Lease Audit Information
TOPIC OF THE WEEK:
American Multi-Cinema, Inc. vs.
Developers Diversified Realty Corporation, et al (Case No.
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
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
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