Commercial Leasing Law Updates from the Firm
Florida Leasing Law Updates 2017
In JPay, Inc. v. 10800 Biscayne Holdings, LLC, a Third District Court of Appeal case from July 2017, 10800 Biscayne Holdings leased commercial office space to Tenant JPAY. The lease expired on September 14, 2015. Tenant failed to pay its rent and vacated in February 2013. Landlord sued the Tenant for breach of the lease and damages. Suit was for past due rent and for continuing damages. At the February 2014 hearing, Landlord said it was not accelerating the rent for the full term of the lease. Tenant argued that the lease had been terminated by the Landlord’s 3-day statutory notice and that Landlord was precluded from further recovery after taking back possession of the property. The court ruled in favor of the Landlord for the rent due through the February 2014 hearing. In October 2014, Landlord filed for a renewed motion for partial summary judgment for rents from March 2014 through August 2014. Tenant claimed the February 2014 Order was final and the trial court had no further jurisdiction. The trial court granted the Tenant’s Motion to Strike and agreed that the February 2014 Order was final.
Landlord then filed a new Complaint for Damages starting March 1, 2014. Tenant claimed that the first Order was res judicata. The trial court denied the Tenant’s Motions and entered Judgment in favor of the Landlord. The Third DCA affirmed the lower court’s rulings in favor of the Landlord.The key was that under both the Landlord’s first and second Complaints it had never plead or sought acceleration of the full rents due through the term of the Lease. The Third DCA held that the Landlord properly took possession of the property for the account of the Tenant and properly sought damages from the defaulting Tenant. It could proceed as it did in portions, as the rents became due. It was not res judicata because the first suit did not accelerate damages for the full term of the lease.
In May 2017, the Third District Court of Appeal held in Garcia v. Dadeland Station Associates, Ltd. that Miami-Dade County could not tax a lease holder of property under a 90 year ground lease from the County. The County attempted to tax the leasehold owner on the land, as well as the buildings. The County argued that the owner of the 90 year lease was the “equitable” owner of the land for property tax purposes. The appellate court held that since the lease did not include a nominal purchase option or perpetual rights of renewal, the leasehold owner was not an owner of the land for property tax purposes.
The 2017 Florida legislature approved a reduction in the business rent on commercial leases to 5.8%, or 6.8% in Miami-Dade, Palm Beach and other counties with local option sales taxes. The new law becomes effective January 1, 2018. The new law only applies to new leases, not existing ones. Governor Scott originally proposed a 25% reduction in the rent tax as a means to attract new business to Florida, but the legislature approved the much smaller reduction.
A recent 17th Judicial Circuit case held that where a commercial landlord voluntarily dismissed its eviction action after the tenant vacated the property, the former tenant was not entitled to attorneys fees as a result of the voluntary dismissal. The court held that this scenario falls outside the general rule that when a plaintiff voluntarily dismisses an action, the defendant is the prevailing party. The rationale was that the plaintiff obtained the relief it sought in gaining possession of the property.
In Palm Beach Florida Hotel and Office Building LP v. Nantucket Enterprises, Inc., the Fourth DCA affirmed in a December 2016 ruling that even if there is a self-help provision in a commercial lease, it will be a wrongful eviction if a landlord utilizes that to evict a commercial tenant without going through the court process. In that case, the tenant restaurant failed to get the proper permits to operate and the city shut it down. The same day, the landlord locked all of the doors to the kitchen, restaurant and back offices, and then later had the police escort all of tenant’s employees from the leased property. The trial court held that it was a wrongful eviction and the tenant was entitled to damages. The appellate court upheld the trial court’s wrongful eviction ruling.
The Fourth Circuit Court of Appeals held that a tenant that does not contest a landlord’s eviction of the tenant from the property may waive other defenses or claims it has relating to the property. In Sena v. Pereira, 179 So. 3d 433 (Fla. 4th DCA), the landlord brought suit to evict a holdover tenant. The trial court entered judgment in favor of the landlord and the tenant did not appeal. The tenant then brought an action for specific performance claiming he held a valid option contract on the property and alleged counts for fraudulent inducement and unjust enrichment. The appeals court held that the specific performance count was barred by the eviction judgment. The tenant should have brought the specific performance claim in the eviction proceedings as the eviction and the specific performance of the option contract were “essentially connected”. The court also found that the fraudulent inducement claim was barred.
