Lease Audit Information


"Similarly Obligated" Language

No. 03CA1577. Dinnerware Plus Holdings, Inc. v. Silverthorne Factory Stores, LLC.
Commercial Lease Agreement—Definition of “Provided That”—Promise-Condition Precedent.

In this commercial lease dispute, plaintiff ("tenant") appeals the trial court judgment in favor of defendant ("landlord"). In 1993, the parties’ predecessors entered into a ten-year lease agreement for retail space. The lease required the tenant to pay fixed monthly rent and pass-through charges, provided that all other tenants in the shopping center were similarly obligated. In 1996, the lease was modified to state that as long as the tenant was not in default, the tenant’s rent would be a percentage of its gross monthly sales. A dispute arose between the parties regarding tenant’s obligation to pay pass-through charges. In 2000, tenant began withholding payment of the pass-through charges until landlord demonstrated that other tenants were similarly obligated. Landlord then demanded payment of unpaid pass-through charges, and fixed monthly rent in accordance with the original lease.

Tenant filed this action, seeking a declaration that its monthly rent was the percentage rent and that it was not obligated to pay pass-through charges until other lessees occupying space within the shopping center became similarly obligated. Landlord counterclaimed and filed a forcible entry and detainer ("FED") action. The two cases were consolidated. Following a bench trial, the trial court concluded that the lease provisions requiring that other tenants be similarly obligated were promises, not "conditions precedent," whose nonoccurrence would relieve tenant of its obligation to pay pass-through charges.

The trial court erred in construing the "provided that" language of the lease as a promise instead of a condition precedent. The Court of Appeals interprets the "provided that all other tenants are similarly obligated" language as unambiguously creating a condition precedent to tenant’s obligation to pay pass-through charges. The determination whether an event is condition precedent may depend on whether its occurrence or nonoccurrence is a matter within the obligee’s control. Here, whether other tenants in the shopping center would be "similarly obligated" for pass-through charges was within the landlord’s control. Because it is undisputed that the condition precedent did not occur, tenant was not obligated to pay pass-through charges. Because tenant was not in default under the lease for failure to pay pass-through charges, there was no factual basis for an FED action, and dismissal of the FED action was proper. The judgment is affirmed in part and reversed in part.


See Also: Great Falls Hardware v. South Lakes Village (380 S.E.2d 642).




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