Daily Development for
Thursday, June 13, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

LANDLORD/TENANT; RENT; "LEASED AREA CLAUSE:" A lease provision for the adjustment of rent based on a redetermination of the amount of leased space is` not limited to de minimis space variations. Hart v. Vermont Investment Limited Partnership, 667 A.2d 578 (D.C. 1995). Tenant entered into a lease of commercial space following lengthy and detailed negotiations. The lease stated that the leased premises contained 4,060 square feet. A subsequent paragraph provided: "In the event that the square footage of the Leased Premises determined Leased Premises . . . is different [from] the square footage provided in [the earlier paragraph], the Minimum Rent shall be adjusted accordingly."

Less than a year later, the original landlord notified the tenant that the leased premises contained approximately 14% more square feet than that described in the lease and submitted a proposed lease amendment for additional rent. The tenant refused to sign the amendment. Shortly thereafter the original landlord sold the building to New Landlord. A month later, New Landlord notified the tenant that the tenant was actually occupying more than 20% additional space. New Landlord demanded rent from the month that it purchased the property based on the new measurements.

The tenant, a law firm, had lost several partners, no longer needed even the amount of space described in the lease, and sought unsuccessfully to renegotiate for less space or a right to sublet some or all of its space. When these negotiations were unsuccessful, the tenant notified New Landlord that it could no longer pay the rent and would vacate the premises as of a date certain. After the tenant vacated, New Landlord brought this action for rent and for damages in excess of $300,000. The trial judge found that the tenant regarded the rent adjustment clause as applying only in the event of a de minimis adjustment in square footage; that there had been no meeting of the minds on the terms of the lease; and it was unenforceable.

On appeal: reversed. Under the "objective theory of contracts" one party's subjective intent is not controlling where that party has agreed in writing to a clearly expressed and unambiguous intent to the contrary. The language in the rent adjustment clause was unambiguous and not limited by its terms to de minimis adjustments in square footage. Nor was the provision in question unconscionable under these facts. Even if the court were to consider a case in which there were a 300% variance in square footage from that stated in the lease, resulting in an unconscionable 300% rent increase, the proper remedy would be to limit the landlord's recovery to a reasonable rent for the increased space rather than to void the contract.

Comment: Despite the tendency of some courts, under the guise of "good faith and fair dealing," to rewrite contracts whenever they don't feel the business relationship has worked out "fairly," many courts continue to view commercial leasing as the epitome of legal "hardball." There are, or ought to be, few naifs in this business. The market is highly diversified and competitive, and all parties have many choices. Information as to competitive opportunities is readily available through an active and competitive brokerage community. It is true that people make mistakes, and bad deals get made. But as UMKC alum Harry Truman said: "If you can't stand the heat, get out of the kitchen."

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 five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Laprica Mims at the ABA. (312) 988 6233.

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