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Latest Decisions on Management Fees
One of the latest is a long line of opinions on "Management Fees" holds that an Anchor tenant in a shopping center was not required, under the terms of it lease, to pay a management fee based on a percentage of the shopping center's gross revenue from all tenants, even though the Landlord claimed that it was permitted to do so under a provision requiring it to pay a pro-rata share of all expenses for the operation and maintenance of the exterior common areas. Instead, the court held that the provision seemed to refer to direct out-of-pocket expenses rather than uncertain management costs. K's Merchandise Mart, Inc. v. Northgate Ltd. Partnership, 835 N.E.2d 965 (Ill App. 2005)
Charges for management fees may be permitted where not duplicative of other charges and where landlord can show that "actual" goods and services were provided. Choice Health v. Devcon Enter., 2007 WL 2409841 (Mass. App. 2007). But see Cafeteria Operators, L.P. v. Coronado-Santa Fe Assoc., 952 P.2d 435 (NM Ct. of Appeals 1997) (fees not permitted when pure "profit").
Recent Developments
Important Decisions from 2009
• Repairs: A movie theater tenant that occupied its premises under a lease that required the tenant to "keep and maintain in good condition and repair... reasonable wear and tear and damage by fire or the elements excepted" did not require it to replace the roof when it could no longer simply be repaired. The court held that a "general repair clause" did not require the tenant to pay for a complete replacement, in the absence of a "plainly discoverable" clause requiring it to do so. In addition, the tenant was entitled to offset the repair costs from rent, even though the repair and rent clauses were independent covenants, because the tenant "met its duty to pay rent through the set off." Quincy Mall, Inc. v. Kerasotes Showplace Theatres, LLC, 903 N.E.2d 887 (App. Ct., 4th Dist. IL 2009).
• Co-Tenancy: Operating co-tenancy failure was not cured when a JC Penney anchor store attached to shopping mall was "replaced" by a freestanding Costco building, where lease defined an "anchor" store as one connected to mall. Rainbow USA, Inc. v. Cumberland Mall, LLC, 2009 WL 3401454 (Ga. App. Sept. 21, 2009).
Toy’s R Us store was not a comparable replacement for Ames, which was a multi department retailer. Fresh Pond Mall Ltd. v . Payless ShoeSource, Inc., 2009 WL 2603874 (Mass Super. July 2, 2009)
• Waiver and Estoppel: Tenant that paid rent for more than 10 years, entered into multiple options to extend lease, and executed estoppels with no claim of breach, did not waive longstanding right to cancel lease as a result of co-tenancy failure because the "existence of an option to cancel the lease is not a default or a breach of the lease." Fresh Pond Mall Ltd. Partnership v. Payless ShoeSource, Inc. 2009 WL 2603874, 5 (Mass.Super.,2009)
Robert Machson regularly speaks on legal topics relevant to retailers at the national convention of the National Retail Tenants Association.
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