One Thing Leads To Another

One Thing Leads To Another

Posted by Lee Brettin · on April 24, 2015 · in Uncategorized · with 0 Comments

Earlier this month Division 1 of the Court of Appeals heard Pacific Market Intern LLC v. TCAM Core Property Fund Operating LP. In this case the court was asked to rule on terms in a commercial lease. In its “unpublished opinion,”* the court citing Nishikawa v. U.S. Eagle High, LLC, unsurprisingly informed the litigants that parties must interpret a lease, which is a contract, “in a manner that gives effect to all the contract’s provisions.” The case revolved around the issue of the tenant’s obligation to pay for parking spaces regardless of whether or not they used those spaces.

This particular lease contains “basic provisions” and “standard provisions.” The case highlights the importance of draftsmanship to avoid contract ambiguities. Basic lease provisions usually include the names of the landlord and tenant, the amount of rent, the lease commencement and termination dates, security deposit and use of the premises. In other words, include the terms that are unique to the agreement between the parties. The standard provisions detail the covenants and conditions applicable (generally speaking) to all of tenants at a particular property.

In this case both the basic and standard provisions contained covenants related to parking space renal obligations. The basic provisions stated that the tenant shall lease a certain number of spaces. The standard provisions provided that the tenant shall have the right to the nonexclusive use of the number of spaces . . . So the question was, did the lease give the right or create an obligation to lease and pay for those parking spaces.

The court looked to “extrinsic evidence,” that is, evidence outside of the contract, in this case, the letter of intent (“LOI”), to interpret the lease. In this case, the LOI did not address the “shall lease” versus the strained “as needed” interpretation more favorable to the tenant. The fact is, nothing in the standard or basic lease terms supported the tenant’s “as needed” interpretation.

The court ruled that a lease must be interpreted according to the plain meaning of the words; specific terms are given more weight than general terms; and the parties may look at evidence outside of the contract to resolve ambiguities. Drafting tip – be sure the lease you are signing says what you intend it to say without having to resort to creative after-the-fact interpretations.

 

* An “unpublished opinion” results from a case being argued at the court of appeals or state supreme court where the court’s opinion does not contain a novel conclusion and therefore the case cannot be used in advocating a position by litigants in a future case

 

Lee Brettin

Lee Brettin is a Seattle lawyer with a practice focused on real estate and business law.

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