Landlord-Tenant Disputes

August 14, 2023

Ruling Adds Clarity to Right of First Refusal for CRE Tenants Involving Bulk Sales

A recent ruling by Florida’s Fourth District Court of Appeal brought an added measure of clarity to the application of a right of first refusal (ROFR) for commercial real estate tenants whose spaces are being sold as part of a bulk sale in a condominium setting.

The case stems from the sale of the commercial condominium unit leased to The Blind Monk, which is a wine and tapas bar at the ground level of a nine-story West Palm Beach condominium. The business filed suit in Palm Beach County Circuit Court alleging it was not given the opportunity to consider whether to exercise its right to purchase its space when the space was sold as part of a bulk sale of 139 units in the building.

The lawsuit against the selling landlord and bulk buyer alleged that they ignored the tenant’s ROFR as provided in its lease agreement. It states that in 2016 a realtor representing the landlord notified the tenant’s owner that its unit and others in the building were for sale and inquired whether he would be interested. The owner replied by citing his ROFR and requesting additional information.

About a week later, the realtor advised him that his unit was appraised at $250,000 and the landlord had received an offer, but contrary to the terms of the lease, the specific terms of the offer were not disclosed and the tenant was never given the opportunity to match them.

June 4, 2023

Miami Herald Real Estate Column: “Real Estate Counselor: Ruling Finds Health Club On Hook for Lease Payments During COVID Closure”

by Siegfried Rivera

Siegfried Rivera

The firm’s latest Miami Herald column was authored by managing partner Oscar R. Rivera and appears in today’s edition of the newspaper. The article, which is titled “Real Estate Counselor: Ruling Finds Health Club On Hook for Lease Payments During COVID Closure,” focuses on the government-mandated COVID-19 business closures at the start of the pandemic in 2020. For LA Fitness and its parent company Fitness International, it equated to months of closed facilities that were generating no revenue but requiring monthly lease payments. Oscar’s article reads:

. . . There was a great deal of conjecture about whether the “force majeure” provisions in leases would shield businesses that were required to close due to governmentally issued mandates from their payment obligations under their leases. These clauses typically relieve parties from the performance of some or all contractual obligations, and from the consequences of failing to perform those obligations, where performance is rendered effectively impossible by circumstances beyond their control. Many thought the COVID closure fit the bill for the application of such provisions to a tee, and litigation would surely ensue.

Lawsuits were indeed filed, and one of the first cases over this exact question to reach conclusion by a state appellate court was decided recently in favor of the landlord for an LA Fitness location in Bradenton. The state’s Second District Court of Appeal affirmed the lower court’s summary judgment ruling and found the health club would not be entitled to a refund of its lease payments made during the mandated closure period.

The company made all rent payments required under the lease during the lockdown, which was from March 17 to June 12, 2020, but it eventually filed suit in August 2021 seeking a refund of those payments. It primarily based its claims on the lease’s force majeure clause, arguing that it was excused from paying rent during the closure period, and it also relied upon the common law doctrines of frustration of purpose, impossibility of performance, and impracticability of performance.

September 9, 2020

Effects of CDC’s Evictions Ban on Residential Tenants, Landlords

by Oscar R. Rivera

Oscar R. Rivera

The recent order to halt residential evictions through Dec. 31, 2020, by the Centers for Disease Control is aimed at preventing the further spread of COVID-19 and protecting tenants impacted by the virus. Under the order, renters of single family, multifamily and mobile home residences who earn less than $99,000 a year ($198,000 for joint filers) may submit a declaration to their landlord asserting their eligibly to be protected from eviction.

For eligibility, renters must provide a declaration form to their landlord asserting their qualifications and inability to pay, and they will not be relieved of their obligations to pay rent nor any fees or interest due to nonpayment. In addition, residents can still be evicted for other reasons, like engaging in criminal activity, posing a health or safety risk, or damaging rental property.

The order also specifically excludes foreclosures of home mortgages from the moratorium, but it is unclear whether a foreclosed homeowner could seek protection from being removed from the property post-foreclosure sale.

Our firm’s real estate attorneys are helping our clients navigate through these challenging times and contend with the issues surrounding the current state of evictions, foreclosures and property transactions. We encourage those with questions to contact us, and we also recommend submitting your email address in the subscription box on the right to automatically receive all our future blog articles.

October 22, 2018

Good Guy Guaranty – What is It?

by Oscar R. Rivera

Oscar R. Rivera

Have you ever heard of this? If you are familiar with leases in the New York City area, you probably have. But if you are not, you might be a bit surprised by it. Like many legal issues that begin in either New York or California, the Good Guy Guaranty is now spreading beyond those borders, and if you are in the business of leasing space, you should become aware of it.

In essence, a Good Guy Guaranty is a pre-negotiated kick-out with the financial backing of a credit-worthy guarantor. The guaranty is in place while the tenant is in possession, but if the tenant gives the landlord sufficient notice that it intends to vacate the premises and subsequently leaves the premises in good condition and as otherwise required by the lease, the tenant and the guarantor are both released.

