Lease Audit Information

TOPIC OF THE WEEK:

American Multi-Cinema, Inc. vs. Developers Diversified Realty Corporation, et al (Case No. 0961-CV13428):

In this 2010 case, the Landlords admitted to certain overcharges, but refused to refund prior years based on the following defenses: 1) the claims were outside of the "audit periods", 2) tenant was estopped from claims based on prior conduct and 3) tenant had waived its right to reimbursement. The court rejected these defenses. 

Basically, the court found the audit language contained in the leases did not act as a waiver of tenant's right to recover overcharges for earlier years discoved as a result of the audit. In addition, they were not estopped and did not waive any claims, because they were unaware of the overcharges when they paid the billings.

Property Manager jointly liable together with each Landlord

The court also rejected the claim that DDR was not liable because it lacked privity with the tenant under each lease. The court found that the property manager can be liable for breach of contract if its relationship to the transaction was so close as to approach privity. In this case, DDR assumed complete and absolute control to collect CAM charges and therefore DDR utilized the contractual right to make demand upon and collect from the tenant.

Contingency Fees for auditing services

Finally, as part of the amended judgment, the court found that the fees and expenses requested by the tenant, including a 30% contingency fee of $138,893.45, were "reasonable".


For a full transcript of the case, please contact us.

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