In a Broward Circuit Court case, it was held that due process requires that a landlord must serve an eviction summons on each subtenant in a commercial building. Landlord entered into a Master Lease with a tenant that then subleased the single building into several businesses. The landlord did not object and the subtenants paid their rents directly to the landlord. The building had one address. The building was posted once with a five day summons. The court agreed with one of the subtenants that the Writ of Possession issued by the Court was defective for the landlord’s failure to provide notice of the eviction action to each of the affected subtenants.
Broward County Self Storage, Inc. v. Naturally Broward, Inc., 23 Fla. L. Weekly Supp. 184a.
On July 1, 2015, a new Florida law went into effect further protecting the rights of tenants after a foreclosure sale:
83.561?Termination of rental agreement upon foreclosure.
(1)?If a tenant is occupying residential premises that are the subject of a foreclosure sale, upon issuance of a certificate of title following the sale, the purchaser named in the certificate of title takes title to the residential premises subject to the rights of the tenant under this section.
This new law applies only to residential and not commercial tenants.
In a Volusia County, FL case, a landlord attempted to evict a tenant who had an option to purchase the property. Under Section 83.42 (2) of the Florida Statutes, the landlord may not evict a tenant under the landlord-tenant statute where the tenant has paid at least 12 months of rent under an agreement that includes a purchase option. The Circuit Court held in this case that a County Court may determine the threshold question of whether the tenant has an equity interest in the property, but the Circuit Court has exclusive jurisdiction over actions relating to title to real property. The landlord/seller, therefore, must file an ejectment action in Circuit Court to remove the tenant/purchaser.
In Noimbe v. Harvey, the landlord filed a one-count complaint for tenant eviction against the tenant for past due rents. The tenant contested the validity of the three-day notice in a motion to dismiss due to improper service and, in addition, posted past due rents in the Court Registry. The County Court granted the tenant’s motion to dismiss, holding the three day notice insufficient on its face. The County Court then reserved jurisdiction to determine disposition of the funds in the Court Registry. The tenant argued that the County Court lost jurisdiction of the case upon its granting of the tenant’s motion to dismiss. After a hearing, the judge awarded a portion of the funds in the Court Registry to the landlord. The tenant appealed and the 4th District Court of Appeals held that the County Court judge improperly ruled on the funds in the Court Registry after the court lost jurisdiction of the case. Once the action for possession was dismissed with prejudice, the tenant’s obligation to post rent evaporated and the tenant was entitled to the return of all of the funds deposited in the Court Registry.
On June 20, 2014, the 5th District Court of Appeals held in Wilson v. Terwillinger, Case No. 5D13-1478, that an Addendum to a Lease providing for liquidated damages or an early termination fee as permitted by F.S. 83.595 (4) was enforceable even though the provision was not also found in the Lease Agreement. The Addendum in this case was executed at the time of execution of the form Lease Agreement. The appellate court found that the two documents executed at the same time should be construed as a single integrated document. As a result, the court held that the Addendum and the liquidated damages clause were intended by the parties to be a part of the initial Lease and thus enforceable.
In May of 2014, the US Court of Appeals for the 11th Circuit in Winn-Dixie Stores, Inc. v. Dolgencorp, LLC interpreted restrictive covenants in leases limiting grocery sales by other tenants in shopping centers in which Winn-Dixie was the anchor store. The Winn-Dixie leases prohibited the sale of “staple or fancy groceries” by other tenants subject to an exception for the sale of such items in less than 500 square feet of “sales area”. The appellate court construed the language of the restrictive covenants in a broader sense than the trial court holding that the phrase “staple or fancy groceries” means both food and other non-food items and the phrase “sales area” includes both shelving space and aisles where customers would view and purchase products. The court’s ruling was based in part on a prior Florida state court case and the appellate court’s interpretation of the dictionary definition of the term “grocery”.
In Sunshine Gasoline Distributors, Inc, v, Biscayne Enterprises, Inc. (3rd DCA, March 26, 2014), the court held that a lease clause which states that a tenant’s option to extend the lease term “shall …require written approval of Lessor, which approval shall be within the sole discretion of Lessor” was a clear and unambiguous contract provision. The landlord refused to extend the term of the lease claiming it had the right to do so for any reason, within its sole discretion. The court rejected the tenant’s argument that there was ambiguity in the lease as a whole on the tenant’s right of renewal and that the history of the lease permitted a lease extension or renewal. The court held that the lease term was clear and unambiguous and upheld the trial court’s ruling in favor of the landlord.