The Law

Loop-hole Found in Onerous Term by Ron Davis The owner of an Iowa shopping center has at last won the right to show leased property to prospective tenants. The shopping center, located in the Waterloo area of Iowa, has been owned by Alta Vista Properties, LLC, for eight years. And ownership of course means that Alta Vista became landlord to its tenants. That status included all rights and responsibilities of a landlord. Problems arose with one tenant, however, when Alta Vista decided to sell the property. That tenant, Mauer Vision Center, had been in business at the shopping center for more than eight years. And its owner refused to allow Alta Vista access to Mauer’s leased property for purposes of showing it to prospective tenants. Alta Vista responded by challenging the tenant on grounds of the tenant’s misunderstanding of the lease. In fact, however, one paragraph of Mauer’s lease did seem to limit the landlord’s access to the premises for purposes of showing it to potential lessees during the last 90 days of the lease term. Alta Vista answered that the lease, if taken as a whole, grants a “reasonable right” to show the premises to prospective buyers throughout the lease term. Moreover, added Alta Vista, the terms of the sales agreement bestowed the express right to sell and mortgage the center property [subject to the lease] during the lease term. Asked Alta Vista, “Who would buy or finance something he or she could not look at?” Finally, Alta Vista pointed out that Mauer allowed the previous owners of the shopping center to show the leased property when potential lessees requested such access. The impasse eventually required the Iowa courts to settle the matter. An Iowa district court, however, decided in favor of the tenant, explaining, “The tenant [must] permit prospective tenants or buyers to enter and examine the Mauer Vision Center premises. But, added the court, the time period allowed to permit entry relates back to the term “last 90 days of this lease.” Moreover, the court did find some problematic terms of the lease. Those terms allowed the tenant the opportunity to obstruct a landlord from letting a [prospective] purchaser inspect the property. Such terms, the court said, were somewhat onerous. However, the court added, the mere fact that a term of a commercial business lease is onerous does not make it ambiguous or unenforceable. Alta Vista challenged that finding. The Supreme Court of Iowa overruled the district court, explaining, “True, the lease says the tenant must allow prospective tenants and buyers to enter and examine the [tenant’s] premises during its last ninety days. Yet it does not say this is the only time they [potential lessees] are permitted on the premises.” (Alta Vista Properties, LLC v. Mauer Vision Center, PC, 2014 WL 5490601 [Iowa]) Decision: November 2014 Published: November 2014