Daily Development for May 2, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
dirt@umkc.edu

Here are two “quickie” holdings from a recent DC case - the kind of issues for which there isn’t much authority when you need it.

WORDS AND PHRASES; “BUSINESS TAXES:” Within the meaning of an “additional rent” clause, “business taxes . . . imposed in respect of” any business conducted on the premises” includes sales taxes.

Mick’s at Pennsylvania Ave. v. BOD, 389 F.3d 284 (D.C. Cir. 2005)

The “additional rent” definition of the lease included: “. . .  all business taxes, rates, duties, levies, assessments and/or license fees imposed in respect of any and every business conducted in, on or from the Leased Premises or in respect of the use or occupancy thereof, to the authorities having jurisdiction thereof promptly when the same shall become due and payable, and before the imposition of any fine or penalties.”  A guarantor argued that sales taxes were not included, and therefore outside his guarantee of the rent.

LANDLORD/TENANT; RENT; RENT WAIVER: Where landlord agrees to waive first three month’s rent upon condition of tenant performing all its lease obligations, court will conclude that the benefit of the waiver is lost if tenant fails to perform lease obligations at any time during the lease.  Therefore, initially waived rent becomes due and payable.

Mick’s at Pennsylvania Ave. v. BOD, 389 F.3d 284 (D.C. Cir. 2005)

The lease provided as follows: “Provided that Sublessee performs all other terms, covenants and conditions of this Sublease, then for the period commencing on the Commencement Date up through March 31, 1998 ("Rent Concession Period"), Sublessee shall not be obligated to pay Basic Rent to Sublessor hereunder.”  Subtenant argued, somewhat plausibly, that this language conditioned the rent waiver only on performance of the lease covenants during the waiver period.  The court disagreed.

Note: The court dodged the more problematic issue of whether the obligation to pay previously waived rent as a consequence of defaults after the waiver period constituted an invalid penalty.  Not properly raised below.

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