Daily Development for Monday, April 10, 1995

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

LANDLORD/TENANT; CHARACTERIZATION AS A LEASE: Agreement establishing right to use a public sports stadium for professional baseball eighty days a year is not a lease, even though so denominated by the parties, but rather is an easement or irrevocable license. Golden West Baseball Co. v. City of Anaheim, 31 Cal. Rptr. 2d 378 (Cal. App. 2d 1994)

The issue here was whether the City of Anaheim could carry out plans for the construction of an office complex on a portion of the parking lot for "Big A" stadium. The office complex plans were part of a package negotiated when the Los Angeles Rams moved to Anaheim. Golden West, owners of the California Angels baseball team, sought a construction of their prior agreement with the city, arguing that the complex interfered with rights guaranteed to the Angels. The issue of construction arose because of some early California authority that might not have permitted a construction of the agreement to modify use rights conveyed. The court commented that it was not certain that characterization of the nature of the rights was really necessary anyway, since ancient common law distinctions were no longer relevant:

"Modern commercial practice tends to consider the right to use land as just another commodity. The law, in keeping with this development, should not stifle commercial real estate transactions by attempting to force contracts creating land rights into a Victorian corset, unsuited to the late 20th century." 31 Cal. Rptr. 2d at 395, note 22.

The court then construed a provision in the recitals of the agreement to mean that the city retained the right to use and control all of the parking area land described in the agreement except to the extent that such use interfered with the number of ground level parking spaces guaranteed to the Angels with ingress and egress (there were several other qualifications as well.) This apparently gave each side some of what it wanted. Comment: The case is a useful guide to persons about to engage in the negotiation of stadium leases. If you want economic control over the area, as opposed to just the right of use to support your activities, you had better be specific.) Also see:

American Jewish Theater, Inc. v. Roundabout Theater Co., Inc., 610 N.Y.S.2d 256 (App. Div. 1994). (Parties' characterization in a written agreement that agreement is a license is not dispositive - when possession is granted for an identified period - agreement is a lease.)

LANDLORD/TENANT; CHARACTERIZATION AS A LEASE: A contract by which a city agrees to pay a hotel to shelter homeless persons if the hotel elects to do so is not a lease. In re Davis, 613 N.Y.S.2d 933 (App. Div. 1994). City made an arrangement with a hotel that it would refer homeless persons to the hotel, and that city would pay hotel (at $105 per day!!!) for each homeless family that it accepted, up to a maximum of 150 per day. Hotel was not obligated to take any of the proferred tenants. The court found that neither the term of the lease nor the area to be leased had been agreed upon by the parties, therefore there was no lease. Because of the finding that there was no lease, neighbors of the hotel could not challenge the city's contract under the Uniform Land Use Review Procedure or a "fair share" hearing pursuant to Section 203 and 204 of the New York City Charter. One judge dissented in part, concluding that a lease had been established and was therefore subject to the two City Charter Sections referenced above.

General Comment on both of above cases:

Of course it is appropriate to classify interests. Real estate agreements never will articulate all of the parties' expectations - the transactions costs are to high. Consequently, if we are to have any level of predictability and avoid litigation of every conceivable issue, we should have "default" parameters that apply when the parties have not stipulated otherwise.

In the editor's view, ad hoc analysis of the parties' intent after a dispute arises frequently does not result in an accurate statement of intent, but rather in the court's rough view of the just result after everything has hit the fan. Real estate investors don't like to take the risk of whimsical judgments by subsequent courts. Hence, we value predictability.

Without characterization of the interest, we are left with either no "default" construction or only one. In either case, we will have less predictability and, most likely, less adherence to the true expectations of the parties at time of agreement.

Both of the above cases use characterization techniques to a certain extent. In both cases, one could question the court's conclusions as overly "result oriented." But the technique is useful, even though, on the edges, one can always criticize the result.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a source that is readily accessible by members of the general public, and should take that fact into account in evaluating confidentiality issues.

ABOUT DIRT:

DIRT is an Internet discussion group for serious real estate professionals. Message volume varies, but commonly runs 5 ‑ 10 messages per workday.

Daily Developments are posted every workday.

To subscribe to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Dirt [your name]

To cancel your subscription to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Dirt

For information on other commands, send the message Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only commercial and general real estate matters but also focuses specifically upon residential real estate matters. Because real estate brokers generally find this service more valuable, it is named "Brokerdirt." But residential specialist attorneys, title insurers, lenders and others interested in the residential market will want to subscribe to this alternative list. If you subscribe to Brokerdirt, it is not necessary also to subscribe to DIRT, as Brokerdirt carries all DIRT traffic in addition to the residential discussions.

To subscribe to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Brokerdirt [your name]

To cancel your subscription to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Brokerdirt

DIRT is a service of the American Bar Association Section on Real Property, Probate & Trust Law and the University of Missouri, Kansas City, School of Law. Daily Developments are copyrighted by Patrick A. Randolph, Jr., Professor of Law, UMKC School of Law, but Professor Randolph grants permission for copying or distribution of Daily Developments for educational purposes, including professional continuing education, provided that no charge is imposed for such distribution and that appropriate credit is given to Professor Randolph, DIRT, and its sponsors.

DIRT has a WebPage at: http://www.umkc.edu/dirt/