Using The Pessimism Defense
by Ron Davis
Did the seizure by a Massachusetts shopping center owner of property leased to a tenant violate the laws of trespass and illegal confiscation?
That question confronted the courts of Massachusetts in addressing a dispute between a Marlborough shopping center owner and a tenant that leased a 300-square-foot section of the property.
That dispute began when the centerís owner agreed to lease that same 300-square-foot section of the shopping center to a commercial bank. At the time of that agreement, the section was undeveloped, and the bank wanted the property to construct a kiosk there.
Not until the kiosk was finished and operational did the tenant object to the acquisition by the bank. That objection was in the form of a lawsuit. The tenant charged the centerís owner with trespass and violation of the lease.
The centerís owner explained that the bank kiosk was part of an overall effort to improve the propertyís layout and customer access. Moreover, the relationship between the tenant and the centerís owner was apparently strained. And that relationship would likely have stalled plans of the centerís owner to move forward with the improvement project.
A Massachusetts land court found that consent of the tenant was in fact required for the centerís owner to take the leased property. But the court did note that because of the relationship between the two parties, the centerís owner seized the property because ďof pessimism that consent would be promptly secured from the tenant.Ē The judge nevertheless required the centerís owner to pay the tenant $85,180 in damages.
The tenant appealed, however, charging that the centerís owner illegally seized the leased property, re-leased it without proper consent from the leaseholder and therefore must return it.
A Massachusetts appellate court upheld the land court, explaining that the centerís owner ďmade a clear, conscious decision not to seek the assent of the tenant [to make use of the property] despite being chargeable with the knowledge that assent from the tenant was required under the terms of the ground lease while it continued in force.Ē
Nevertheless, the judge found no evidence that the centerís owner used the breach of the ground lease to extort money or new or additional concessions from the tenant or from anyone else. Concluded the judge, ďThe centerís ownerís actions do not rise to the level of unfairness that constitute a violationĒ of business conduct law.Ē (Marlborough East Main LLC v. Karnak Realty LLC, 2009 WL 57766 [Mass.Land Ct.])
Decision: January 2009
Published: February 2009