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by Ron Davis

An omission in a tenant’s lease requirements has proved costly for the owners of a Georgia shopping center.

The shopping center, located in suburban Atlanta, had leased space to the tenant–an Ingles supermarket–for nearly 10 years. During that time, the center’s owners hired a security guard and billed Ingles periodically for a portion of the costs involved in paying the guard.

Ingles, in turn, paid part of the billed amounts, based on an equal division among tenants, and disputed the remaining billed amounts. And when the center’s owners sold the shopping center two years ago and tried to collect from Ingles the unpaid portions of the security guard costs, Ingles, as expected, refused to pay.

The center’s owners sued Ingles for breach of contract, seeking the amount they calculated as Ingles’ share of the security guard cost. As a basis of their argument, the center’s owners contended that the lease agreement between the two parties allowed them to charge Ingles for security on a prorated, proportional basis.

But the language of the lease does not mention a requirement that Ingles pay a share of the cost of a security guard. Nor does the Ingles lease even refer at all to security guards or their payment.

The center’s owners contended, however, that Ingles had agreed in the lease to pay “common area costs,” which, they added, include payment for a security guard.

A Georgia court ruled in favor of Ingles, noting that the lease had made no mention of an obligation by the tenant to pay a share of the costs for a security guard. The center’s owners appealed, reasoning that even though the Ingles lease did not specifically mention payment for a security guard, the two parties modified the contract through their conduct.

A Georgia appellate court, concurring with the lower court, explained, “Reading the lease in its entirety and harmonizing its terminology, we conclude that the list of costs to be calculated under the common area costs formula does not include security guard costs. The lower court judge correctly ruled that Ingles was not required to pay for security guard costs according to the common area costs formula in the lease.” (Covington Square Associates v. Ingles Markets, Inc., 2007 WL 93141 [Ga.App.])

Decision: February 2007
Published: March 2007

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