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Into the Breach
by Ron Davis

Proving a breach of a shopping center leasing agreement isn’t easy without providing enough evidence to back the breach charges.

A good example: a recent sublease of premises at a Houston, TX, shopping center. At that facility, a software-training firm rented the premises of a tenant for an agreed three-year term. That agreement specified that the sublessee would abide by the “same terms, conditions, requirements and provisions as are set forth in the master lease” of the tenant.

The sublease also referred to the master lease in provisions that addressed the lease term, minimum rent, late charges, and insurance required. But although the sublessee asked for a copy of that master lease for his reference, he never received it.

After a dispute over certain escalating charges related to maintenance, the sublessee moved from the shopping center. In response, the tenant notified him that he owed for unpaid rent and fees—a total of $10,353.48 (a figure later adjusted to $58,996 to cover future rent). And when the sublessee did not comply with that payment request, the tenant sued for breach of contract.

At trial, the sublessee disputed the amounts owed, stating that he had made certain payments that he believed were unjustified. And he said he was forced to carry his own insurance on the premises. Finally, he said his company incurred between $15,000 and $20,000 in expenses for repairs to bring the premises up to local building code standards so he could obtain insurance. But he admitted that he had made no payments to the tenant of any sort after vacating the leased premises. And he also admitted that the sublease refers to acceptance of the premises “as is, where is.”

Based on a lack of the tenant’s lease-related documentation, however, a Texas court ruled in favor of the sublessee. The tenant appealed that ruling.

A Texas appellate court agreed that the tenant had never established the sublessee’s indebtedness, nor had the tenant ever provided the vital master lease that lists the requirements of leasing.

Explained the judges, “Without the master lease in evidence, the courts have no means of determining the extent of any default, in particular a default relating to indebtedness. For the same reason, the courts are not able to determine the sublessee’s compliance with the terms of the master lease, to which he was bound by the express terms of the sublease. Accordingly, we agree with the conclusion that the tenant did not establish the threshold issue of the sublessee’s indebtedness.” (Randall’s Food and Drugs, L.P. v. Patton, 2008 WL 3876149 [Tex.App.-Hous. (1 Dist.)])

Decision: September 2008
Published: September 2008



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