Six Year Mistake
by Ron Davis
A tenant’s refusal to pay for six years of insurance costs that an Ohio shopping center forgot to bill incrementally has resulted in the tenant’s eviction.
The shopping center, located in North Canton, had leased space to the tenant–Stein Mart, Inc.–since 1996. And the insurance costs incurred by the shopping center were one of the common-area expenses shared by the various tenants on a prorated basis.
Each year, Stein Mart paid, upon receipt of a bill, its share of such common-area expenses as maintenance and taxes. But not until 2002 did Stein Mart receive notice to pay its share of insurance. In June of that year, the shopping center owner finally billed Stein Mart for the six years that the tenant had operated at the center.
When Stein Mart balked at paying the insurance bill, the shopping center owner began eviction procedures. In response, Stein Mart argued that only annual billings were valid and enforceable. To require payment for six years of a common-area expense, added the company, violated the tenant-landlord agreement between the two parties.
The shopping center owner pointed out, however, that no provision of the lease required the owner to invoice Stein Mart on an annual basis.
An Ohio court, in ruling in favor of the shopping center owner, explained, “Failure of either party to insist upon the strict performance of any provision of the lease or to exercise any option or enforce any rules and regulations will not be construed as a waiver in the future of any such provision, rule or option.” Stein Mart appealed that ruling.
An Ohio appellate court upheld the lower-court decision, adding, “As noted, the parties to this lease were sophisticated, represented by counsel, and bargaining at arm’s length from equal bargaining positions. Also as noted, the language of the lease agreement was clear and unambiguous, and intended by the parties to control their business relationship.... In this case, the lease terms were specific, but the tenant chose to let these events occur. A failure of action by the tenant rather than by an incorrect interpretation of the evidence resulted.” (Stark Commons, Ltd. v. Stein Mart, Inc., 2004WL 2939385 [Ohio App. 5 Dist.])
Decision: December 2004
Published: January 2005