the tenant New Tropical Car Wash, LLC.

Dispute Between New Landlord & Existing Tenant

The dispute at the center of the case arose from the tenant’s non-payment and lease default due to the tenant’s failure to pay additional rent as defined by the triple net lease, which consisted of a proportionate share of property maintenance fees and real estate taxes for the shopping center. The case was complicated at a preliminary hearing  by a trial court judge who misinterpreted the language in the lease regarding the definition of additional rent. The tenant filed an answer in response to the initial eviction lawsuit which argued that an oral agreement allegedly entered into between the tenant and the prior landlord alleviated the Tenant’s obligation to pay additional rent.

Arguments Presented at Preliminary Motion to Determine Rent Hearing

During the preliminary hearing, the trial court judge was solely tasked with determining the amount of rent that the tenant was required to deposit with the court to maintain their defense pursuant to Florida law and monthly lease obligations during the pendency of the lawsuit. At the hearing my client’s prior counsel argued that no waiver of the tenant’s obligation to pay additional rent existed, and that even if the court found that a waiver was created between the tenant and the prior landlord, the tenant thereafter waived the alleged waiver by paying an installment of additional rent to my client, the new landlord. The tenant’s counsel then argued that the installment of additional rent was paid to my client, because my client placed the tenant under duress by threatening to bring an eviction action if the tenant did not pay additional rent.

Unlawful and Unconstitutional Trial Court Ruling

The trial court failed to properly interpret the Triple Net clauses of the lease agreement to find that a pro-rata share of property taxes was included within the lease agreement’s definition of additional rent. The trial court judge mistakenly found that the tenant was not in default of the lease and was not delinquent on any rent, and that the tenant previously paid additional rent to my client after being placed under duress by my client. To make matters worse, the trial court then dismissed my client’s eviction action without the legal authority to do so, because the court was solely tasked with determining rent to be paid into the court registry by the tenant, and payments to be made into the court registry by the tenant during the litigation of the substantive issues in the case.

Successful Appeal that Created Caselaw Precedent

Following the fiasco in the trial court, I successfully spearheaded an appeal with co-counsel through Florida’s Fourth District Court of Appeals, which resulted in the creation of Florida appellate caselaw on a legal issue of first impression. In its ruling drafted by the Chief Judge of the appellate court, the appellate court reversed and remanded the case back to the trial court for new proceedings after the full three judge appellate panel agreed with my interpretation of the poorly drafted triple net lease over the trial court’s interpretation and agreed with two of my three other arguments for reversal in the case, including that the trial court violated my client’s due process rights under the 14^th Amendment of the U.S. Constitution by dismissing my client’s eviction action outside of the trial court’s statutory authority and without any prior notice to my client that the entire case could have been dismissed at the preliminary hearing.

Main Takeaways

This case reinforces why commercial landlords and residential landlords must:

-       Maintain well-drafted lease agreements with clear and unambiguous clauses.

-       Conduct adequate due diligence on lease agreements and other legal matters with counsel, prior to purchasing property subject to existing lease agreements.  

-       Retain an experienced real estate attorney who is well versed and experienced in utilizing the law, even law outside of real estate law to your advantage.

 Contact Biazzo Law today at (703) 297-5777 or corey@biazzolaw.com to schedule a consultation today. www.biazzolaw.com

** Information in this blog should not be considered legal advice, nor does it form an attorney-client relationship

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