Lease Audit Information

TOPIC OF THE WEEK:

Cafeteria Operators, L.P. v. Coronado-Santa Fe Assoc., 952 P.2d 435 (NM Ct. of Appeals 1997) :

In this decision, the New Mexico Court of Appeals affirmed the determination of the trial court that the Landlord charged excessive and unjustified common area maintenance charges by creating a subsidiary maintenance company and billing Tenant inflated costs. Included in the charges of the subsidiary, "Kinder Maintenance", were management costs and profit on top of the actual maintenance costs. The trial court determined that the Landlord could only transfer the "actual costs" of the maintenance. Per the Lease, Tenant was only obligated to pay its "proportionate share of costs and expenses of maintaining and operating the common areas".

In addition, the Court of Appeals affirmed the decision of the trial court to award punitive damages to the Tenant stating that the Landlord's profit-making subsidiary was an "intentional and malicious end run around the CAM fee provisions of the lease".

The court also agreed with the Tenant that Landlord's expenses in overseeing maintenance work performed by others is simply one of the costs of operating the shopping center, and compensated by rents.

See also: Recoll Management Corporation v. Stone & Webster Engineering Corporation

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