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All’s Well That Ends Well
by Ron Davis

All’s well that ends well. That sums up a rent dispute that occurred between an Ohio shopping center owner and a tenant, but one that ended amicably.

The dispute arose after the shopping center, Farmers Market Drive-In, in suburban Columbus, leased space to the tenant for the operation of a bar. As part of the lease terms, the center’s leasing agent and the bar owner orally agreed to a four-month rent hiatus: the four months of free rent was aimed at compensating for renovation work required to get the premises ready and allow the bar enough time to develop business.

The shopping center owner, however, was apparently unaware of that agreement, and when the tenant failed to pay rent after the effective date of the lease, the owner sued. In fact, the two parties did agree in the lease that the tenant owed rent from the date of the lease signing. So the owner demanded payment.

A magistrate ruled that a mutual mistake was made and that the center’s owner “incorrectly demanded rent” but also that the tenant defaulted by failing to pay rent that he agreed he owed. As a result of that impasse, the magistrate reformed the lease, but resolved all claims in favor of the center’s owner, and awarded the owner damages and attorney’s fees.

The tenant appealed, arguing that the court erred by failing to find that the lease agreement should be “reformed to reflect the agreed-upon rent commencement date” and that the center’s owner was actually guilty of breach of lease. Meanwhile, the center’s owner finally learned that the tacit agreement between the tenant and the leasing agent actually occurred..

On Ohio court agreed with the tenant, explaining, “The center’s owner for some time did try to enforce the lease agreement terms as written and asserted it was entitled to rent for the period in question. But the owner later conceded that, due to the oral representation of the leasing agent, the lease agreement should have provided for a period of free rent. The owner did try to enforce the written terms of the contract, but later realized the mistake. Though he did not do so until well into his lawsuit, there is no evidence of fraud or bad faith. Rather, the findings support the conclusion that the lease agreement set forth incorrect terms as a result of a mutual mistake. The magistrate also properly concluded that the appropriate remedy was to reform the terms of the lease agreement to reflect the intent of the parties regarding the rent commencement.” (Farmers Market Drive-In Shopping Centers v. Magana, Slip Copy, WL 1560276 [Ohio App. 10 Dist.])

Decision: June 2007
Published: July 2007



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