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by Ron Davis

A breach of lease has cost a tenant of an Ohio shopping center far more than he expected to pay.

The owners of the Columbus-area shopping center charged the tenant with breach of the three-year lease after he abruptly moved from the facility during the first year of operation of his business. In response to the tenant’s move, the center’s owners quickly hired three real-estate firms to find a new tenant, then sued the tenant, seeking compensation for their loss of income.

The tenant argued, however, that the center’s owners had agreed “orally” that they would not seek future rents from him if he simply vacated the premises. After he moved, he apparently did leave the premises in good condition.

The center’s owners replied, however, that they had no knowledge of any agreement of that type. And in their lawsuit, they asked the court to award them damages for the months remaining on the tenant’s lease--plus interest.

An Ohio magistrate hearing the case ruled in favor of the shopping center’s owners and ordered the tenant to pay them $122,698.62 and future rents of $45,448.57. The tenant appealed that order, contending that the center’s owners had reneged on their verbal agreement and the court was awarding them a double recovery of damages.

The tenant also argued that the magistrate had erred when he calculated the settlement. That settlement, he said, was based on unlawful penalties and a double recovery of damages. Of the $122,698.62 that the magistrate awarded in past due rent, for example, $63,010.47 is attributed to late charges or interest. Such charges, the tenant asserted, “constitute an unenforceable penalty in that they were designed solely as punishment.” Finally, the tenant said, “The charges do not bear a reasonable proportion to actual losses, and the two parties never considered any damages that might flow from a breach of lease.” The tenant also charged that the center’s owners never tried to replace him as a tenant so as to mitigate the amount he owed.

An Ohio appellate court rejected the tenant’s arguments, explaining, “The claim that he did not know that the center’s owners would seek additional late fees as other payments became past due rings hollow. Additionally, the center’s owners had said that they were entitled to damages from late fees and interest…. Also significant to the mitigation issue is that the space is listed with three commercial real estate brokers. And utilizing a reputable commercial real estate brokerage firm to advertise space has been found to satisfy the duty to mitigate.” (UAP-Columbus JV326132 v. O. Valeria Stores, Inc., Slip Copy, 2008 WL 384236 [Ohio App. 10 Dist.])

Decision: February 2008
Published: February 2008

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