The landlord benefits from it because it has a guarantor that backs the tenant and a tenant that surrenders possession when they vacate, thereby avoiding the need for the landlord to undertake eviction or abandonment litigation. The tenant benefits in that if it gives the landlord advance notice of its intent to vacate (usually anywhere from six to nine months) and is otherwise in compliance with the lease, it can close, be relieved of future liability and not be sued for damages. And, the guarantor benefits in that if they make sure the tenant complies with the lease, the guarantor is never called upon to pay.

September 10, 2018

Florida’s Enforceability of Waivers of Defenses by Guarantors of Leases Protects Commercial Property Owners

by Siegfried Rivera

Siegfried Rivera

By: Oscar R. Rivera

For commercial real estate landlords, guaranty agreements requiring the principal owners of small businesses to personally guaranty the obligations of the corporate tenant are standard operating procedure. In addition, commercial landlords oftentimes also require the corporate guaranty of a parent or other affiliated company, if the creditworthiness of a corporate tenant or franchisee is questionable. One question that is often posed is whether waivers of defenses by guarantors in such guaranty agreements are enforceable? Fortunately, for property owners in Florida, if the waivers are properly drafted, the answer is yes.

The waiver of defenses paragraph helps property owners avoid costly and disruptive litigation if legal action becomes necessary to enforce a guaranty. Guaranty agreements containing language that clearly and unambiguously waives defenses to the enforcement of the guaranty have been strictly construed and enforced by Florida courts.

A typical waiver provision reads as follows:

“Guarantor hereby expressly waives (a) notice of acceptance of this Guaranty; (b) presentment and demand for payment of any of the Liabilities of Tenant; (c) protest and notice of nonpayment, nonperformance, nonobservance or default to Guarantor or to any other party with respect to any of the Liabilities of Tenant; (d) all other notices to which Guarantor might otherwise be entitled; (e) any demand for payment under this Guaranty; and (f) any and all defenses relating to Landlord’s failure to perfect a security interest in Tenant’s property and/or seize or attach any other collateral.”

July 28, 2015

Appellate Court Overturns Summary Judgment for Eviction of St. Petersburg Nightclub and Restaurant

by Oscar R. Rivera

Oscar R. Rivera

A ruling filed on July 22 by the Second District Court of Appeal overturned the circuit court’s summary judgment in favor of a landlord for the eviction of its tenant that operated a restaurant and a separate nightclub from its two spaces at the property. The ruling adds clarity to the burdens that must be met for summary judgments granting commercial evictions.

In the case of Atria Group v. One Progress Plaza, II, Atria Group took possession of the two suites in April 2010, and One Progress Plaza filed for eviction in September 2013 alleging that Atria had committed numerous nonmonetary violations including damage to the property, illegal activity, disregard of building rules and other lease requirements, unsanitary conditions, and failure to clean the premises.

Atria promptly filed its answer and affirmative defenses, as well as a request for mediation and a counterclaim. It denied the majority of the allegations regarding the claimed breaches, and it argued that One Progress Plaza failed to give the requisite notice of breach and opportunity to cure, and the eviction would cause an inequitable forfeiture based on Atria’s $2 million investment into the promotion and renovation of the premises and its payment of $25,000 per month in rent since 2010.

In pursuit of its motion for summary judgment, the landlord filed an affidavit which outlined the alleged violations of the lease. The circuit court granted summary judgment for eviction in favor of the landlord, and the tenant appealed.

The appellate panel’s opinion notes that the lease agreement between the parties provides an important caveat for the establishment of material defaults and breaches of the lease:

“(3) The failure by Lessee to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Lessee . . . where such failure shall continue for a period of ten (10) days after written notice thereof from Lessor to Lessee; provided, however, that if the nature of Lessee’s default is such that more than thirty (30) days are reasonably required for its cure, then Lessee shall not be deemed to be in default if Lessee commences such cure within said 30-day period and thereafter diligently prosecutes such cure to completion.”

The appellate ruling concludes that the circuit court erred in granting the summary judgment for eviction because the landlord’s property manager acknowledged in his deposition that most of the alleged defaults or violations of the lease had, in fact, been corrected, and the affidavits provided by both parties raise issues of material fact about the occurrence of the alleged defaults and Atria’s curative acts within the terms of the lease. The panel also found that One Progress Plaza failed to establish that the alleged violations of the lease were material, given that Atria was remedying any problems as they arose, and the landlord failed to refute all of the tenant’s affirmative defenses or to establish that they were legally insufficient.

The court was also swayed by Atria’s assertions that eviction would cause an inequitable forfeiture based on its $2 million investment into the promotion and renovation of the premises and its continuous payment of the rent since 2010. It found that the tenant may be able to prove that it would be inequitable to terminate the lease in light of its significant investment in the property.

The appellate court’s opinion reiterates the stringent nature of the burdens that typically must be met for summary judgments for commercial evictions. In reversing the summary judgment for eviction, the appellate court remanded the case back to the circuit court for further proceedings, and its findings as to the validity of the tenant’s assertions and affirmative defenses should prove to be very influential in the case.